FREQUENTLY ASKED QUESTIONS-PART 3--Liability for Historic site conditions or Historic off-site waste disposal

As always, nothing in this blog is intended as legal advice for a specific situation or for general application;  and it should not be used or relied upon in that manner. Good legal advice can only be provided with respect to a  specific situation.  My blog is an opportunity to  share my views on  various generic  issues which I have encountered, and as such, are intended solely as “food for thought”.   

This blog series features short answers to a number of common questions I have encountered pertaining to scope of Phase I investigations, and potential liabilities for historic  UST contamination or other site contamination.   For anyone interested in diving into the issues in more detail, we will begin a related 90 minute Zoom Roundtable series, in mid-June ( 2021), covering each of the FAQ areas covered in the blogs.   If you would be interested in participating, just send me an email at MitchellBurack@BurackEnvironmentalLaw.com.

1.     Question:  A Buyer’s  Phase I report indicates that historic industrial areas on the property reportedly  had “RCRA Closure” several decades ago, before it was bought by the current owner.  Does either the Seller or the buyer need to worry?      

   Answer—Maybe…

·      All RCRA closures are not equally thorough. It is common for closure of areas such as pits below equipment, to be closed by cleaning and filling, without extensive sampling. This is especially true in the early to mid 1980s, when the RCRA program was starting up.

·      An important value point for RCRA closure documentation, can be the documentation  indicating the location of historic operational areas involved with hazardous substances. Detailed evaluation of any such information can be  critical  for assessing the need for follow up sampling;  but such evaluation will not necessarily be considered as  part of the original  Phase I investigation scope of work.   

·      If there is a continuing contamination issue, the current owner can be liable to address it despite not having caused it;  once  they no longer own the property, liability would become less clear.  A new owner would inherit the same no-fault liability that the seller had.  

2.     Question: We are purchasing a property as part of the business assets of  Seller’s operations there.  Do we need indemnity for any  liability as a “successor” for future property damage claims by a neighboring resident?    Health injury claims due to historic vapor intrusion?  

Answer--Yes—because any future claimant will  undoubtedly take the legal position that you are a successor; and the cost of legal defense of such claims can be substantial—regardless of outcome in court. 

·      Such claims also frequently arise when Superfund site notice letters are issued to 1980s-era customers of a landfill or drum recycler, and/or their  presumed successors. 

·      Predicting final legal  outcome is not an exact science—but there are several cases which illustrate the possibility of being held liable, based on perceived “continuation” of  Seller’s business, or absorption of a business in a manner which is perceived as a “de facto merger”.

·      When relying on a contractual indemnity it is always wise to consider the the likely future resources of the Seller, as well as the likelihood of future environmental claims, based on due diligence information.   

3.     Question: We received a demand letter from the owner of a former drum reclamation plant property, which  we have never heard of, m,  being remediated under a  CERCLA settlement, which we have never even heard of.   They say we are a  liable party as  the successor to the company who owned and operated  our property  35 years ago and sent “RCRA-empty” drums to the reclamation facility.  Can they do that? 

Answer-- That is a common tactic reflecting claimants’ strategy of roping everyone possible into a PRP group, regardless of factual uncertainties and possible legal defenses.  

·      EPA and private settling PRPs frequently create a list of PRPs from available customer lists and receipts from 35 years ago, and do a quick check to see if the company is still in business , if any other company is at that address, or if any other company looks like a possible successor.  They assume that any letter recipient having a plausible objection to characterization as successor, will make that known; and if their argument is very convincing, perhaps they can be dleted argue the point and submit appropriate documentation.  

·      As for the ultimate liability result—many clients are surprised to hear that environmental law applies a somewhat broader standard of successor liability than the traditional rules applicable to a purchase of “assets only”.   It is extremely common to see companies who purchased a business in its entirety, including all related real estate, and continued similar operations there, using  the business name and invoice stationery , and employing many of the same managers, all  without (or despite) counsel advice. If substantially all of the assets of the company have been acquired, there is a potentially strong case for successor liability, under such facts; and it may  be challenging to prove otherwise.   

FREQUENTLY ASKED QUESTIONS—PART 2--UST LIABILITY

Mitchell Burack          April 6, 2021  

As always, nothing in this blog is intended as legal advice for a specific situation or for general application;  and it should not be used or relied upon in that manner. Good legal advice can only be provided with respect to a  specific situation.  My blog is an opportunity to  share my views on  various generic  issues which I have encountered, and as such, are intended solely as “food for thought”.   

This blog series features short answers to a number of common questions I have encountered pertaining to scope of Phase I investigations, and potential liabilities for historic  UST contamination or other site contamination.   For anyone interested in diving into the issues in more detail, we will begin a related 90 minute Zoom Roundtable series, in mid-June ( 2021), covering each of the FAQ areas covered in the blogs.   If you would be interested in participating, just send me an email at MitchellBurack@BurackEnvironmentalLaw.com.

1.     Question:  We are planning facility expansion work in an area where historic USTs were reportedly  used by the tenant of an owner,  2 generations previous.  The tanks were allegedly all removed just before PA DEP  issued their first tank regulations in the early 1990s. Are we liable for any cleanup of releases from those tanks which were not addressed  before?  Could we have cost recovery claims against previous owner/operators?  

     Answer--  Both you and past owners may have liability, given the broad provisions of  state law.  However, a past “operator” may not be as easy a target as a past owner; and the outcome would depend on the facts regarding who did what and when.      

·      The PA Tank Act has confusing language which sets forth 2 different dates for determining ownership liability--  1) the effective date of the Tank Act (August  6,  1989) ; and  2)  The effective date of the federal UST legislation( November 8, 1984) , regulatory responsibility for which has been delegated to the states.    Courts have held that the PA Tank Act  can constitutionally  impose retroactive liability  before its own “effective date”; and also that the inconsistency in the 1984 and 1989 deadlines is not important.

·       For any tank proven to have been emptied before   November 8, 1984,  the  historic owner would be considered the “owner” of that tank and liable for subsequent releases. But liability for their prior  tenant as a past operator, is a still  an unsettled legal issue.  If the tank still contained product  on November 8, 1984,  the more recent previous site owner is considered “owner” even if they never used the tank.  In any case, the statute also imposes liability on  the current owner or occupant of property where a UST is or was located. That is why good  environmental due diligence includes looking  for evidence of old USTs that may have been “closed in place” without  attention to sampling or excavation of contaminated soils. 

·      Another  question is whether the tank is considered to be a “regulated tank” such that current specific UST corrective action regulation requirements would apply.  The 2019 PA Act 2 guidance says that remediation of  a “regulated” UST must comply with specific requirements of the UST corrective action regulations, including the requirement to completely remove all free product contamination on groundwater. This rule  can be very burdensome—especially when the product thickness is a couple of inches or less and not moving anywhere.    Unregulated tanks  (e.g. non-commercial heating oil tanks, or tanks closed before August 1989),   are covered only by Act 2—which provides for  a  more flexible evaluation of plume stability, with determination of whether off-site migration is likely.   

·      Regardless of Tank Act applicability, any claim seeking remediation of release to groundwater will usually also include the Cleans Streams Law, which creates    liability for current  owner and and occupant  of property causing surface or groundwater contamination.

2.     Question:  A former gas station property, had a release 10 years ago, and has ongoing monitoring and treatment of groundwater by the former owner.  Funding is being  provided by  the PA USTIF fund.   Can a Buyer  rely on continued USTIF payments until DEP final approval?   

