Introduction

On January 11, 2002, President Bush signed into law the Small Business Liability Relief and Brownfields Revitalization Act (the "Act"). The Act’s passage came after years of Congressional debate and deadlock over amendments to the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), commonly referred to as the Superfund law. 42 U.S.C. § 9601 et seq. The Act combined two earlier bills – the Small Business Liability Protection Act, and the Brownfields Revitalization and Environmental Restoration Act. These two bills reflect the dual purpose of the Act - of providing relief from Superfund liability for small businesses and certain property owners, and to promote the revitalization of "brownfields," properties where redevelopment is hindered by the presence or potential presence of contamination.

The Act provides needed, new defenses to CERCLA liability. It generally prohibits federal enforcement action at contaminated sites being addressed under State oversight To promote the revitalization of brownfields, the Act authorizes federal funding for State brownfields programs, and for grants/loans for brownfields assessment and remediation. The Act reflects Congress’ intention that the States play a primary role in brownfields revitalization.

In Section I below, we provide an overview of CERCLA liability. In Section II, we address the clarification the Act provides to the pre-existing "innocent landowner" defense under CERCLA. In Section III, we address the new "bona fide prospective purchaser" defense to CERCLA liability the Act provides for, and compare that new defense to the "innocent landowner" defense. In Section IV, we address the other new exemptions and other relief from CERCLA liability provided through the Act. In Section V, we address the brownfields revitalization provisions of the Act.

Overview of CERCLA Liability.

The risk of incurring environmental liabilities merely from acquiring title to contaminated property arises primarily from CERLCA. 42 U.S.C. §§ 9601 et seq. CERCLA was enacted to address the public health and other threats posed by sites where hazardous substances have been, or may be, released into the environment. In addition to establishing the Superfund - a fund to cover the cost of cleaning up sites for which no responsible party can be made to pay, CERCLA gives the federal Environmental Protection Agency ("EPA") broad powers to clean up facilities contaminated by hazardous substances, either by arranging for the cleanup itself or ordering a responsible party to do so. 42 U.S.C. §§ 9604, 9606-07.

A broad range of chemicals and wastes that are toxic or otherwise harmful to human health or the environment are included within the scope of "hazardous substances" governed by CERCLA. 42 U.S.C. § 9601(14). Petroleum and other oil products, however, are excluded from the definition of "hazardous substances." Id. A release of petroleum or other oil products are governed by state law. See e.g., North Carolina Oil Pollution and Hazardous Substances Control Act, N.C. Gen. Stat. §§ 143-215.75 et seq.

A "facility" under CERCLA includes any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located. 42 U.S.C. § 9601(9).

Section 107 of CERCLA imposes strict liability for the costs of responding to a release or material threat of a release of hazardous substances on a wide range of "potentially responsible parties" or "PRP’s." In general, anyone who incurs cleanup costs, whether it is EPA, a State, a PRP or other private party, can sue PRP’s to recover those costs, or a fair contribution of those costs. 42 U.S.C. §§ 9607(a), 9613(f). The PRP’s are:

1. the owner and operator of the facility;

2. any person who at the time of disposal of any hazardous substance owned or operated the facility at which such hazardous substances were disposed of;

3. Any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility owned or operated by another party and containing such hazardous substances; and

4. Any person who accepts or accepted hazardous substances for transport to disposal or treatment facilities.

42 U.S.C. § 9601(a)(1)-(4).

The current owner and operator of the facility are liable pursuant to Section 107(a)(1), even if no disposal of hazardous substances has taken place during their ownership, unless they qualify for any of defenses discussed below.

The Fourth Circuit Federal Court of Appeals has broadly interpreted the term "disposal" as used in Section 107(a)(2) to impose liability not only for active involvement in the "dumping" or "placing" of hazardous substances, but for ownership of the facility at a time that hazardous substances were "spilling" or "leaking." Nurad, Inc. v. William E. Hooper & Sons, Inc., 966 F.2d 837, 846 (4^th Cir. 1992). Thus, for example, if a tank, pipe or other vessel that is no longer actively used on the property contains hazardous substances that continue to leak from the tank, pipe or vessel, anyone who owned or operated the property during this passive leaking may qualify as an owner or operator during time of "disposal." This may be true even if someone bought the property unaware of the existence of the underground tank or piping that is the source of this passive leaking.

