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Deveau: RCRA threatens validity of brownfield redevelopment

August 27, 2014
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Indiana Lawyer Focus

By Frank Deveau

During the past 12 months a troubling trend has developed in the area of brownfield redevelopment. In several routine property transactions, buyers, sellers and lawyers have had the unpleasant experience of having their deals scuttled by a questionable application of the Resource Conservation and Recovery Act.

RCRA, of course, is the so-called federal “cradle to grave” statute that governs treatment, storage and disposal of hazardous waste. When a RCRA-permitted facility ceases hazardous waste operations, it must go through closure or corrective action to remediate any associated contamination. Most environmental practitioners would likely agree that it is indeed appropriate for the permittee to clean up contamination resulting from its operation. Several problems arise, however, when an environmental agency seeks to impose RCRA closure and/or corrective action obligations on a subsequent landowner of a former RCRA-permitted facility.

The BFPP defense and comfort letters

deveau Deveau

Typically, in the world of brownfield redevelopment, parties are concerned about potential liability under the Comprehensive Environmental Response Compensation and Liability Act or CERCLA. CERCLA imposes strict, joint and several liability on the current owner of contaminated property, regardless of fault. As a result, buyers of brownfield properties typically are very careful to avoid or limit such liability. Congress provided an effective tool for avoiding CERCLA liability in such transactions with the enactment of the 2002 brownfield amendments, which created the Bona Fide Prospective Purchaser defense. To obtain the benefits of the defense, there are certain pre-closing and post-closing requirements. Pre-closing, thorough due diligence is one of the most important requirements. Post-closing, reasonable steps to ensure human health and the environment are protected is likely the most important requirement. U.S. EPA and many state environmental agencies will also provide qualifying buyers with comfort letters, which generally say that the agency believes the buyer has met all BFPP requirements and, therefore, has no CERCLA liability. Even though comfort letters are non-binding, clients and lenders love them because it gives them a degree of “comfort” that they won’t be subject to crushing CERCLA liability after closing.

The RCRA time bomb

The RCRA problem has arisen in the following context. During due diligence, the prospective buyer discovers contamination that indicates that a prior owner (RCRA permittee) failed to properly perform RCRA closure. As a result, the agency (rightly) withdraws its prior finding that the site was closed and (wrongly) declares that the current title holder (that has always operated a flower shop at the site) is required to complete RCRA closure/corrective action at the site. Moreover, the agency further announces that any subsequent title holder will also be subject to RCRA closure and/or corrective action even if such owner is a BFPP and has obtained a comfort letter.

An even worse scenario (which has also happened) is the following: Years after closing, with a comfort letter still firmly in hand, a BFPP is notified that RCRA has asserted jurisdiction over the property. And, per RCRA, the poor guy who holds title is deemed to be the RCRA permit-holder for purposes of corrective action.

There are several problems with this agency policy.

First, environmental agencies apply it to not only former big volume treatment and disposal facilities, but also to small-time operations that stored hazardous waste on site.

Second, a buyer can be “liable” even if his pre-purchase due diligence revealed the site had received written regulatory closure confirmation. Clearly, this creates a RCRA time bomb giving “buyer beware” a whole new meaning.

Third, it imposes a serious threat to brownfield redevelopment because so many properties are potentially implicated.

Fourth, it threatens the future viability of the BFPP defense and agency comfort letters, and

Fifth, as discussed below, it’s just plain wrong legally.

RCRA does not apply to subsequent title holders

Unfortunately, there isn’t much caselaw interpreting this issue. Both RCRA and CERCLA came onto the legal scene in 1980. The cases from the early 1980s suggest that initially U.S. EPA wasn’t sure which statute to utilize in cleaning up contaminated sites. However, U.S. EPA quickly figured out that the strict, joint and several liability scheme of CERCLA made it the enforcement/remediation tool of choice. As a result, there are virtually no cases dealing with subsequent owners of former RCRA-permitted facilities … at least until a few months ago.

In May, New York’s appellate court held that, under RCRA regulations (essentially identical to Indiana’s) a subsequent owner was not subject to corrective action requirements at a formerly permitted storage facility. Thompson Corners, LLC v. New York State Dep’t of Environmental Conservation, 2014 WL 1924148 (N.Y. App. Div. May 15, 2014).

The case arose when New York’s Department of Environmental Conservation issued an order requiring a subsequent owner of a former RCRA-permitted property to comply with RCRA corrective-action requirements. The trial court upheld DEC’s corrective-action order. Thompson appealed, resulting in the May 15 decision.

The court ultimately found that RCRA regulations contemplate that corrective action can only be imposed as a condition of obtaining a permit to operate a RCRA facility. Citing New York’s version of CERCLA, the court explained further that the Legislature knew how to impose strict liability on subsequent property owners and did not do so with respect to RCRA.