       Answer--Need to look at several things here:

·      USTIF has a number of strict eligibility requirements, relating to proper registration of USTS, payment of registration of fees, and assignment of rights to USTIF paymentsupon sale of a property.   All eligibility issues need to be checked off  before closingon a purchase.

·      The statutory USTIF coverage  limit irs $1.5 million per release.   However, In many cases, coverage has been significantly  reduced by proration based on determining that some of the release occurred before the USTIF statutory start date in 1994.   You need to confirm up front,  that there is sufficient USTIF coverage funding  left for necessary work, including potential future treatment upgrades. 

·      USTIF and DEP frequently disagree on appropriate extent of necessary remedy; and USTIF will not always cave and cover  DEP-required costs as “reasonable”.  It is important to assess up front, whether there is risk of a significant differential between DEP expectations and USTIF willingness to cover as reasonable costs.

FREQUENTLY ASKED QUESTIONS--PART 1--ENVIRONMENTAL DUE DILIGENCE

Mitchell Burack April 1, 2021

FREQUENTLY ASKED QUESTIONS-Part 1—ENVIRONMENTAL DUE DILIGENCE 

As always, nothing in this blog is intended as legal advice for a specific situation or for general application;  and it should not be used or relied upon in that manner. Good legal advice can only be provided with respect to a  specific situation.  My blog is an opportunity to  share my views on  various generic  issues which I have encountered, and as such, are intended solely as “food for thought”.   

This blog series features short answers to a number of common questions I have encountered pertaining to scope of Phase I investigations, and potential liabilities for historic  UST contamination or other site contamination.   For anyone interested in diving into the issues in more detail, we will begin a related 90 minute Zoom Roundtable series, in mid-June ( 2021), covering each of the FAQ areas covered in the blogs.   If you would be interested in participating, just send me an email at MitchellBurack@BurackEnvironmentalLaw.com.

1.     Question: We just completed an ASTM 1527-compliant Phase I investigation for purchase of a property having  historic industrial use.  The report indicates that Seller received PA Act 2 approval for site remediation 15 years ago, and that this is considered a “Controlled” REC.  There is no evidence of any other REC.  Do we need to do anything else? 

            Answer-- Many buyers see a certified Phase I report, confirming an earlier Act 2   approval from DEP, with voluminous appendices attached, and conclude that no further         information is necessary.  However, there are several additional considerations:  

·       An  Act 2 release does not cover all potential future liability contingencies. The scope of an Act 2 release is tied to  the specific contaminants tested for,  as part of the site investigation, and to the media addressed ( soil, groundwater, surface water).  There may also be significant approval conditions or assumptions articulated in the DEP approval letter. All coverage gaps and approval conditions should be evaluated. 

·       Act 2 remedies can range from rigorous cleanup,  meeting residential Statewide Health Standards, to “site-specific” remedies which rely on risk assessment modelling, and  an Environmental Covenant  requiring use restrictions and  maintenance of a site cap to prevent exposure to residual sub-surface contamination.  The amount of effort put into the approved “remediation” needs to be considered, as it may impact property value, as well as compatibility of the property with Buyer’s redevelopment goals.

·       Act 2 approval also does not affect  liability under federal laws such as CERCLA or RCRA, and may not protect against a  state common law damages claim by neighboring property owners.  Thus, it is important to consider the extent to which future EPA involvement is reasonably likely; and whether there are any unresolved off-site contamination issues which could blossom into private citizen claims in the future.  

·       The corollary question is: You are the Seller who  acquired this property after the 2005 Act 2 approval ; and the Buyer’s lender is insisting on detailed Phase II investigation, to assure that all is well.  You don’t want to open a can of worms but you also  seek to sell the property “As-is-where-is”.  What do you do?  The answer is—you need to obtain as much detailed information as possible regarding the work done in 2005, in order to support a position that no further sampling is truly necessary.  Failing that, all you can do is try to limit the location and parameters of sampling in order to minimize the risk of unwelcome surprises.  

2.     Question: If our ASTM-compliant Phase I report missed anything, I have an “innocent purchaser” liability defense for anything we don’t find—Correct?

Answer--  That would be the general rule; but it is, ( as always) more complicated than that. 

·      Ostensibly, an ASTM 1527-compliant Phase I automatically qualifies for the innocent purchaser defense, as “All appropriate Inquiry (AAI)” pursuant to EPA regulations.  But, what if the Phase I investigation followed the letter of the ASTM 1527 protocol, but was carried out very robotically,  with an unacceptably low level of real- world insight, reflecting the very low commoditized fee paid by client?  And 15 years later, issues arise, which seem like they should not have been difficult to spot? Is it still AAI?     A  court will undoubtedly have the opportunity to  resolve that question at some point in the future; when a current and past owner become embroiled in a cost recovery suit over future-discovered contamination.  In the meantime, reliance on a Phase I investigation or report, which  is lacking in insight,  and conveys an impression of just trying to get a lender to accept it, is not good practice, with or without an innocent purchaser defense.

·      This is especially true since the EPA AAI rule does not apply to government OR private actions under the PA HSCA statute ( innocent owner defined differently);  Clean Streams Law ( no innocent owner); or the Tank Act ( no innocent owner).   

3.     Question: If we do  Phase II sampling in areas of suspected historic  industrial use,   we would also have a “Bonafide Prospective Purchaser”  defense for anything we do find—correct?  [so long as we subsequently take “reasonable steps” pursuant to EPA 2019 guidance to contain hazardous substance releases and protect occupants from exposure]

Answer--That is correct. BUT:

·       If sampling suggests significant historic impact which has not been previously addressed in any way, the reasonable steps burden may become significant, and may be  difficult to accurately quantify up front. 

·       One should also consider that,  with or without legal requirements to act, the reasonable care obligations of  becoming owner/operator or lessor may require extensive work, just  to assure that property is safe for occupancy and that property value is not eroded by unresolved environmental issues.

·       Another consideration is that PA environmental statutes do NOT have a BPP defense. This is an important limitation; because a majority of  properties having historic environmental issues will eventually be resolved under State programs ( unless there are RCRA corrective action or PCB issues); and most remedial cost liability disputes, if any, will be resolved as private cost recovery actions between past and present owners and tenants, with claims under both State and federal laws.  CERCLA liability is only one potential piece of the puzzle for most sites.   

PFAS UPDATE

(Like all my blog entries, this is intended to be informative but not intended as legal advice in any specific situation; and no one should be relying on any generic regulatory interpretations herein, as a substitute for careful fact-specific evaluation of regulations and guidance) . 

Shortly after posting my April 29 blog on PFAS groundwater contamination, I learned that EPA had published revised draft guidance on risk-based action levels for both PFOA and PFOS.  Thus, a brief update is necessary.

For the last 10 years, EPA health advisory levels have ranged from 0.2 ug/l PFOS and 0.4 ug/l PFOA [ 2009], to 0.070 ug/l (“70 ppt”) for either chemical, individually or combined [ 2016].  

