By Andrew H. PerellisPatrick D. Joyce, and Craig B. Simonsen

Seyfarth Synopsis: Businesses and industries across the country which own or have interests in facilities and properties that may come under the broad scope of these new Superfund “Recommendations” will need to stay attuned and involved with what the Agency is doing relating to your interests. 

The U.S. Environmental Protection Agency recently released its Superfund Task Force Recommendations Report (Report). The report, ambitiously, provides “42 specific and detailed recommendations to streamline and improve the Superfund program.” Along with the Report, EPA Administrator Scott Pruitt also released a directive to EPA leaders and offices across the Agency of eleven “specific actions that should be implemented right away, with renewed focus,” including the identification, within 60 days, of the “sites where the risk of human exposure is not fully controlled.”

The Agency claims in its news release on the Report that “the recommendations of the Superfund Task Force, when implemented, will improve and expedite the process of site remediation and promote reuse.” The 42 Superfund Task Force recommendations are organized into five goals:

  1. Expediting Cleanup and Remediation;
  2. Re-invigorating Responsible Party Cleanup and Reuse;
  3. Encouraging Private Investment;
  4. Promoting Redevelopment and Community Revitalization; and
  5. Engaging Partners and Stakeholders.

In addition, the goals in the Task Force Report are accompanied by a set of strategies that include actions which are to commence in as little as 30 days from the Report’s approval.

A few of the notable recommendations include:

  • Providing “reduced-oversight incentives” to cooperative, “high-performing PRPs,” and use of enforcement tools as disincentives for protracted negotiations, or slow performance under cleanup agreements, including”
    • actively using enforcement authorities, including more prevalent issuance of unilateral orders to recalcitrant parties to discourage protracted negotiations
    • prohibiting PRPs from multiple chances to revise the same document when initial submittal is subpar
  • Focusing on sites which have “taken far too long to remediate” including:
    • establishing an “Administrator’s Top Ten” list which will get Administrator Pruitt’s weekly attention and
    • directing additional resources to sites that have been on the National Priorities List (NPL) for five years or longer;
  • Identifying third parties to invest in NPL sites and other “innovative tools” to “accelerate cleanups and promote reuse” such as:
    • utilizing alternative approaches to financing site cleanups, including environmental liability transfer and protections for third party investors and
    • working with PRPs to better integrate reuse needs into cleanup activities;
  • Prioritizing NPL sites where remedies have already been selected;
  • Encouraging the use of new technologies and clean up approaches by PRPs; and
  • Incentivizing PRPs who perform “timely, high quality cleanup” such as:
    • reducing oversight costs for PRPs that perform timely, high quality work and
    • increasing PRP and Agency adherence to project deadlines.

For businesses and industries across the country which own or have interests in facilities and properties that may come under the broad scope of these new Recommendations, diligence and attention are the key words. Stay tuned and involved with what the Agency is doing relating to your interests.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Environmental Compliance, Enforcement & Permitting Team.

By Patrick D. Joyce, Jeryl L. Olson, and Craig B. Simonsen

EPA SignThe U.S. Environmental Protection Agency is modernizing its self-disclosure policy, commonly known as the Audit Policy, through a centralized “eDisclosure Portal” to receive and automatically process self-disclosed civil violations of environmental laws. 80 Fed. Reg. 76476 (December 9, 2015).

The new Portal will serve as an alternative to traditional paper or telephone disclosures, with the EPA encouraging users to use the eDisclosure Portal to make the disclosure process faster and more efficient.  EPA hopes that the eDisclosure Portal will encourage more violators to self-disclose in a timely manner.

The eDisclosure portal will accept new disclosures involving almost all types of civil violations, which will be placed into two categories:

  • Category 1 Disclosures: all EPCRA violations except CERCLA 103/EPCRA 304 chemical release reporting violations and EPCRA violations with significant economic benefit.
  • Category 2 Disclosures: all non-EPCRA violations, EPCRA violations where the violator cannot meet the Audit Policy “systematic discovery” (audit) requirement, and all EPCRA/CERCLA violations excluded from Category 1.

Pre-existing unresolved EPCRA disclosures may be resubmitted through the eDisclosure system within 120 days after launch of the portal, or by April 7, 2016.

In its eDisclosure Information Sheet, EPA notes that it is retaining the incentives outlined in its “New Owner Policy,” but that it will continue to “accept and process new owner disclosures outside the eDisclosure system.”

The requirements for the voluntary disclosure process, including the twenty-one (21) day disclosure period, will remain the same.  An online Compliance Certification will be due within sixty (60) days of submitting the initial online disclosures (or within ninety (90) days for Small Businesses Compliance Policy disclosures), but violators may request an extension for Category 2 disclosures.