The same result should apply in Indiana. Indiana’s RCRA regulations are materially the same as New York’s. Similarly, Indiana’s Legislature could have imposed strict corrective-action liability on subsequent owners of formerly permitted RCRA facilities but chose not to do so.

Nevertheless, if environmental agencies do not back off their application of RCRA to subsequent brownfield purchasers, an Indiana court will need to resolve this dilemma. Until that happens, buyers (and their lawyers) need to beware of the lurking RCRA threat.•

XBTXFrank J. Deveau is co-chair of Taft’s environmental practice group and a member of the firm’s executive committee. For over 30 years, he has devoted his practice primarily to all aspects of environmental law, related administrative and civil litigation and insurance recoveries. Deveau also frequently serves as a mediator in environmental disputes. The opinions expressed are those of the author.

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  1. Call it unauthorized law if you must, a regulatory wrong, but it was fraud and theft well beyond that, a seeming crime! "In three specific cases, the hearing officer found that Westerfield did little to no work for her clients but only issued a partial refund or no refund at all." That is theft by deception, folks. "In its decision to suspend Westerfield, the Supreme Court noted that she already had a long disciplinary history dating back to 1996 and had previously been suspended in 2004 and indefinitely suspended in 2005. She was reinstated in 2009 after finally giving the commission a response to the grievance for which she was suspended in 2004." WOW -- was the Indiana Supreme Court complicit in her fraud? Talk about being on notice of a real bad actor .... "Further, the justices noted that during her testimony, Westerfield was “disingenuous and evasive” about her relationship with Tope and attempted to distance herself from him. They also wrote that other aggravating factors existed in Westerfield’s case, such as her lack of remorse." WOW, and yet she only got 18 months on the bench, and if she shows up and cries for them in a year and a half, and pays money to JLAP for group therapy ... back in to ride roughshod over hapless clients (or are they "marks") once again! Aint Hoosier lawyering a great money making adventure!!! Just live for the bucks, even if filthy lucre, and come out a-ok. ME on the other hand??? Lifetime banishment for blowing the whistle on unconstitutional governance. Yes, had I ripped off clients or had ANY disciplinary history for doing that I would have fared better, most likely, as that it would have revealed me motivated by Mammon and not Faith. Check it out if you doubt my reading of this, compare and contrast the above 18 months with my lifetime banishment from court, see appendix for Bar Examiners report which the ISC adopted without substantive review: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS

  2. Wow, over a quarter million dollars? That is a a lot of commissary money! Over what time frame? Years I would guess. Anyone ever try to blow the whistle? Probably not, since most Hoosiers who take notice of such things realize that Hoosier whistleblowers are almost always pilloried. If someone did blow the whistle, they were likely fired. The persecution of whistleblowers is a sure sign of far too much government corruption. Details of my own personal experience at the top of Hoosier governance available upon request ... maybe a "fake news" media outlet will have the courage to tell the stories of Hoosier whistleblowers that the "real" Hoosier media (cough) will not deign to touch. (They are part of the problem.)

  3. So if I am reading it right, only if and when African American college students agree to receive checks labeling them as "Negroes" do they receive aid from the UNCF or the Quaker's Educational Fund? In other words, to borrow from the Indiana Appellate Court, "the [nonprofit] supposed to be [their] advocate, refers to [students] in a racially offensive manner. While there is no evidence that [the nonprofits] intended harm to [African American students], the harm was nonetheless inflicted. [Black students are] presented to [academia and future employers] in a racially offensive manner. For these reasons, [such] performance [is] deficient and also prejudice[ial]." Maybe even DEPLORABLE???

  4. I'm the poor soul who spent over 10 years in prison with many many other prisoners trying to kill me for being charged with a sex offense THAT I DID NOT COMMIT i was in jail for a battery charge for helping a friend leave a boyfriend who beat her I've been saying for over 28 years that i did not and would never hurt a child like that mine or anybody's child but NOBODY wants to believe that i might not be guilty of this horrible crime or think that when i say that ALL the paperwork concerning my conviction has strangely DISAPPEARED or even when the long beach judge re-sentenced me over 14 months on a already filed plea bargain out of another districts court then had it filed under a fake name so i could not find while trying to fight my conviction on appeal in a nut shell people are ALWAYS quick to believe the worst about some one well I DID NOT HURT ANY CHILD EVER IN MY LIFE AND HAVE SAID THIS FOR ALMOST 30 YEARS please if anybody can me get some kind of justice it would be greatly appreciated respectfully written wrongly accused Brian Valenti

  5. A high ranking Indiana supreme Court operative caught red handed leading a group using the uber offensive N word! She must denounce or be denounced! (Or not since she is an insider ... rules do not apply to them). Evidence here: http://m.indianacompanies.us/friends-educational-fund-for-negroes.364110.company.v2#top_info

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