The April 25, 2019 guidance does NOT change EPA’s 70 ppt number.  It just clarifies that this number is the default “preliminary remediation goal” (PRG) in the absence of a federal or state drinking water standard. The new development is that they are recommending 40 ppt as a “screening level”—which means: below that level is considered acceptable risk; and above that level requires evaluation. As I interpret the guidance, this number is NOT based on new conclusions about underlying health risk of PFOA and PFOS. It is simply the mathematical result of modifying the “hazard quotient” (HQ) factor,  to reflect potential additive toxicity of PFOA and PFOS, as well as the likely existence of other PFAS compounds for which toxicity has not yet been evaluated.  70 ppt  is still the  number they stand by for purposes of defining unacceptable lifetime risk, and defining RMG.     

This interim guidance feels like an attempt to wade a little further  into this growing and important public health issue, while being very mindful of the huge potential remedial costs for over 400 federal military bases, and the substantial public drinking water utility costs as PFAS continue to be found all over the country.  It is likely that state drinking water and cleanup standards will be the primary factor for PFAS contamination situations in the foreseeable future; and those numbers are trending lower than 70 ppt and even 40 ppt.   

WHAT DO FIRE FIGHTING FOAM, DRINKING WATER SUPPLIES AND MILITARY BASES HAVE IN COMMON?

(Like all my blog entries, this is intended to be informative but not intended as legal advice in any specific situation; and no one should be relying on any generic regulatory interpretations herein, as a substitute for careful fact-specific evaluation of regulations and guidance) .

Overview of the Problem

The answer, of course is PFAS (Per and poly- fluorinated alkyl substances). Lately we are hearing a lot in the news about Perfluoro octane Sulfonate(PFOS) and Perfluorooctanoic Acid (PFOA) as well as other types of PFAS. Environmental issues began primarily at Teflon and plastics manufacturing facilities, which utilized PFAS as a key ingredient.    Several large class action suits by downgradient residents were settled by Dupont and 3M.   By 2000 or so, concerns were also being raised about the presence of PFAS in Aqueous Film forming Foam (AFFF) [ aka “C-8 AFFF] which is effective against liquid fuel fires.   Military bases and airports relied on this foam to control damage from such fires, and they and first responders often ran fire-fighting drills with such foam. Once applied to the ground, PFASs typically migrate through soils to groundwater, allowing contaminant migration to proximate and not so proximate water supplies. By 2002, some companies had already phased out C-8 AFFF in favor of non-C-8 fluorinated surfactants. However, the U.S. military continued to procure C-8 AFFF; and manufacturing and/or use of C-8 AFFF inventory likely continued until approximately 2015. 

A noteworthy part of the story is that PFASs were not regulated drinking water contaminants and were not even being monitored. However, EPA issued a health “advisory” level in 2009 of 0.2 ug/l for PFOS and 0.4 ug/l. for PFOA.   In 2013 EPA issued an Unregulated Contaminant Monitoring Rule, requiring public utilities to have the appropriate lab tests run to detect PFAS. Two utilities in the Philadelphia region found PSA in this manner and had to shut down their wells.  DEP then commenced sampling private wells within a mile radius and supplying bottled water where necessary. In 2016, EPA issued a revised advisory level of 0.070 ug/l for PFOS and PFOA individually or together.  

As attention became focused on military bases, over 400 military bases became involved in investigating potential PFAS contamination. As of 2017, there were 90 facilities (including the Willow Grove naval air facility) with levels above the 2016 EPA health advisory of 0.070 ug/l.  trying to deal with a PFAS site investigation that typically shows off-site migration and potential impact to both private wells and public water supply wells. Included in that list is the former naval air station at Warminster, PA.  

IMPORTANT FACTS THAT WILL DETERMINE HOW THIS PLAYS OUT IN THE NEXT 10 YEARS

1.     There is no federal drinking water standard (MCL) ; but EPA’S ACTION PLAN FOR PFAS, announced in February 2019, includes efforts to promulgate drinking water standards. The Plan also calls for efforts to regulated PFAS as hazardous substances under CERCLA, even before final promulgation of new MCLs. Until that occurs, there is no statutory jurisdiction for recovery of cleanup costs associated with PFAS;    And several states have promulgated standards as low as 0.014 ug./l.  Pennsylvania has also announced plans to propose drinking water standards for PFAS. Such standards are likely to be lower than EPA’s current 0.70 ug/l guideline.  New Jersey and other states are heading toward a standard of 0.14 ug/l. 

2.       Studies are indicating that PFASs are very persistent in the environment.  They move from groundwater to surface water, up the food chain into human tissue and blood and mothers’ milk, and into sewage treatment effluent and sludge, and landfill waste.  Thus, a public water supply well can easily have a PFAS impact without an obvious local source.  

3.     The same is true for groundwater samples taken at any site for due diligence or for remedial site investigation. Thus, there will be a number of sites where testing for PFAS in groundwater will be prudent.  However, the source will not normally be on site and may not even be nearby. Government investigations of potential sources will be slow and often unproductive.  Private and public claims for cost reimbursement may be likewise unproductive.                                               

4.     Recent reports confirm that PFAS- impacted groundwater may have as many as 100 or more PFAS variations (both precursors to and breakdown products of PFOA and PFOS).  Many of these likely pose similar health risks, but have not even been researched, and are not covered by current EPA health advisory numbers. Some of these substances require unique testing methods, and some of those methods may not be readily available to commercial labs   Some of these “variations” will undoubtedly join PFOA and PFOS as specific substances of concern in the future. Until then, any groundwater sampling which ostensibly “addresses” PFAS issues will need to be evaluated very carefully, to determine what can be learned and what cannot currently be learned. 

5.     Replacement products for C-8 AFFF can still be problematic—because PFASs with chains longer than 8 carbons can break down into C-8 chemicals.  

6.     It is noteworthy that any public OR private well recently discovered to have PFAS, may have had the contaminant for several decades before discovery. By the same token, any individual who has not lived in their home for their entire life, may have had PFAS exposure elsewhere, in addition to any current exposure.  This will undoubtedly further complicate forensics efforts in PFAS cases.  

7.     While the regulatory agencies try to get their arms around the problem numerous class action law suits, by residents affected by regional PFAS groundwater contamination, will continue in the courts, against the companies who previously manufactured AFFF containing PFAS, and the governmental or private parties owning properties from which contamination is spreading.  

The take home point would be that PFAS contamination poses huge liability for foam manufacturers, the military, and some private property owners, and significant costs for impacted local water supply utilities.  And residents who use on- site wells for potable water, will be the last to know of potential health concerns, if PFAS is found in a local public water supply. Significant effort has been devoted to studying and responding to the PFAS problem.  Nevertheless, we are still in the very early stages of accurately identifying the health risks and identifying all the areas of regional contamination which require attention.  

Environmental Issues for Building Renovation, Demolition and new Construction--Part 2- Lead Based Paint

Like all my blog entries, this is intended to be informative but not intended as legal advice in any specific situation; and no one should be relying on any generic regulatory interpretations herein, as a substitute for careful fact-specific evaluation of regulations and guidance. 

QUESTIONS TO CONSIDER

Generally, lead in buildings is only an issue for structures built before 1978.  In addition to lead based paint (LBP), regulated lead can occasionally also be found in roofing material, door and window cornices (decorative frames) and electrical conduits. However, for purposes of this blog, we will generically refer to the most common issue, which is LBP.

 Lead is often perceived by environmental professionals and by contractors as less heavily regulated than asbestos. Nevertheless, the absence in many cases, of applicable EPA or state agency standards is often of minor significance because of the OSHA construction standard at 29 CR §1962.62, which applies to renovation and demolition.  

