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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. I will continue to pray that God keeps giving you the strength and courage to keep fighting for what is right and just so you are aware, you are an inspiration to those that are feeling weak and helpless as they are trying to figure out why evil keeps winning. God Bless.....

  2. Some are above the law in Indiana. Some lined up with Lodges have controlled power in the state since the 1920s when the Klan ruled Indiana. Consider the comments at this post and note the international h.q. in Indianapolis. http://www.theindianalawyer.com/human-trafficking-rising-in-indiana/PARAMS/article/42468. Brave journalists need to take this child torturing, above the law and antimarriage cult on just like The Globe courageously took on Cardinal Law. Are there any brave Hoosier journalists?

  3. I am nearing 66 years old..... I have no interest in contacting anyone. All I need to have is a nationality....a REAL Birthday...... the place U was born...... my soul will never be at peace. I have lived my life without identity.... if anyone can help me please contact me.

  4. This is the dissent discussed in the comment below. See comments on that story for an amazing discussion of likely judicial corruption of some kind, the rejection of the rule of law at the very least. http://www.theindianalawyer.com/justices-deny-transfer-to-child-custody-case/PARAMS/article/42774#comment

  5. That means much to me, thank you. My own communion, to which I came in my 30's from a protestant evangelical background, refuses to so affirm me, the Bishop's courtiers all saying, when it matters, that they defer to the state, and trust that the state would not be wrong as to me. (LIttle did I know that is the most common modernist catholic position on the state -- at least when the state acts consistent with the philosophy of the democrat party). I asked my RCC pastor to stand with me before the Examiners after they demanded that I disavow God's law on the record .... he refused, saying the Bishop would not allow it. I filed all of my file in the open in federal court so the Bishop's men could see what had been done ... they refused to look. (But the 7th Cir and federal judge Theresa Springmann gave me the honor of admission after so reading, even though ISC had denied me, rendering me a very rare bird). Such affirmation from a fellow believer as you have done here has been rare for me, and that dearth of solidarity, and the economic pain visited upon my wife and five children, have been the hardest part of the struggle. They did indeed banish me, for life, and so, in substance did the the Diocese, which treated me like a pariah, but thanks to this ezine ... and this is simply amazing to me .... because of this ezine I am not silenced. This ezine allowing us to speak to the corruption that the former chief "justice" left behind, yet embedded in his systems when he retired ... the openness to discuss that corruption (like that revealed in the recent whistleblowing dissent by courageous Justice David and fresh breath of air Chief Justice Rush,) is a great example of the First Amendment at work. I will not be silenced as long as this tree falling in the wood can be heard. The Hoosier Judiciary has deep seated problems, generational corruption, ideological corruption. Many cases demonstrate this. It must be spotlighted. The corrupted system has no hold on me now, none. I have survived their best shots. It is now my time to not be silent. To the Glory of God, and for the good of man's law. (It almost always works that way as to the true law, as I explained the bar examiners -- who refused to follow even their own statutory law and violated core organic law when banishing me for life -- actually revealing themselves to be lawless.)

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