EPA will spot check Category 1 disclosures to ensure accuracy and all Category 1 electronic Notices of Determination are conditional upon the accuracy of the representations made by the violator.  EPA will screen Category 2 violations for criminal violations and other serious issues.

While the benefits of the eDisclosures process for the Agency are apparent, companies considering disclosures should carefully consider the pros and cons of disclosure, the timing requirements, and the risks associated with disclosures.

For any self-disclosure questions, and for assistance with any of your disclosures, please contact the authors, your Seyfarth Shaw attorney, or any member of the Environmental, Safety & Toxic Torts Team.

By Andrew H. Perellis, Patrick D. Joyce, and Craig B. Simonsen

The Fifth Circuit recently held that a seller of dry cleaning chemicals did not assume Superfund “arranger” liability by merely selling a useful but hazardous chemical with the intent that it be used by a dry cleaning business that then subsequently discharged the contaminant into ground water. Vine Street, LLC v. Borg Warner Corp., No. 07-40440 (5th Cir., January 14, 2015).

Vine Street is one of the first Court of Appeals to consider “arranger” liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9607(a)(3), in light of the Supreme Court’s decision in Burlington N. & Santa Fe Ry. Co. v. U.S., 556 U.S. 599 (2009), holding that arranger liability attaches only if there is an intent to dispose of a hazardous substance..

A Borg Warner Corp. subsidiary, Norge, designed and sold dry cleaning equipment to Vine Street LLC in the early 1960s.  Despite efforts to prevent discharge through an engineered reclamation system, some of the perchloroethylene (PERC) used in the dry cleaning process was discharged into the sewer.  In 2006, the District Court held a bench trial and ruled that Norge was liable to Vine Street for 75% of the costs associated with cleaning up PERC plume because Norge knew its reclamation system was not 100% effective and some of the PERC might end up in the sewer.

Borg Warner appealed the judgment to the 5th Circuit, but it was stayed due to ongoing bankruptcy proceedings.  By the time the stay was lifted, the Supreme Court had published its ruling in Burlington Northern that “knowledge alone is insufficient to prove an entity planned for the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.”

In Vine Street, Borg Warner argued that Norge (and therefore Borg Warner) was not liable to Vine Street under CERCLA because it did not intend to dispose of the PERC when it sold the dry cleaning equipment and an initial supply of PERC to the cleaners in the 1960s.  The Fifth Circuit Court reversed the District Court judgment against the seller, finding that the “purported arranger [must take] intentional steps to dispose of a hazardous substance.”  The District Court had applied an outdated Fifth Circuit standard that only required a “nexus” between a purported arranger and the disposal of waste (Geraghty & Miller, Inc. v. Conoco, Inc., 234 F.3d 917 (5th Cir. 2000).

Vine Street presents us with another reminder that CERCLA’s arranger liability depends upon a fact-specific inquiry as to whether the entity had the necessary intent to dispose of a hazardous substance.

By Andrew H. Perellis, Jeryl L. Olson, and Ilana R. Morady

On October 6, 2014, EPA finalized an amendment to the “All Appropriate Inquiries” (AAI) rule to remove the reference to ASTM E-1527-05. 79 Fed. Reg. 60087. This means that ASTM E-1527-05 is no longer adequate to establish landowner and lender liability protections under CERLA. Buyers, sellers, and lenders take note: you will now need to ensure that your AAI is conducted under the newer 2013 ASTM standard.

“All Appropriate Inquiries,” or AAI, is the process of evaluating a property’s environmental conditions and assessing the likelihood of any contamination. Buyers, Sellers and Lenders involved in the transfer of real estate, including real estate transferred as part of a corporate merger, acquisition or asset sale, know that ASTM E-1527 is the typical starting point for conducing AAI and thus obtaining landowner and lender liability protections under the environmental statute CERCLA. In 2013, the 2005 ASTM standard was revised (see our article, SOMETHING NEW IS IN THE AIR:  Important Changes to ASTM E 1527 “Phase I” Environmental Due Diligence, to read more about the 2013 revisions). EPA’s policy at the time was that both ASTM E1527-05 and E1527-13 were consistent with the AAI rule at 40 CFR Part 312.  Now, however, EPA has amended the AAI rule  to remove the reference to ASTM E-1527-05, thus rendering the 2005 standard inadequate for establishing CERCLA landowner and lender liability protections.