The key questions to consider for Lead in a renovation or demolition scenario construction are similar to those discussed in Part 1 for asbestos:

1)    To what extent is a pre-demolition/renovation building survey required and how much material sampling is required or advisable?

2)    Is advance notification required if LBP is detected or assumed to be present?

3)    To what extent is pre-demolition removal of LBP required in order to comply with applicable regulations?

4)    If debris is likely to contain LBP, does that affect disposal requirements or use as fill? 

5)    If I follow the regulations and available agency guidance, does that protect me from claims by workers or neighbors alleging negligent exposure to lead dust? 

OSHA Construction Standard:

Initial Exposure Assessment Requirement:

 The first (and often most important) regulatory requirement is to perform an employee exposure assessment in accordance with the regulations.  If the results indicate exposure below the action level of 30 ug/m3, 8 hour TWA, (“negative initial determination”) then the only further requirement is to utilize feasible best practices which assure that exposure will be below the OSHA PEL standard of 50 ug/m3   (assuming 8 hours per day). Feasible best housekeeping practices include efforts to minimize lead accumulation on surfaces, and the use of HEPA filtered vacuums or comparable technology to minimize spread of dust from surfaces where lead accumulates. If the exposure assessment shows results above 30, then a variety of specific protective measures and monitoring requirements kick in.  Additional housekeeping rules also apply if air monitoring shows results above the PEL of 50 ug/m3. Appendix B of the regulation provides detailed descriptions of these protective measures.

No Requirement for Notification or pre-demolition abatement:

 There is no OSHA requirement to notify any government authority if lead is detected.  There is also no requirement to do lead “abatement” prior to renovation or demolition. 

Basic Features of Exposure Assessment:

  An exposure assessment begins with a “Phase I-type” investigation as to whether and where there may be lead present in the material to be disturbed.  As-built drawings, renovation records and other owner documentation should be reviewed. Buildings constructed after 1978 are usually assumed not to pose a lead hazard.  Where LBP may be present, it can be measured by paint chip samples or by x-ray fluorescence (XRF) scanning.  Where presence of lead is confirmed, the next required evaluation must be based on air quality data which is representative of exposure conditions for workers disturbing such material.  This requires real time data or an appropriate simulation of the work site, or access to acceptable comparable data generated within the last 12 months.

Interim Protection When Work Begins Before Results of Exposure Assessment

A compliant exposure assessment can be tedious and resource intensive, as well as frustrating for a construction contractor trying to meet a deadline.  In some cases, contractors may want or need to start work ahead of the exposure assessment results.  The regulations provide that option; but for any of the “high risk” tasks listed in §1962(d)(2), there must be interim protection provided, including respiratory protection, protective clothing, training, and potentially medical surveillance.

Some practical take home points to consider, would be:

          -A lead compliance protocol is not something which can be developed “on the fly” during a project.  It requires up front evaluation of the presence of lead, and potential air sampling, in order to determine the required extent of worker protection.  For contractors not experienced in dealing with lead, it may be necessary to have an experienced consultant put together a compliance plan.

          -An owner’s contractual representation as to knowledge of presence of LBP, is not the end of the story—It is just one piece of the investigation that a contractor must carry out.

        -  If the exposure evaluation indicates expected air levels below 30 ug/cm3 , that does not mean exemption from the standard.   Best Feasible Practices are still required if presence of LBP is known or suspected.

      -If a contractor wants to begin work ahead of exposure assessment results, it is important that the construction advisory team fully consider some of the consequences of interim protective measures.  These include the “optics” of having workers on site in “moon suits”.  In some situations, this can attract detrimental attention from neighboring properties and local press. 

      -A common mistake is the assumption that OSHA standards only apply to material with lead content above 0.5%. In fact, this jurisdictional threshold  only applies to EPA regulations under TSCA,  as described below; and  studies reportedly show that paint with less than 0.5% lead can cause airborne lead levels well in excess of 50 ug/cm3   during activities such as sanding and interior demolition.

EPA TSCA Regulation:

 EPA regulation of lead exposure is currently very limited. Section 403 of the Toxic Substances Control Act (TSCA) requires EPA to address LBP hazards related to dust and soil contamination from building renovation or repairs.   The current Renovation, Repair and Painting (RRP) regulations at 40 CFR 745 only address homes, and school and child care facilities, frequented by children 6 and under.  The program also has a jurisdictional LBP threshold of 0.5% lead by weight, or 1.0 mg/cm2.

The Agency has identified hazard levels for building dust as:  40 ug/ft.2 for floors, 250 ug/ft.2 for interior window sills, and 400 ug/ft.2 for window troughs.  The level for outdoor soil is 400 ppm for a play area, and is otherwise 1200 ppm. These standards are obviously conservative and intended for protection of a sensitive population of residents (children); whereas the OSHA standard protects workers. Nevertheless, owners and contractors frequently use the EPA numbers as a benchmark in non-residential projects, since there are no other commonly accepted numbers for building dust.      

EPA is also required under the federal TSCA statute to address commercial and public buildings, but they have been slow in developing a program, despite a citizen suit seeking to require completion.  In 2014, EPA released a “Framework for Identifying and Evaluating Lead-based paint Hazards from Renovation, Repair and Painting Activities in Public and Commercial Buildings”.  This has been the subject of public comments and a peer review process, but proposed regulations have not yet been issued.  Given the current political climate at EPA, expanded lead regulations under TSCA would seem highly unlikely in the near future. Nevertheless, this 21-page document is arguably the state of the art with respect to non-residential building LBP removal, and is recommended reading for construction professionals.   

Clean Fill Issues:

There is also the question of LBP impact on debris disposal and use of material as fill. PA DEP’s Fill Management Guidance requires one to apply best practices to remove toxic materials (such as leaded paint) from building surfaces before demolition, if the material is to be used as fill. This can be very expensive and objectionable to a sub-contractor who agreed in the contract to “comply with all applicable federal and state regulations” but was not expecting pre-demolition abatement.   On the other hand, DEP’s numerical clean fill standard for lead is 450 ppm, which implies that they do not really expect pre-demolition abatement for paint with low levels of lead.    In situations like this, it is often a good idea to discuss DEP’s expectations with a case manager ahead of time, in addition to seeking opinions from counsel or environmental consultants. It is also wise to make sure that owner and contractor are on the same page. 

Is Regulatory Compliance a Shield Against Common Law Exposure Claims?  

Most lead exposure claims arise from young children chewing on paint chips or surfaces of furniture still coated with LBP. Not surprisingly these situations are most common in older and more poorly maintained rental properties. Landlords in such buildings face potential liability.    Less frequently, a contractor employee or neighbor might take legal action if they feel that a sloppy demolition project exposed them to dust containing lead.  In both of these situations, compliance with existing legal standards is not a barrier to common law claims for negligence—especially since the coverage for lead standards is rather thin, compared to other toxic substances. That should be food for thought before issuing or accepting a contract which just says “comply with all applicable government regulations”. 

ENVIRONMENTAL ISSUES FOR BUILDING RENOVATION, DEMOLITION AND NEW CONSTRUCTION

In addition to my usual caveat (that this is intended to be informative but not intended as legal advice in any specific situation) I want to add that demolition/renovation rules are particularly detailed, and  yet somehow still unclear from time to time. I have provided a fair amount of detail here-especially with regard to asbestos, because I could not think of any other way to usefully describe these requirements.  However, no one should be relying on the generic regulatory interpretations in this blog, as a substitute for careful fact-specific evaluation of regulations and guidance. 

