New brownfields law enacted

Real Estate Weekly, Feb 27, 2002 by Ram Sundar, Bea Grossman

On Jan. 11, President Bush signed the Small Business Liability Relief and Brownfields Revitalization Act into law. The act provides for financial assistance to eligible entities. for the purpose of promoting the cleanup and reuse of brownfields by authorizing $250 million to fund the cleanup of -such sites for each of fiscal years 2002 through 2006. Abandoned brownfields sites are scattered throughout the country. By some counts, the number may be in excess of 500,000 sites.

The act also makes changes to the "innocent land-owner defense" under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or Superfund. In order to claim the innocent landowner defense, a property owner must demonstrate that, at the time the property was acquired, it did not know and had no reason to know that hazardous substances had been released at the site and that it took appropriate inquiry into previous ownership and uses.

Significantly, the Act provides that the U.S. EPA must, by Jan. 11,2004, establish regulatory standards for satisfying this requirement to carry out all appropriate inquiries. With respect to property purchased on or after May 31, 1997, and until the U.S. EPA promulgates new regulations, the widely used American Society for Testing and Materials (ASTM) standard practice may be used to satisfy the "all appropriate inquiries" requirements.

The act also adds a "bona fide prospective purchaser" defense to CERCLA liability reflecting the fact that the purchaser of a brownfield site might indeed be acquiring a contaminated site that requires cleanup. This new defense provides that a party whose liability is based solely on the purchaser being a site owner or operator will not be liable, provided that the purchaser does not impede any site response actions. In order to qualify for the bona fide prospective purchaser, the disposal of hazardous substances at the site must have occurred prior to the bona fide purchaser's acquisition and the purchaser must, among other things, perform appropriate inquiries and due care in dealing with hazardous substances at the site.

The act creates two "small business" exemptions from CERCLA liability, which apply only under very specific circumstances: the DeMicromis and-the Municipal solid Waste Exemptions. Under the DeMicromis is Exemption, CERCLA liability will not attach to generators or transporters if the total amount of the material containing hazardous substances sent to the site in question was less-than 110 gallons of liquid materials or less than 200 pounds of solid material and all or part- of the disposal, treatment or transport to the site occurred before April 1, 2001. However, the DeMicromis Exemption does not apply if the hazardous substances in question contributed significantly or could contribute significantly to the cost of the response actions at the site.

The Municipal Solid Waste Exemption provides protection from CERCLA liability for the following generators of municipal waste: Owners, operators, or lessees of residential property from which the municipal solid waste was generated or businesses that employ on average not more than 100 full-time individuals and that are small business concerns during the three taxable years preceding the date of notification of potential liability under CERCLA or organizations exempt from tax during the taxable year preceding the date of notification of potential liability that employed not more than 100 paid individuals at the location which generated the municipal solid waste. There are certain exceptions to the Municipal Solid Waste Exemption similar to those applicable to the DeMicromis Exemption.

The act provides for a number of additional changes under CERCLA, which are beyond the scope of this article. However, it is noteworthy to mention that, subject to certain requirements, final listing of a site on the National Priorities List will be deferred at the request of a state if the site is the subject of a state voluntary cleanup. Most of the harsh liability provisions under the federal Superfund remain intact under the Small Business Liability Relief and Brownfields Revitalization Act. Nonetheless, the passage of this law has received widespread enthusiasm. The act represents good public policy that should encourage economic growth and the redevelopment of Brownfields.