October 01, 2013

Is CERCLA Owner Strategy Changing?

James Andreasen

Recent CERCLA cases suggest that purchasing contaminated properties may be safer than some assume, at least if the stars (or at a minimum the facts) align correctly. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675 (2006), property owners are defined as liable for any necessary remediation costs. Various exceptions, including the innocent purchaser defense, added to the 1980 statute as part of a 1986 amendment, protects purchasers who had no reason to know of contamination after conducting all appropriate inquiry into the condition and past uses of the property. 42 U.S.C. § 9601(35). This exemption created a new industry in conducting the requisite inquiry and resulted in the U.S. Environmental Protection Agency (EPA) and entities such as the American Society for Testing and Materials (ASTM) developing standards for compliance with the appropriate inquiry requirements. It left skeptics wondering if EPA or a court would ever likely find an inquiry was “appropriate” if it missed contamination discovered after purchase and requiring a response action. As part of 2002 amendments, Congress grafted on a potentially more expansive defense, called the bona fide prospective purchaser defense, that could protect purchasers even if they knew of contamination before purchasing the property. 42 U.S.C. § 9607(r). Maintaining the defense requires not only all appropriate inquiry, but also compliance with a laundry list of criteria aimed at assuring the purchaser protects the environment from the known conditions. Those ongoing obligations became the subject of EPA guidance and ASTM standards, as well.

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