Renovation or demolition of older buildings may pose regulatory liability issues and compliance requirements pertaining to asbestos-containing material (ACM) or lead based paint (LBP).  The applicable regulatory requirements are sometimes fuzzy, which can result in both regulatory issues and legal disputes over contract scope of work. New construction on a Brownfield site poses design challenges and legal issues arising from uncertainty about sub-surface conditions, especially where soils beneath a former industrial building have not been thoroughly examined.  

  In Part 1 of this blog, below, we will consider OSHA and EPA asbestos regulations and liability risks generally.

 In Part 2  we will consider construction regulations pertaining to Lead Based Paint.

  In Part 3,  we will look at new construction on properties having historic industrial use, which can pose a variety of design and regulatory issues for construction contractors, design professionals, and construction counsel.

 In the spring of 2018, I plan to host several multi-disciplinary roundtable discussions covering all of these subjects.  If you think you may not be on the roundtable notice list from last year, [ Phase I investigations] please drop me an email to be added for this round. 

PART 1—DEMOLITION AND RENOVATION ISSUES—ASBESTOS

Asbestos is a potential issue in buildings constructed before approximately 1980.   The common theme for asbestos regulation is minimization of airborne fibers due to disturbance of ACM (defined as containing at least 1% asbestos).

Many construction lawyers, contractors, environmental consultants, and even specialized industrial hygiene/abatement specialists, do not have a full and accurate understanding of applicable legal requirements pertaining to ACM. This can lead to legal disputes over the intended scope of work. It can also lead to regulatory violations with penalties, or law suits by construction workers, site occupants and neighbors against the owner and contractors for negligent exposure during site work.

Some of the key questions which arise include:

1)     Is a pre-demolition/renovation building survey required or advisable? Is bulk sampling required?

2)    Is advance government notification required if ACM is detected or assumed to be present?

3)    Is pre-demolition removal of ACM required in order to comply with OSHA and EPA regulations?  If so, what are the applicable safety standards

4)    If demolition debris is likely to contain some asbestos, how does that affect disposal requirements or use as fill? 

5)    If I follow the regulations and available agency guidance, does that protect me from claims by workers or neighbors alleging negligent exposure?

OSHA construction regulations

OSHA construction rules for asbestos materials are found at 29 CFR § 1926.11.    Regulations include both work practice requirements and numerical standards.  Employers are required to carry out an initial evaluation to assure that air borne fibers will not exceed 1 fiber/cc for a 30-minute period, and 0.1 fibers/cc, 8-hour time-weighted average (TWA).  A Negative Initial Evaluation (NIE) allows work to proceed without a majority of otherwise applicable worker protection measures. However, a number of generic work practices aimed at minimizing airborne release of fibers, can still be applicable. OSHA “Class II” materials (e.g. vinyl asbestos floor tiles) have such requirements. 

EPA regulations

Regulations are located at 40 CFR § 61, and are part of the hazardous air pollutant “NESHAPS” program. These rules are aimed more at minimizing exposure to building occupants and to neighbors.   PADEP regulations incorporate the EPA regulation by reference.  These regulations apply to all buildings except single family residence or multi-family residential with 4 units or less.   Under both EPA regulations and PA DEP regulations, advance notification of demolition is required if there is any ACM, even if the project is ultimately exempt from specific work requirements.

Regulated and Non–Regulated ACM  

The key threshold criterion for substantive requirements under the regulation is whether the ACM is already in friable condition (able to be crushed into powder by hand pressure) or likely to become friable as a result of demolition/renovation activity or subsequent debris consolidation or recycling. Such material is considered “Regulated” ACM (RACM) and is subject to pre-project removal requirements if the affected surface area exceeds 160 square feet of floor or other surface, or 260 linear feet of pipe insulation.

Owners and contractors generally know what to do when they are removing thermal pipe insulation containing obviously friable ACM.    However, there are also several other types of ACM which are less well understood, and can result in either non-compliance or unnecessary costs due to “over-compliance.” Examples would include vinyl asbestos floor tiles, asphalt roofing shingles with ACM, asbestos cement roofing material, and window caulking with ACM.

For EPA purposes, material which is not automatically RACM based on current friability, must be evaluated for RACM status based on likelihood of becoming friable, in light of the removal method and equipment to be used. Category I ACM is presumed Non-RACM unless it is subject to sanding, grinding, cutting, or abrading, which automatically renders it RACM.   Sanding and abrading are not defined; and the EPA definitions of grinding and cutting are subjective enough to be open to some interpretation. Thus, it is important to read all definitions carefully, apply common sense to non-defined terms, and also to document (and have your contractor document) your interpretation and the basis for it, in case there are future inquiries. 

 EPA Category II material is presumed to have the potential to become friable during renovation or demolition, and must be evaluated in advance on a case by case basis.  If the evaluation indicates a high probability of becoming crumbled or pulverized during planned demolition of renovation activity, then the material must be handled as RACM.  Before undertaking such an evaluation, one should review the EPA asbestos guidance, which identifies a number of generic scenarios for which the Agency has already created a “presumption” of either RACM or non-RACM.  These presumptions are a function of the type of material as well as the removal method to be used.  Thus, if one wishes to assure that a demolition contractor will be in compliance, it is necessary to know some details about plans for removal of materials having ACM.  Most materials which contain ACM can potentially become RACM if damaged extensively during demolition.    

A few of the EPA presumptions are:

-Sanding, grinding, cutting, or abrading—any ACM becomes RACM

-Floor tiles—Non-RACM so long as not “extensively damaged,” “tile breakage is minimal”, and a shot blaster is not used;

-Asphalt Roofing material—This is considered Category I and can be left in place for general demolition; Pre-demolition removal via power plows or power slicers is also considered ok.

-Waste Consolidation—Moving debris by bulldozer is considered ok.  However, use of any equipment which will break up the material [e.g. jack hammer] will be considered “grinding” and therefore it becomes RACM.

Disposal and use as fill

There are several important rules to note:  1) Non-RACM maygo to a C&D landfill but cannot be sent anyplace where it will likely be pulverized ( e.g. cement recycling facility; 2) RACM can only be disposed of in a landfill licensed to take asbestos material; 3) Mixing RACM into any demolition debris makes the entire pile RACM and unsuitable for on-site fill; PA Management of Fill Policy  prohibits use of “friable asbestos” as fill material but does not specifically prohibit non-RACM ( unless of course you grind it up to make useful as fill, and thereby create RACM.)

Is Regulatory Compliance a Shield Against Common Law Exposure Claims?  

  Legally, compliance with asbestos construction regulations does not bar a common-law claim for damages.  However, most of the asbestos legal problems I have seen were caused by some combination of outdoor unsecured debris piles containing asbestos material, or failure to remove asbestos material before commencement of aggressive demolition work which created visible emissions of white dust.  Such situations are typically the result of regulatory misunderstanding or disinterest, which resulted in no real compliance effort. 

Another common-law trouble spot is the fact that the asbestos NESHAP exempts buildings with four or less residential units, as well as friable asbestos of less than 260 linear feet.  It is common to think that asbestos can be ignored in these situations, but that is actually a bad idea. Aggressive treatment of friable asbestos in these situations can easily cause visible dust emissions and a potential health hazard, which will obviously not be considered “due care”.