Clarification to the Pre-Existing Innocent Landowner Defense.

Before the Act, the defenses to CERCLA liability were very limited. Those were the release of hazardous substances was caused solely either by an act of God, an act of war, or by a third-party in certain circumstances. 42 U.S.C. § 9601(b).

The "innocent landowner" defense is technically just the third-party defense asserted by a current owner of contaminated property. Essentially, an innocent landowner is one who bought the property after the disposal of hazardous substances took place, did not know or have reason to know of the prior disposal of hazardous substances after making "appropriate inquiries" about the property, exercised due care with respect to the hazardous substances once detected, and took precautions against foreseeable acts or omissions of the responsible third party.

To qualify as an innocent landowner, the current owner of the facility must show:

1. The release or threat of a release of a hazardous substance was caused solely by a third party;

2. The third party is not an employee or agent of the current owner;

3. The acts or omissions of the third party did not occur in connection with a direct or indirect contractual relationship to the current owner, or if there was a contractual relationship (e.g., the one who sold the property to the current owner is a liable party), the current owner acquired the property after the disposal of placement of the hazardous substance, and one or more of the following were true:

   1. at the time the current owner acquired the facility, they did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of, in , or at the facility,

   2. the current owner is a government entity which acquired the facility by escheat, or through any other involuntary transfer or acquisition, or through the exercise of eminent domain authority, or

   3. the current owner acquired the facility by inheritance or bequest; and

4. The owner exercised due care with respect to the hazardous substances, and took precautions against foreseeable acts or omissions of the third party.

42 U.S.C. §§ 9607(b), 9601(35)(A) (emphasis added).

To establish that the property owner "had no reason to know of" a prior disposal of hazardous substances, Congress indicated in previous amendments to CERCLA that it must have undertaken, at the time of acquisition, "all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial and customary practices in an effort to minimize liability." 42 U.S.C. § 9601(35)(B)(emphasis added).

Until the Act was signed into law in 2002, confusion understandably remained over exactly what level of due diligence constituted "all appropriate inquiry . . . consistent with good commercial and customary practices." In the Act, Congress attempted to address this confusion. First, Congress indicated that, in the case of property for residential use or other similar use purchased by a nongovernmental entity, a facility inspection and title search that reveal no basis for further investigation is considered to satisfy the "all appropriate inquiries" requirement. 42 U.S.C. § 9601(35)(B)(v).

Second, Congress directed EPA to adopt regulations establishing the standards and practices for conducting "all appropriate inquiries" by January 11, 2004. At press time for this paper, EPA had not yet published proposed regulations on this subject. EPA is utilizing the "negotiated rulemaking process" in preparing these new, important regulations, by which representatives of various interest groups are invited to negotiate the text of proposed regulations with EPA. A copy of a "Negotiated Rulemaking Committee (draft) Final Consensus Document" on these new regulations, dated December 5, 2003, can be obtained at EPA’s brownfields web page, at www.epa.gov/swerosps/bf/index.html.

In the interim, however, for any property acquisition that occurred after May 31, 1997, Congress indicated in the Act that the procedures of environmental due diligence established by the American Society for Testing and Materials ("ASTM"), including, "Standard Practice for Environmental Site Assessment: Phase 1 Environmental Site Assessment Process," satisfy the "all appropriate inquiries" requirement. 42 U.S.C. § 9601(35)(B)(iv)(II)(2002). Congress thereby utilized commonly-used standards for conducting phase 1 environmental site assessments and transaction screenings as the interim standard until EPA enacts the anticipated regulations defining "all appropriate inquiry."

The New Defense for "Bona Fide Prospective Purchasers," How it Differs from the Innocent Landowner Defense, and Windfall Liens.

After the Act, the innocent landowner defense remains available only to the purchaser of property that did not know and had no reason to know of a prior release of hazardous substances on the property. One of the major changes to CERCLA in the Act is the addition of a defense for one who buys contaminated property with knowledge of the contamination, provided certain conditions are met. This is the "bona fide prospective purchaser" defense ("BFPP"). As stated in an internal EPA memo:

The BFPP provisions represent a significant change in CERCLA. For the first time, a party may purchase property with knowledge of contamination and not acquire liability under CERCLA as long as that party meets the BFPP criteria.