The amendment comes after EPA received many adverse comments in response to its decision to allow both ASTM E1527-05 and E1527-13. Commenters stated that using two standards could create confusion, especially since even ASTM no longer recognizes 2005 as meeting its standards for good customary business practice. EPA ultimately agreed, and is now requiring the 2013 standard to establish AAI. Thus, if you are commissioning a Phase 1 audit report to establish AAI, you will need to make sure  the environmental consultant performing the Phase 1 relies upon ASTM E1527-13.

By Andrew H. Perellis and Patrick D. Joyce

The Ninth Circuit Court of Appeals recently held that a district court must provide deeper scrutiny to Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §9601 et seq. (1980), consent decrees.

The August 1, 2014 decision in State of Arizona v. Ashton Company Inc. Contractors and Engineers, et al., No. 12-15691 (9th Cir. August 1, 2014) changes what had previously been a virtual rubber stamp of approval into a significant hurdle to speedy CERCLA settlements.  The case addressed liability of several potentially responsible parties (PRPs) under CERCLA and the Arizona Water Quality Assurance Revolving Funds (WQARF). The State of Arizona was seeking recovery of cleanup costs resulting from the contamination of the Broadway-Patano Landfill Site, a hazardous waste site in Tucson, Arizona.

After an investigation that ended in 2009, the State sent settlement offers to those PRPs who had requested early settlement and were also de minimis parties.  The proposed settlement agreements required each settling party to pay a specified amount in exchange for a release of liability under CERCLA and WQARF.

The State initiated the lawsuit to receive judicial approval of the proposed settlement agreements.  However, several non-settling PRPs moved to intervene in the case, objecting to the proposed settlement agreements.  The intervenors argued the State had not provided enough information to the district court to allow the court to make an decision on whether the proposed settlement agreements were fair and reasonable and consistent with CERCLA’s objectives.

The district court approved the proposed settlement agreements, deferring to the Arizona Department of Environmental Quality’s (ADEQ) judgment that “the public interest is best served through entry of th[e] agreement[s].” State of Arizona v. Ashton Company Inc. Contractors and Engineers, et al., No. 10-634 (D. Az. February 21, 2012). The Ninth Circuit Court of Appeals partially reversed the district court’s decision, saying the court had failed to independently scrutinize the terms of the settlements, as required under CERCLA.

Traditionally, early consent decrees have been used as a way to remove de minimis parties from litigation so the court can focus on determining liability for those PRPs who were more involved at a site.  Making a liability determination is not typically a speedy process, as liability is not based solely on the mass or volume of waste provided.  Rather, more complex factors are often taken into consideration including: concentration of hazardous substances contributed, type of hazardous materials contributed, knowledge of effects on the environment, and whether disposal was done in good faith.

In reversing the district court, the Ninth Circuit found the district judge had given too much deference to ADEQ’s assurances that the settlements were fair and reasonable.  Further, the Ninth Circuit criticized the district court for not even discussing the amount each settling PRP would pay.  Rather, the district court merely found the settling PRPs were de minimis because ADEQ calculated their liability to be between 0.1% and 0.2% of the total $75 million cost.  The Ninth Circuit found that a state agency such as ADEQ (unlike U.S. EPA) was not entitled to deference concerning its interpretation of CERCLA, a federal statute, and the district court “may not abdicate its responsibility to independently determine that the agreements are fair, reasonable, and consistent with CERCLA’s objectives.”

After Arizona v. Ashton, to satisfy the Ninth Circuit’s mandate for deeper scrutiny of settlement agreements, the settling parties will now have to provide a suitable record showing that the allocation underlying the settlement is appropriate.  Requiring increased judicial scrutiny of CERCLA settlements is particularly appropriate in light of CERCLA’s provision giving contribution protection to settling parties.  A non-settlor who ultimately pays more than its fair-share of liability has no recourse against parties that have settled and enjoy contribution protection.  As such, judicial scrutiny of whether a settlement is appropriate mitigates against early settlors getting a ‘sweetheart deal.”

Many attorneys on the business and legal sides of transactions involving the transfer of real property have developed working knowledge of the primary purposes of performing Phase I environmental due diligence: (1) gain information on the environmental conditions of a property; (2) establish defenses to CERCLA liability; (3) secure lending; and (4) secure insurance.

Many attorneys are also generally familiar with the CERCLA defenses parties seek to establish when conducting appropriate environmental due diligence:  (1) Innocent Purchaser Defense; (2) Bona Fide Prospective Purchaser defense (also applies to tenants); (3) Contiguous Property Owner defense; and (4) Lender Liability defense.

Notwithstanding this collective knowledge, environmental attorneys often receive the question: What is a REC, anyway?

