|Date:||8 Jul 2003 20:28:09 -0000|
|Subject:||[CPEO-BIF] All Appropriate Inquiry Rulemaking Report and Another Perspective...|
Lenny Siegel says that the AAI rule must do more than the ASTM Phase I
standard because the legislation is designed to accomplish two distinct
purposes in addition to demonstrating that a land owner has looked, but
hasn't found contamination. These additional purposes are (1) to define
reasonable steps that prospective purchasers must take to address potential
contamination [I agree], and (2) to guide site characterization and
assessments funded by EPA grants [I couldn't find this].|
As I read the statute, the major thrust of the AAI rule is to define a standard of conduct for investigating contamination by a prospective purchaser who later acquires the property, where previously undiscovered contamination later materializes and is a basis for a CERCLA prosecution. It is the new landowner's burden to demonstrate to a court's satisfaction that, prior to acquiring the property, he/she carried out "all appropriate inquiries... into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards and practices." The statute then goes on to enumerate 10 criteria which the EPA Administrator must consider in issuing an AAI final rule. [These criteria include "interviews with past and present owners, operators, and occupants of the facility for the purpose of gathering information regarding the potential for contamination at the facility." Interviews with neighborhood residents are pointedly absent from this enumeration--although there is a separate criterion to cover "commonly known or reasonably ascertainable information about the property."]
The point is that the focus is on carrying out an inquiry that accords with "generally accepted good commercial and customary standards and practices." The value of the ASTM Phase I standard is that, by the very mechanism of its development and periodic updates, and the broad private and public sector participation in these efforts, it was designed to reflect and embody generally accepted good commercial practices.
However, as Larry Schnapf correctly points out, the bona fide prospective purchaser must take reasonable steps [Lenny's purpose #2] with respect to contamination or it could lose its status as a BFPP. This is also true for the "innocent landowner." In the case of a BFPP, the documented presence of contamination is not enough to defeat the liability exemption if the other requirements of Section 101(40) are satisfied. These include taking "reasonable steps" to stop any continuing release, prevent any threatened future release, and prevent exposure to any previously released hazardous substance. Bob Hersh is undoubtedly correct that "no reputable developer would buy a property and choose to invest money in it without a very thorough assessment and investigation"--at least if preliminary inquiry revealed the potential for significant contamination.
Even in the case of the proverbial "innocent landowner" whose status is defeated if he/she had reason to know of any contamination (which might otherwise militate in the direction of a "hear no evil, see no evil" approach), the incentives favor thorough rather than superficial investigation because if previously undetected contamination is later discovered, the landowner retains his/her "innocence" only if he/she took "reasonable steps" to stop any continuing release, prevent any threatened future release, and prevent exposure to any previously released hazardous substance. (The only difference in this regard between the BFPP and the innocent landowner is that the BFPP, having found contamination prior to taking title, must take these "reasonable steps" right away [at least as soon as the purchase has been consummated], while the innocent landowner need only take these steps when and if contamination is found. In both cases, failure to take the required steps--which could be extensive and expensive--defeats the exemption and exposes the owner to liability. Far better to be aware of the problem before going ahead with the land purchase.
Another reason it is in the self-interest of the landowner or prospective purchaser to fully characterize the site is that the liability exemption for offsite source contamination also depends on the same "all appropriate inquiry" standard and on taking the same "reasonable steps" as apply to the BFPP and innocent landowner defenses.
That is still not a reason for adopting an AAI rule that goes beyond what the statute requires or that injects the federal government into land use regulation that intrudes on the traditional domain of states and localities. However, in providing grant assistance to states, the statute defines the elements of adequate "state response programs" necessary to qualify for such assistance. These include oversight and enforcement authorities adequate to ensure that a response action will protect human health and the environment and that meaningful opportunities are provided for public participation.
This is not akin to the civil rights laws, where private and public interests clash (or are perceived to clash). It is also not a case where one need worry excessively "if the AAI requirements are very easy and basic and do not really adequately assess the contamination on a property." The statute, as well as the self-interest of the purchaser or redeveloper, precludes an approach that is too easy or too basic.
If the historical record is "not too good" for some sites (as Peter Strauss worries) is that a sufficient reason to burden the innocent prospective purchaser with costly testing as a mandate of the AAI rule? If there are data gaps, isn't it really up to the risk tolerance of the purchaser to decide whether to proceed with the deal and take a chance on incurring costly mitigation steps later? Although neighboring landowners also have a stake in this risk of contamination (and this risk goes beyond mere dollars and cents), how is this risk alleviated by placing so many burdens on the prospective purchaser that the land (and any hidden risk) remains undeveloped (and unabated)?
If contamination is found and the prospective purchaser chooses to not acquire the property, Peter Strauss worries that the information will be lost and the risk will go unabated. This is a legitimate concern--although if the risk is significant enough most state laws surely require notification. Under New York's expected-to-be-passed-in-September new Brownfields law, the state DEC will also be required to maintain a computerized database of brownfield sites in which such information would be preserved (at least for sites that come to DEC's attention through New York's stringent notification requirements). Larry Schnapf is again correct that, under most redevelopment scenarios, even if no additional remediation were required (which won't be an option under New York's new law), the redeveloped site will signficantly limit and mitigate exposure to contaminants compared to maintaining the status quo. This is another argument for encouraging rather than discouraging redevelopment.
Where non-profits (whether or not faith-based) assume ownership of brownfield sites and discover that they have inherited a contamination problem, those who caused or contributed to the contamination should be the ones to clean it up--or, if they can't be found or are financially non-viable, the state should step in. This is not something the AAI rule can be expected to single-handedly address.
Where "innocent citizens are bearing the costs of past private business activity," the solution is not to punish and preclude future business activity by unrelated innocent businesses.
The "six blind men and the elephant" metaphor applies only up to a point. In this case the legislation serves as a kind of "seeing eye dog" limiting the interpretations and flights of fancy that might otherwise emerge. There's another metaphor about "riding on the back of a tiger" that should be remembered by those who seek to subject real estate transactions to all-encompassing federal regulations in order to guard against every conceivable environmental risk. (I wonder if there's a story about "six blind men and the tiger.")
Kenneth S. Kamlet, Esquire
Director of Legal Affairs
Newman Development Grp., L.L.C.
3101 Shippers Road, P.O. Box 678
Vestal, New York 13851-0678
607-770-1010, FAX: 607-770-3482
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