See Memo Re: Bona Fide Prospective Purchasers and the New Amendments to CERCLA, Breen, Director of Office of Site Remediation Enforcement, May 31, 2002.

Accordingly, under the Act, a defense to CERCLA liability is now available to one who buys property after a release of hazardous substances occurs there regardless of what the buyer learns from pre-acquisition due diligence, provided the buyer upon acquisition meets the conditions expected of them in assisting with an appropriate response by others to the release or threatened release. If the buyer conducts "all appropriate inquiry," and as a result, does not learn about the prior release, the innocent landowner defense should be available. If the buyer conducts "all appropriate inquiry," and as a result, learns of the prior release, the BFPP defense is available, provided all conditions for that defense listed below are met.

The relevant provision in the Act provides that a BFPP, whose potential liability for a release or threatened release is based solely on the purchaser being considered to be an owner or operator of a facility, shall not be liable as long as the BFPP does not impede the performance of a response action. 42 U.S.C. § 107(r)(1). A "bona fide prospective purchaser" is a person that:

Acquired ownership of the facility after the date of enactment of the Act (signed into law January 11, 2002);

All disposal of hazardous substances at the facility occurred before the acquisition;

Made "all appropriate inquiries" into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards and practices . . . .

Provided all legally required notices with respect to the discovery or release of any hazardous substances;

Exercised appropriate care with respect to hazardous substances found at the facility by taking reasonable steps to stop any continuing release, to prevent any threatened future release, and to prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance;

Provided full cooperation, assistance, and access to persons that are authorized to conduct response actions;

Is in compliance with any land use restrictions established applied to the property;

Complied with any request for information or administrative subpoena;

Is not potentially liable, or affiliated with any person who is potentially liable for response costs through any familial relationship, any contractual, corporate or financial relationship (other than a contractual, corporate or financial relationship that is created by the instruments by which title to the facility is conveyed), or the result of a reorganization of a business entity that was potentially liable.

42 U.S.C. § 9601(40).

As with the pre-existing innocent landowner defense, "all appropriate inquiries," for all acquisitions occurring after May 31, 1997, means compliance with ASTM procedures on an interim basis, until EPA publishes its anticipated regulations on what constitutes "all appropriate inquiries." Id. at § 9601(40)(B)(ii).

The BFPP defense is not absolute, however. The Act provides the United States with a "windfall lien" that can be collected against a BFPP to cover unrecovered response costs incurred by EPA in cases where the response action has resulted in an increase in the fair market value of the property. Id. at § 9607(r)(2)-(3). The windfall lien cannot exceed the increase in market value attributable to the EPA-financed response action. Id. at § 9607(r)(4). The windfall lien goes into effect when EPA incurs the response costs, and remains in effect until it is satisfied or EPA recovers all of its response costs. Id. at § 9607(r)(4). This lien is meant to avoid allowing a BFPP to profit from use of money from the Superfund to finance a response action on their property that is not recovered by the United States from the PRPs.

Other New Exemptions and Other Relief from CERCLA Liability.

The Contiguous Property Owners’ Exemption.

The Act also includes a new, conditional exemption from Superfund liability for owners or operators of contaminated property that is contiguous to property, owned by another party, from which hazardous substances have been released. 42 U.S.C. § 9607(q). This new exemption is very similar to a prior EPA policy in dealing with contiguous property owners or operators.

Under this new defense:

• A person that owns real property that is contiguous to or otherwise similarly situated with respect to, and that is or may be contaminated by a release or threatened release of a hazardous substance from, real property that is not owned by that person shall not be considered to be an owner or operator of . . . facility under [Section 107(a)(1)-(2)] solely by reason of the contamination if [they]:

• did not cause, contribute or consent to the release or threatened release;

• are not potentially liable, or affiliated with any person that is potentially liable, for response costs at a facility through any direct or indirect familial relationship or any contractual, corporate, or financial relationship (other than such a relationship created by a contract for the sale of goods or services);

• is not the result of a reorganization of a business entity that was potentially liable;

• take "reasonable steps" to stop any continuing release, and prevent or limit human, environmental or natural resource exposure to any hazardous substance released on or property owned by that person;