  A take home point would be that good asbestos liability management in an older building depends on accurate information about the extent of potential ACM, which can then be used to assure regulatory compliance as well as minimization of unnecessary health risk.  A good survey decreases the risks of spreading friable asbestos dust from undocumented sources.  This reduces the risk of temporary project shut-down by OSHA or EPA, expensive abatement actions and civil penalties, as well as the risk of possible common law legal action by tenants, neighbors, or workers. 

September 14--Vapor intrusion sampling shows low level TCE above standard and State says that short-term exposure poses immediate risk to pregnant women--What do you do?

Quick Overview of Vapor Intrusion(“VI”) and Regulatory Standards:

Vapor intrusion is caused by contaminated soil and/or groundwater. VI conditions can occur via natural movement of vapor through soil, as well as migration facilitated through and along underground drainage and utility lines [ “preferential pathways”].   Vapor migration situations caused by TCE and PCE are commonly encountered, despite the fact that these solvents are no longer commonly used.  One key reason is that historic dry cleaners, auto repair facilities and small industrial shops often get a “passing” grade in rigidly performed Phase I site investigations [See my Jan.27, 2016 blog] because of the absence of obvious evidence of either contamination or agency files indicating historic regulatory issues.  Consequently, these potentially impacted sites are allowed to evolve into environmentally benign neighborhood commercial establishments without either documentation or remediation of historic leakage and spillage of solvents. The day of reckoning may arrive years later when a Phase II investigation is finally done and   groundwater contamination is detected above cleanup standards and above the established VI screening level.  These findings lead to requirements for further plume delineation as well as possible VI sampling in nearby buildings.

If indoor air sampling shows VOCs above established VI standards, the legally responsible party will usually be required to implement remedial action such as installation of a vapor mitigation system.  There will also be continuing concerns about property value and the possibility that occupants of the home have already been exposed to contamination for a substantial period of time. 

Many VI standards for VOCs are extremely low [e.g. TCE standard of 3 ug/m3 in New Jersey, and proposed TCE standard of 2.1 ug/m3 in Pennsylvania] and are therefore readily triggered. Such standards are based on extrapolation from animal research data which is typically focused on long-term exposure at fairly high levels.  There have also been human epidemiologic studies such as the recent effort at the IBM plant in New York.   The data as a whole are widely acknowledged to be inconclusive and in need of further research.  Nevertheless, EPA stands by its no-risk level (Rfc) of 2 ug/m3 TCE for all media; and this has become a benchmark for state standards seeking to accomplish maximum protection of public health, pending development of more reliable information.   

Short-Term TCE Exposure and Risk of Birth Defects:

The highly charged atmosphere of vapor intrusion has been turned up several clicks by growing additional concern over potential cancer and non-cancer risks from short-term exposure to VOCs.  Of particular concern is TCE-- and EPA warnings beginning in 2011, of the possibility of fetal heart damage occurring early in a pregnancy.  A number of states, including New Jersey have recently issued guidance (NJDOH June 2016 Fact Sheet] specifically addressing TCE and congenital heart damage, and recommending response action for residents. NJDEP has distributed the fact sheet to LSRPs with recommendations for how and when to include the fact sheet with VI data given to residents.    Issuance of a generic, accurate, and understandable guidance on a complex and sensitive public health issue raises challenges for regulators in any state. New York, Massachusetts and Ohio are among the limited group which has also attempted to address the acute TCE exposure issue.   However, the New Jersey fact sheet and LSRP recommendations starkly illustrate some of the key challenges—thereby providing a vehicle for discussion of issues.  To the extent I am singling out the New Jersey effort in this blog entry, it is with all due respect to both NJDOH and NJDEP and for the sole purpose of constructive dialogue. 

The 2016 New Jersey Dept. of Health TCE Fact Sheet

The NJ Dept. of Health (DOH) fact sheet, states that: “...animal studies show that exposure to low levels of TCE during the three-week period of heart formation in the first trimester of pregnancy could result in an increased risk of a heart defect in the unborn baby”. [emphasis added]

 It also states that: any woman exposed to TCE above vapor intrusion standards who is pregnant or “who may become pregnant” should “reduce their exposure to TCE as soon as possible” and talk to a health professional. [emphasis added] Just in case the reader has missed the point, the fact sheet also includes a photo of the abdomen of a quite pregnant woman. 

 I think the intent was to create awareness of potential immediate health concerns, which an individual can then pursue individually with government personnel by telephone, or with their personal doctors.  That makes some sense in principle; but I think it could be received poorly by residents in real time.  Remember that the fact sheet is intended for distribution to families who were very recently told that that there is a contaminated property in the neighborhood, raising the need to test air in their home.  Now you are telling them that their home is in fact contaminated.  I think if there is anyone in the household who is definitely pregnant or trying to be, they will be scared to death, regardless of the qualified terminology used in the fact sheet. Many of these people will immediately seek answers to predictable questions, either from the LSRP or from NJDOH, NJDEP, EPA, or ATSDR [ as the fact sheet invites them to do].  In the absence of a well-funded and material upgrade to existing communication resources, it is optimistic to expect that these inquiries can be adequately and skillfully handled.

The other reality is that government agencies will always have restrictions on the extent to which subjective information about health risk can be provided over the phone.  When residents receive incomplete answers to their questions, combined with the heavily nuanced risk language of the fact sheet, many will feel like they are being “managed”—like the government feels obligated to say something but really doesn’t know the answer and is not in a position to provide a solution. This leads to the anger and hostility toward government officials and responsible parties alike, which we often see at local public meetings about environmental situations in residential areas.   Among the people reacting this way will undoubtedly be those who call the phone number in the fact sheet for the Rutgers University Occupational Health Sciences Institute and are told [ as the fact sheet does imply] that the Institute can only talk to a health care provider.

Obvious questions which should be anticipated  

If we are going to distribute fact sheets about dangers to unborn babies, we can expect a number of predictable and complex questions to be raised by recipients. Some of the these could conceivably be addressed anticipatorily in a fact sheet.  Some, not so easily:

•  When exactly is this “3-week period” during the first trimester?  I researched on google and it says the critical time for fetal heart damage could be before the end of the second gestational month. Is that true?
•  Google also says that short-term vapor exposure research is considered inconclusive by     many scientists—so why are you saying that research “shows” there is a problem?  Is there new information? 
•  What do you mean exactly by “increased risk”?
•   How likely exactly is harm to my baby, given the TCE level in my home?
•  What does that mean-- “reduce my exposure”? Are we talking about leaving the windows open? Staying out of the basement? Evacuation of my home? When I was asked for permission to sample my home, the fact sheet I received said that if there were problems it might require a “depressurization” system like people have for radon.  Are you saying that would not be enough here? 
•  It sounds like you have known about these TCE “risks” for a while, and it looks like this contamination may have been in my house for years.  Why am I first learning about this now, when I am already 12 weeks pregnant?

General Suggestions and Observations:   

In fairness, it would be impossible to meaningfully answer all reasonably anticipated questions in a fact sheet; and some questions would be tricky in any format. Nevertheless, we need to consider a more mindful attempt to anticipate obvious concerns and how people will be reacting in real time. I think we need to do a better job of communicating risks in plain and specific language. Perhaps there is a way that agencies can take some risks and honestly explain that the scientific research on acute TCE exposure is inconclusive but it is nevertheless deemed necessary and important to disclose to the public so that impacted families can make informed personal choices.  I think agencies also need to find a way to clearly communicate the timing of the narrow window of opportunity for risk minimization, and the consequent need for any response to be immediate.