For the answer, do checkout this discourse, beginning at page 14, prepared by Ilana Morady, Jeryl Olson, and Andrew Perellis.

By Jeryl L. Olson

In follow-up to our August 16, 2013, blog regarding the EPA’s Direct Final Rule installing the new ASTM E1527-13 as an alternative, updated process for conducting Phase I environmental due diligence, it should be noted the Agency has indicated (in an email to BNA reporter Pat Ware) that it will WITHDRAW that rule.  78 Fed. Reg. 64403 (Oct. 29, 2013).

The ASTM E1527 standard is identified in 40 CFR Part 312 as the standard to be followed to ensure a user of the standard can assert Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) affirmative defenses (innocent purchaser and bona-fide prospective purchaser defenses) to CERCLA liability for contaminated real property,  The ASTM E1527 standard is universally used in real estate transactions to assess environmental conditions on properties subject to transactions.

The withdrawal is based on comments received by EPA which criticize not just the terms and conditions of the 2013 version of the ASTM standard, but EPA’s interpretation of how and when the new standard can be used. BNA reports that comments were received which criticized the Agency’s position that users may rely on either the 2005 or the 2013 versions of the standard when performing Phase I assessments. The BNA reported criticisms suggest that because the 2013 standard will be more expensive, institutional users of the standard (e.g. lenders) who tend to be high-volume purchasers of consulting services for Phase I assessments will continue the use of the 2005 standard, which is less expensive, thus rendering the 2013 standard at best moot, but most likely, confusing and potentially controversial to the myriad users of Phase I reports.

It is expected that consultants who have been gearing up for the new 2013 standard which was anticipated to become effective late this fall, will fall back for now and will be proposing services based solely on the 2005 standard.

NOTE: This blog has been updated with a more recent blog.

By Jeryl L. Olson

The U.S. EPA has published its approval of the updated ASTM Standard that is the basis for the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) affirmative defenses.  Amendment to Standards and Practices for All Appropriate Inquiries, 78 Fed. Reg.  49690 (August 15, 2013). 

EPA published its approval of the “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process,” ASTM E1527-13, updating ASTM E1527-05.  The codification of the ASTM standards as the 40 CFR Part 312 (Innocent Landowners, Standards for Conducting All Appropriate Inquiries) EPA- approved method of performing environmental due diligence for purposes of establishing the innocent purchaser defenses and bona fide prospective purchaser defenses  has broad ramifications; even where the purpose of conducting environmental due diligence  is not to establish the basis for a future CERCLA defense,  the standard is so universally applied that it has become defacto the standard of environmental due diligence. 

There are no substantive differences between the 2005 and 2013 version of the ASTM Phase I due diligence standard, and therefore EPA has published the updated standard as a direct final rule.

By Andrew H. Perellis and Ilana R. Morady

Suppose you enter into a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Administrative Order to perform remediation where your release of liability is conditioned on successful performance of the remedy to the U.S. Environmental Protection Agency’s satisfaction. You want to recover some of your response costs so you sue other potentially responsible parties. Do you sue under Section 107 of CERCLA for cost recovery with the prospect of joint and several liability, or do you sue under Section 113 for contribution?

The Seventh Circuit addressed this question in its December 19, 2012 decision, in Bernstein v. Bankert, Nos. 11-1501 and 11-1523. We wrote about this decision in our February 21, 2013 blog. Now, following a request for a panel rehearing and consideration of amicus EPA’s concerns,the Seventh Circuit has issued an amended opinion superseding its prior opinion. See July 31, 2013 amended decision. The amended opinion does not alter the substantive outcome of the earlier decision, but is a must read if you are a “CERCLA-hound,” as we are.

We could spend pages discussing the Section 107 v. Section 113 dichotomy, but won’t do so here. The very short version is that according to the Seventh Circuit, there are specific triggers for when a Section 113 contribution claim is available. Either the party must have been subjected to a civil action under CERCLA Sections 106 or 107, or the party must have “resolved” its liability to the United States for some or all of a response action in an administrative or judicially approved settlement. See CERCLA Section 113(f)(1) and 113(f)(3)(B). If either of those triggers have occurred, not only is contribution available, it is the only remedy available. In other words, an action under Section 107 is out of the question.

Responding to amicus EPA’s concerns, the Court’s amended decision acknowledges that a party can resolve its liability at the time that it enters into a settlement with EPA. However, whether the settlement actually resolves the liability is dependent on the language of the settlement. If the settlement only conditionally resolves liability based upon satisfaction of future performance, contribution is not available while performance is taking place.