• comply with CERCLA requests for information and administrative subpoenas;

• provide full cooperation, assistance and access to persons that are authorized to conduct response actions or natural resource restorations at the facility from which there has been a release or threatened release (including the cooperation and access necessary for the installation, integrity, operation, and maintenance of any complete or partial response action or natural resource restoration at the facility);

• comply with any land use restrictions established or relied on in connection with the response action at the facility;

• does not impede the effectiveness or integrity of any institutional control employed in connection with a response action;

• complies with any request for information or administrative subpoena;

• provides all legally required notices with respect to the discovery or release of any hazardous substances at the facility;

• conducted "all appropriate inquiry" within the meaning of Section 9601(35)(B) with respect to the property, and did not know or have reason to know that the property was or could be contaminated by a release or threatened release of one or more hazardous substances from other real property not owned or operated by the person.

Id. at 9607(q)(i)-(viii).

The burden is on the contiguous property owner or operator to show all of these conditions are met, by a preponderance of the evidence, for this exemption to apply. Id. at 9607(q)(B).

Some commentators have noted that requiring a contiguous property owner to take "reasonable steps" to stop any continuing release, and prevent or limit human, environmental or natural resource exposure to any hazardous substance could cause confusion, since there are no standards for determining what affirmative "reasonable steps" must be taken to meet this requirement. The Act does address groundwater contamination that migrated below contiguous property to the source of the release. It provides in such circumstances the "reasonable steps" the contiguous property owner or operator must take shall not generally include groundwater investigations or installation of groundwater remediation systems. Id. at 9607(q)(D).

The Act provides that any person who does not qualify for this exemption because they had, or had reason to have, knowledge that the property was or could be contaminated by a release from other property, may nevertheless qualify as a BFPP, if they make the requisite showing. Id. at 9607(q)(C). As noted, the BFPP defense is available to a person who, as a result of pre-acquisition appropriate inquiry, knew or had reason to know of a release or threatened release. Id. at 9601(40).

The Act also allows EPA to issue an assurance that no enforcement action will be initiated against a contiguous property owner or operator, and affords them protection against CERCLA cost recovery or contribution actions. Id. at 9607(q)(D)(3).

The De Micromis Exemption.

The Act also includes a new, conditional exemption for waste generators or transporters who disposed of only very small volumes of materials containing hazardous substances at sites listed on EPA’s National Priorities List ("NPL"). Id. at 9607(o). The provision provides that:

• [Subject to the exceptions described below], a person shall not be liable, with respect to costs at a facility on the [NPL], . . . if liability is based upon [Sections 9601(a)(3)-(4) – generator or transporter liability] and the person . . . can demonstrate that:

• the total amount of the material containing hazardous substances that the person arranged for disposal or treatment of, arranged with a transporter for transport for disposal or treatment of, or accepted for transport for disposal or treatment, at the facility was less than 110 gallons or liquid materials or less than 200 pounds of solid materials (or such greater or lesser amounts as the [EPA] Administrator may determine by regulation; and

• all or part of the disposal, treatment, or transport concerned occurred before April 1, 2001.

Id. at 9607(o)(1).

This exemption will generally afford liability protection to businesses or persons who have contributed less than two drums of liquid waste, or a comparable amount of solid waste.

This new exemption is conditional, and does not apply if the President (EPA by delegation) determines that:

• the materials containing hazardous substances have contributed significantly or could contribute significantly, either individually or in the aggregate, to the cost of the response action or natural resource restoration with regard to the facility; or

• the person seeking the exemption has failed to comply with a information request or administrative subpoena, or has impeded or is impeding, through action or inaction, the performance of a response action or natural resource restoration with respect to the facility; or

• a person has been convicted of a criminal violation for the conduct to which the exemption would apply, and that conviction has not been vitiated.

Id. at 9607(o)(2). This obviously gives EPA rather broad authority for finding a particular person cannot avail themselves of this exemption to CERCLA liability. It remains to be seen how EPA will exercise its authority under this "pull back" provision. Notably, there is no judicial review allowed of EPA decisions to exercise this authority. Id. at 9607(o)(3).

Regardless, this new exemption emphasizes the importance for small quantity waste generators to keep complete manifests and other records regarding their waste disposal.