 If time is of the essence, it also seems necessary to articulate the concentration at which emergency relocation merits serious consideration [ versus just installation of a mitigation system and implementation of interim protective measures].  It should be possible to take this approach, with appropriate caveats, and without unintentionally suggesting that any particular TCE concentration below that level is “safe”. An example would be the Ohio EPA guidance issued in August.  They identify >6.3 ug/m3 as the threshold where “temporary relocation of receptors may be necessary”. Then they say that >20 ug/m3 is a threshold at which to “relocate receptors”.  In between 6.3 and 20, the meaning is still unfortunately fuzzy; but the agency has at least identified a universe below 6.3, in which relocation is probably not necessary, and a universe above 20 where no one is going to tell you it might be safe to stay. That seems like a step forward from avoiding mention of any specific number and implying that response strategy cannot be rationally linked to actual TCE concentration.

The NJDEP Recommendations for fact sheet distribution by LSRPs

The NJDEP emailed a copy of the June 2016 DOH fact sheet to LSRPs.  Their recommendation was that the fact sheet be given to residents [along with vapor data] “when there is an exceedance of TCE in the indoor air” and occupants of the building include “women of childbearing age”; [ emphasis added] I think the highlighted language could be problematic for LSRPS. 

What is the definition of “Child-Bearing Age”?

  This language puts a LSRP in the awkward position of appearing to have responsibility to determine the age of every female in a household [ summer guests as well?], and interpreting the meaning of “childbearing age”—15-44?  15-49? Perhaps it would make more sense to just distribute to all households with elevated TCE levels, and to let the residents determine for themselves whether there is a female occupant in harm’s way. 

What is the applicable air concentration threshold for distribution of the fact sheet?

There also seems to be unnecessary ambiguity regarding the threshold level that should trigger distribution of the fact sheet.  The DEP recommendation seems to suggest that distribution to residents is required only if there is “an exceedance of TCE.”   If the intent is to distribute only if the vapor concern level of 3 ug/m3 (or immediate action level of 4?]  is exceeded, why not just say so?

Another consideration is that most people do not understand micrograms and parts per billion.  They tend to be extremely uncomfortable learning that their indoor air [ or drinking water] has a detectable level of a carcinogen that is “below standards”. Pregnant women and their families living in a home having a TCE level of 2.5 ug/m3 TCE, will be very preoccupied with wondering if they are really safe. They may become extremely activated upon learning that a 43-year-old non-pregnant female neighbor,  with 3.1 ug/m3 TCE in their basement, received a warning fact sheet  about risk of birth defects, and is having a mitigation system installed at no cost;  Given the uncertainty and anxiety surrounding these issues, perhaps it would make sense to distribute an agency fact sheet to any household with detectable TCE, so that they could be informed of the TCE issue and proceed as they deem appropriate.

What about the Responsible party?

Responsible parties everywhere can no longer afford to focus solely on applicable regulatory requirements.   Vapor intrusion is a fertile subject for civil litigation seeking property damages, medical monitoring, or personal injury damages for conditions allegedly caused by exposure. A typical responsible party may be decades removed from the original site contamination.  Unlike regulatory obligations to investigate and remediate, which are usually strict liability, common law tort liability is very much about legal duties to warn of or prevent harm, and alleged negligent failure to do so.  Thus, extent of liability can be strongly affected by how thoroughly and how promptly an off- site investigation is carried out.

In light of the narrow window of opportunity discussed earlier, there are really important access issues that responsible parties [ and agencies] need to consider for implementation of vapor intrusion sampling –

(1) How long it will take to accurately identify target property owners and addresses, deliver a request for access, obtain a positive response, make access arrangements, obtain vapor samples, obtain results, and notify residents.   In most cases the answer is well over a month.

 (2) What do we do in the not- uncommon situations where access requests are ignored? And what if we have a non-resident owner? In either case, requests for access are typically repeated again in 30 days, and then action to obtain a court order is contemplated.  Meanwhile, tenants or other occupants are still not having their homes sampled to determine if a warning or mitigation is appropriate.

It seems fair to say that the typical process of obtaining access for vapor sampling, would disable any effort to give timely warning of birth defect risk from TCE exposure.  Thus we need to consider whether a best effort to warn needs to be a lot more aggressive in attempting to gain access, regardless of any state regulatory standard or guidance on the subject. Likewise, agencies will need to consider direct involvement to facilitate timely approvals for access so that sampling and delivery of data to residents can be expedited.   

This blog is intended solely as a generic commentary and should not be considered as legal advice.  It is also not intended as criticism of any specific company or individual. 

Post-Real Estate Transaction Liability--Beyond ASTM 1527, All Appropriate Inquiry and Innocent Owner Status

In the previous blog we explored the limitations of the ASTM 1527-13 Phase I protocol, and the consequences of the currently trending rigid and commoditized approach to Phase I due diligence.  Today we engage in a reality check about what happens AFTER you get a Phase I report.  The questions discussed below are very common and reflect some key misconceptions which interfere with good decision making.  I offer for each, a short answer and then some commentary:

1.     “I did the required ASTM 1527 Phase I and it said there are no RECs (Recognized Environmental Concerns):

(A)  “That means the the site is clean—Isn’t that right?” [ NOT EXACTLY—ASTM DEFINES EVIDENCE OF HISTORIC SUSPECT USES AS “DE MINIMIS” UNLESS THERE IS SPECIFIC EVIDENCE OF A LIKELY RELEASE.  IN ANY EVENT, “CLEAN” IS A GOOD WORD TO AVOID BECAUSE IT MEANS DIFFERENT THINGS IN DIFFERENT SITUATIONS]

(B)  “And if I find something later I don’t have to worry because I have the innocent owner defense—right?” [ YOU MAY HAVE A DEFENSE UNDER FEDERAL LAW BUT THAT IS ONLY A SMALL PIECE OF THE WORRY SPECTRUM]

                      (C) “So now it’s ok to go to closing with an “as-is” provision in the sale agreement    without doing a lot of expensive Phase II sampling?  [ NO—YOU STILL NEED SOME RISK ASSESSMENT INFORMATION—BECAUSE THE DEFENSE WON’T SOLVE YOUR PROBLEM IF RELEASES ARE DISCOVERED AFTER CLOSING AND YOU HAVE TO REMEDIATE TO ALLOW CONSTRUCTION.   

2.     “The report identified several RECs—so should I insist on an indemnity from the Seller? 

[ YES BUT KEEP IN MIND THAT SELLER MAY NOT HAVE SUFFICIENT ASSETS TO COVER A FUTURE CLAIM, AND/OR MAY DRAG YOU THROUGH LITIGATION BEFORE OFFERING A COMPROMISE SETTLEMENT.]

1(A)—No RECs means the site is clean? 

 Consider removing the word clean from your vocabulary when discussing environmental issues.  “Clean” is one of those undefined short hand terms that means different things on different days, and gets people into trouble. For example: Soil contamination is measured by a variety of numerical contamination standards which consider site use (residential vs. non-residential) and exposure pathways (human contact, impact to groundwater, or potential vapor intrusion for a nearby building). Groundwater contamination is also measured by residential and non-residential standards, and vapor intrusion screening levels.  So on most days, Clean really means “below all applicable numerical standards based on intended future use”.  Is that reasonably equivalent to a Phase I finding of no RECs?