So does this result discourage a party from entering into an agreed order with EPA because it cannot pursue contribution (or receive contribution protection)? Not at all, according to the Seventh Circuit. Rejecting EPA’s contention, the Court said that a party who is performing under an administrative order where liability is only conditionally resolved still has a remedy — a Section 107 action!

Now you might say to yourself, isn’t a Section 107 action even better than pursuing a Section 113 action? Under Section 107 not only do I get a longer statute of limitation period, but I also get to sue for joint and several liability. Why would I ever want to sue for just my proportional share under Section 113 when I can bludgeon my adversary with the prospect of obtaining all of my response costs under Section 107 (thus avoiding my fair share of liability)?

And now we get to the most interesting part of the amended decision. In response to this musing, the Seventh Circuit states: “the mere fact that the [plaintiffs] seek to impose joint and several liability does not mean they will be successful.” According to the Seventh Circuit, the opportunity for apportionment exists; indeed: “there is not more risk that a defendant could be gamed into shouldering full liability, or more than his fair share, by a plaintiff with a § [107] cost recovery action than by a plaintiff with a § [113] contribution action.” Same risk; same outcome. Either statutory provision gets to the same result.

But is this actually so? Let’s take a closer look because we suspect that the Seventh Circuit’s solution to the Bankert case could raise problems in the future. As we know, under the Supreme Court’s ruling in Burlington Northern and Santa Fe Railway Co. v. U.S., 129 S. Ct. 1870 (2009), liability under CERCLA is not always joint and several if a defendant can establish that the harm is divisible. The Seventh Circuit’s holding in Bankert arguably conflates divisibly and apportionment. This may be fine for Section 107 actions brought by one liable party against another, indeed it is the logical outcome, but can this also be enough to defend against an Section 107 claim brought by the Government? If all one needs to establish for divisibility when sued by the Government is that there are multiple parties and a basis for apportionment, then there is little teeth in the threat of joint and several liability.

On closer scrutiny, the prerequisite for defeating joint and several liability as articulated in Burlington Northern is two-fold: first, a finding that the harm is theoretically capable of being divided, which is a question of law; and second, that there is a basis for apportionment, which is a question of fact. The Seventh Circuit appears to either ignore the question of whether the harm is divisible, or implicitly finds that as between two liable parties, the “harm” to evaluate for divisibility is not the harm to the property or to the environment, but instead is only the financial harm that results from performing remediation.

Is this all a tempest in a teapot in actions between liable parties? Maybe. In a fight between liable parties where plaintiff is seeking joint and several liability, if defendant fails to defeat joint and several liability based on divisibility, can it not obtain the same result by pursuing a counter-claim for contribution? Remember, the party performing the remedy under an administrative order with a contingent release of liability also enjoys no more than contingent “contribution protection.” Accordingly, the defendant counter-claims in contribution. If defendant establishes several liability, it pays only its share of liability. If, however, plaintiff prevails on joint and several liability, then defendant is entitled to recover from plaintiff in contribution for sums beyond its proportionate share. Either way, between liable parties under a Section 107 claim, the court ultimately should end up apportioning liability regardless of whether the “harm” is divisible.

By Andrew H. Perellis, Philip L. Comella, and Craig B. Simonsen

In U.S. v. D.S.C. of Newark Enterprises Inc., No. 09-2270, (D.N.J. 6/12/13), the Court found that the sale of an ongoing business with hazardous materials remaining on site, which is later released by the purchaser, does not make the seller liable for having arranged for disposal.

The case concerns U.S. Environmental Protection Agency (EPA) response costs incurred during the cleanup of a three-acre industrial site (Site), located in Trenton, New Jersey. In 1983 the Site was sold, including its manufacturing equipment, baghouses, works-in-process, raw material inventories, and supplies. The parties to the sale characterized the inventories as “useful products” and valued the products as part of the business assets that were sold as a “going concern” for over $2 million.

The new owner began its brake manufacturing operations on the Site, including use of the baghouses and other equipment purchased. A leasee then leased the Site from the owner and manufactured brake shoes and pads on the Site from 1983 until approximately 2002. The operational processes created asbestos dust, which was collected and stored in the baghouses located on the Site.

In 2002, the leasee “ceased operations at the [Site], abandoning barrels and other containers of hazardous substances and waste materials….” The EPA then engaged in removal activities. As a result, the EPA incurred response costs of over 1.2 million in the Site cleanup.

In the end, the Court found that contrary to the buyer’s “argument that any use of the baghouses constitutes disposal, containerizing asbestos dust for temporary storage does not constitute a ‘disposal’ under CERCLA.” Further, the seller had demonstrated to the Court that the record revealed no facts indicative of an “intent to arrange for the disposal of hazardous substances.”