The Act also gives certain liability protections to de micromis waste generators The plaintiff has the burden of showing the exemption is inapplicable to the defendants in a cost contribution suit under CERCLA arising from an NPL site, except when either EPA, or a State or local government is the plaintiff. Id. at 9607(o)(4). Further, if the private plaintiff in such a suit fails to make that showing, they are liable for the relevant defendant’s costs of defense, including reasonable attorney’s and expert witness fees. Id. at 9607(p)(7). This should make plaintiffs in such suits more diligent in screening who they name as defendants before the action is brought, and thereby reduce the scope of defendants in CERCLA contribution suits.

The Municipal Solid Waste Exemption.

The Act also creates a new, conditional exemption for certain generators of "municipal solid waste" that is disposed of at facilities listed on the NPL. Id. at 9607(p). Subject to certain exceptions described below, it exempts from waste generator liability for "municipal solid waste" ("MSW") disposal at such facilities persons or businesses that can demonstrate that they are:

• an owner, operator or lessee of residential property from which all of the person’s MSW was generated with respect to the facility;

• a business entity (including a parent, subsidiary or affiliate of the entity) that, during its three taxable years preceding the date of its notification of potential CERCLA liability, employed an average not more than 100 full-time individuals, or the equivalent thereof; and that is a "small business concern" within the meaning of the Small Business Act, from which was generated all of the MSW attributable to the entity with respect to the facility; or

• a tax-exempt, not-for-profit organization, as described in 501(c)(3) of the Internal Revenue Code which, during the year preceding its receipt of notification of potential CERCLA liability, employed not more than 100 paid individuals at the location from which was generated all of the MSW attributable to the organization with respect to the facility.

Id. at 9607(p)(1). Notably, the exemption is not available to municipalities, that commonly own the relevant landfill.

"Municipal solid waste" is defined as waste material this is:

• generated by a household (including a single or multi-family residence); and

• generated by a commercial, industrial, or institutional entity, to the extent that the waste material –

1. is essentially the same as waste normally generated by a household;

2. is collected and disposed of with other municipal solid waste as part of normal municipal solid waste collection services; and

3. contains a relative quantity of hazardous substances no greater than the relative quantity of hazardous substances contained in waste material generated by a typical single-family household.

Id. at 9607(p)(4)(A).

Examples of MSW include:

• [F]ood and yard waste, paper, clothing, appliances, consumer product packaging, disposable diapers, office supplies, cosmetics, glass and metal food containers, elementary or secondary school science laboratory waste, and household hazardous waste.

Id. at 9607(p)(4)(B).

MSW does not include:

• [C]ombustion ash generated by resource recovery facilities or municipal incinerators, or waste material from manufacturing or processing operations (including pollution control operations) that is not essentially the same as waste normally generated by households.

Id. at 9607(p)(4)(C).

Like with the de micromis exemption, however, there is a "pull back" provision, by which the President (EPA) may nullify the exempt status of a MSW generator if it makes the determination, which is not subject to judicial review, that:

• the MSW has contributed significantly or could contribute significantly, either individually or in the aggregate, to the cost of a response action or a natural resource restoration with respect to the facility;

• the generator failed to comply with an information request or administrative subpoena issued pursuant to CERCLA; or

• the generator has impeded or is impeding a response action or natural resource restoration at the NPL facility.

Id. at 9607(p)(2)-(3).

Another similarity to the de micromis exemption is certain liability protection is afforded those who qualify for the MSW exemption. First, no cost contribution action under CERCLA can be brought by anyone against the owner, operator or lessee of residential property that qualifies for the MSW exemption, except when EPA or a State or local government is the plaintiff. Id. at 9607(p)(6). Further, regarding MSW disposed of on or after April 1, 2001, the plaintiff in a cost contribution suit under CERCLA arising from an NPL site has the burden of showing the MSW exemption is inapplicable to the defendants, except when either EPA, or a State or local government is the plaintiff. Id. at 9607(p)(5)(A). And regarding MSW disposed of before April 1, 2001, that burden rests with the plaintiff in such a contribution suit, regardless of who the plaintiff is. Id. at 9607(p)(5)(B).

Alternative Settlements for Parties with Limited Ability to Pay.