The problem is that a Phase I is a preliminary qualitative evaluation of property which relies   solely on visual inspection, interviews and review of available public records and on-site documents.  The report categorizes all findings as either REC [ specific evidence of likely release] or De minimis [ evidence of past suspect use but no specific evidence of likely release].  There is no sampling data for comparison to applicable standards unless previous site sampling results are identified and obtained.   Thus, at most sites, the finding of REC or de minimis is reached without any data or with whatever limited historic data can be obtained.  The ASTM definition of de minimis would include a finding of likely historic use by a dry cleaner, gas station, metal plating shop, or all three, if there is no specific evidence of a specific likely release. That is why “De Minimis” does not equal “Clean”.

To be fair, a Phase I report is sometimes able to conclude “no RECs” because there is no evidence of suspect historical uses and there is enough available documentary evidence to give that conclusion reliable credibility. Unfortunately, there are often important gaps in the historic record, or the available evidence in fact suggests the possibility of historic use of solvents or other chemicals—sometimes well before the emergence of environmental regulations in the 1980s.  In these situations, the REC/De minimis pass-fail test may convey a false sense of certainty. 

What if the Phase I reveals that there are documented past releases, for which a government agency has issued a no further action approval based on meeting numerical standards?   Based on ASTM definitions, such a condition would be considered a REC but specifically, a Historic REC (HREC).  However, this can actually be a good thing—and such a site might actually be considered “clean” at least with respect to the location and media addressed previously. [Unless the applicable standards have changed]

Achievement of numerical standards can be difficult at sites where contamination has resulted from long term impact.  Thus we also find sites where agency approvals are granted based on risk assessment, despite residual soil and groundwater contamination above standards.   These sites are not “Clean” but are “Clean Enough” that site development is still feasible so long as one can tolerate protective institutional controls [activity and use limitations, capping of specific areas, perhaps building on a slab instead of excavating a large foundation].   A Phase I report would appropriately label this situation a “Controlled” REC [ CREC]. 

1(B) Phase I with no RECS means I have a defense and don’t have to worry if contamination is found later?

This question illustrates the result of 10 years of media discussion about the importance of ASTM 1527 for qualifying for the CERCLA “innocent purchaser” defense, and readers assuming that it means more than it really does, and then spreading those assumptions to others, in briefing and training sessions. First-- it is easy to forget that CERCLA is not the only or even most common legal basis for resolving site cleanup disputes.  Pennsylvania has two statutes of its own—one of which [ Hazardous Substance Clean up Act—HSCA]  has an innocent owner defense which is worded a little differently and does not provide automatic compliance with the All Appropriate Inquiry (AAI) criterion by completing an  ASTM Phase I report.  There is a second state law, which does not have an innocent owner defense at all [ Clean Streams Law-CSL] and can actually result in strict liability for an innocent buyer.  There are also several commonly invoked common law tort claims, such as negligence, trespass, and nuisance, which are likely unaffected by any statutory defense.  Thus a CERCLA innocent owner defense would not necessarily protect against a PADEP clean up order, a third-party claim by a neighbor seeking property damages or claiming illness, or a HSCA claim 10 years later by a future owner of the property who discovers contamination. 

Another reality is that a CERCLA defense can turn out to have limited value.  For example, EPA does not often go after the owner of a property discovered to have contamination during construction.  The main value of a CERCLA innocent owner defense would be to facilitate a private cost reimbursement claim under CERCLA against a past owner/operator.    Nevertheless, most defendants will resist a reimbursement claim that ostensibly gives them sole responsibility for site costs. In order to level the playing field, it is reasonable to expect an argument that the Phase I report did not meet the requirements of the defense, despite having received a Phase I report which follows the ASTM 1527 scope. Such argument might include the position that   your Phase I report [ the one concluding no RECs] in fact demonstrates you had “reason to know” of likely hazardous substance disposal, because of findings of historic suspect uses which labelled “De minimis”; and therefore you have some liability too.  If suit is filed and the court rules on summary judgment that entitlement to the defense is a legitimate question of fact [ a common result of such motions] trial or settlement may be several years away.  This creates the common situation where assertion of claims or defenses may require substantial unilateral investment of remedial and legal cost resources as well as time, before having a shot at cost recovery.

1(C)--Phase I with no RECs means I can agree to “as-is” terms without having to do Phase II sampling? 

As discussed above, Phase I conclusion of no RECs does not equate to “clean site”.  If the “de minimis” findings of past site use warrant a closer look, then it is a mistake to assume that detailed due diligence can be avoided—especially if the transaction terms are essentially as-is.  As a practical matter, many sale agreements start out with Seller demanding as-is, but the extent of the as-is gets limited in negotiations.  One way to get those limitations is to generate some Phase II site data and insist that Seller retain responsibility for all known conditions. 

(2) –If the report found several RECs do I have to get a Seller Indemnity? 

Just because a Phase I report concludes there are one or more RECs, does not mean there is a serious problem.  A REC could be evidence of a historic underground tank that was not properly closed, evidence of a historic spill which contaminated soil and groundwater and was not fully addressed, a greasy old floor drain, or records of an ancient septic system which was used by an auto body shop, metal fabrication shop and a dry cleaner.  Some of these sound worse than others but the actual impact of any of them cannot be determined unless some Phase II sampling is done along with some evaluation of potential remedial costs.  The Phase I report can only identify and qualitatively describe the RECs—and under the ASTM protocol it does not even have to include recommendations as to follow up sampling. Thus Phase II sampling could become the basis for giving Buyer sufficient comfort to go forward with a deal despite ominous conclusions in a Phase I [ or an informed basis for backing out].   

In many cases, time and resources discourage proper Phase II sampling.  Thus the next best thing may be perceived to be an indemnity covering any and all future environmental liabilities, or at least the specific identified RECs. Sellers are understandably reluctant to give indemnities, but sometimes need to do so in order to close a sale.   Many buyers view an indemnity as an excuse to skip Phase II sampling because the Seller is on the hook for all RECs.  That is a bad idea.  As discussed earlier, the universe of potential environmental liability concerns can be much broader than those labelled as REC. Thus a limited indemnity may not be covering a potentially serious concern. 

 I also think that all indemnities should be considered limited, because they are only as good as the Seller’s assets at the time of a future claim. Over time, sale proceeds and other liquid assets of a LLC, partnership or other small cap-type of business can easily get lost in distributions, other investments, or insolvency—making it difficult to collect on any judgment that might be obtained. 

 It is also a business reality that one can always find a “plausible” defense to a contractual indemnity and force the matter into prolonged litigation. Thus a buyer with an indemnity should be prepared to unilaterally bear the cost of remediation as well as the cost of litigation, pending the outcome of indemnity claims.  The same is true, of course, for any contribution claims against other past owners or operators.     

The take-home point is that contractual indemnities as well as “legal rights” against past owners and operators may require substantial unilateral investment of resources for remediation and for litigation before any recovery can occur, as well as a solvent party from whom to obtain such recovery.   A much better approach [ when possible] is to seek Seller’s covenant to address environmental conditions to the satisfaction of the state agency, within a specified time period. Such covenant can be secured by escrow of sale proceeds.   But in order to be in a position to demand such a covenant, one needs to have enough site data to describe the situation that would be addressed.  Thus due diligence can become the vehicle for resolving liabilities as well as warning of them.

This blog is intended solely as generic commentary and should not be considered as legal advice.  It is also not intended as criticism of any company or individual.