As part of the effort to relieve small businesses of the financial impact of CERCLA liability, the Act also amends Section 122(g) of CERCLA, which regards expedited settlements with de minimis parties, to authorize expedited, reduced or "inability to pay" settlements with PRP’s that demonstrate an inability or limited ability to pay CERCLA response costs. 42 U.S.C. § 9622(g)(7)-(12)(the added provisions). Consistent with prior EPA policy, the general test for such a settlement is whether the person or business can pay response costs and still maintain their basic business operations, considering their overall financial condition and demonstrable constraints on their ability to raise revenues. Id. at 9622(g)(7)(B). As a condition to such a settlement, the applicant must waive all claims for contribution under CERCLA, unless the President determines such a waiver to be unjust. Id. at 9622(g)(8)(A). The President may decline to offer such a settlement to a PRP if he determines the PRP has failed to comply with any request for information or administrative subpoena, or has impeded or is impeding the performance of a response action with respect to the relevant facility. Id. at 9622(g)(8)(B).

Every "inability-to-pay" settlement reached per this provision, once finalized, must be publicized to all PRP’s who have yet to settle their liability to the United States with respect to the relevant facility. Id. at 9622(g)(12).

Brownfields Revitalization Provisions.

Funding For Brownfields Assessment, Revolving Loans and Remediation.

Section 9604 of CERCLA sets forth the authority of EPA in responding to a release or threatened release of hazardous substances. The Act contains a new subsection (k) in Section 9604, which codifies and expands upon EPA’s brownfields revitalization program. In the new subsection 9604(k), Congress provided for three main types of federal brownfield grants, available to "eligible entities." Those are: (1) assessment grants, (2) revolving loan fund grants, and (3) cleanup or remediation grants.

The Act authorizes $200 million per year for fiscal years 2002 - 2006 for these grants. Id. at 9604(k)(12)(A). $50 million per year (or 25% of the total amount funded if less than $200 million) is appropriated for such efforts at petroleum-contaminated facilities that qualify as brownfield sites. Id. at 9604(k)(12)(B).

Before addressing the specifics regarding these different types of grants, it is important to recognize what is a "brownfield site" where such funds can be spent, and who is an "eligible entity" that can obtain such grants.

A New Definition of "Brownfield Site" for Funding Purposes.

The Act contains the new, following definition of a "brownfield site":

real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant or contaminant.

Id. at 9601(39)(A). Notwithstanding the exclusion of petroleum from the definition of "hazardous substances" in CERCLA, for purposes of brownfields revitalization funding, the term "brownfield site" expressly includes sites contaminated by petroleum that:

• meet the definition of a "brownfield site" stated above;

• is determined by EPA or a State to be of relative low risk,

• for which there is no viable responsible party, and will be assessed and cleaned up by a person who is not potentially liable for the costs of doing so; and

• Is not the subject of a RCRA corrective action order for a underground storage tank release.

Id. at 9601(39)(D)(ii)(II). The definition also includes mine-scarred land. Id. at 9601(39)(D)(ii)(III).

The term "brownfield site," however, expressly excludes facilities which are:

• the subject of planned or ongoing removal action;

• listed or proposed for listing on the NPL;

• the subject of a CERCLA unilateral administrative order, court order, administrative order on consent or judicial consent decree;

• have valid permits under the Solid Waste Disposal Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act or the Safe Drinking Water Act;

• subject to corrective action under the Solid Waste Disposal Act, for which a corrective action permit or order has been issued;

• a land disposal unit for which closure notification under subtitle C of the Solid Waste Disposal Act has been submitted, and closure requirement have been specified;

• subject to the jurisdiction, custody or control of a department, agency or instrumentality of the United States, except for land held in trust by the United States for an Indian tribe;

• where a release of polychlorinated biphenyls (PCBs) subject to remediation under the Toxic Substances Control Act has occurred; and

• where assistance for response activity under subtitle I of the Solid Waste Disposal Act (i.e. the Leaking Underground Storage Tank Trust Fund) has been given.

Id. at 9601(39)(B). The Act authorizes the President, however, to make financial assistance available to many of these facilities upon a finding that financial assistance will protect human health and the environment, and either promote economic development or enable the creation of, preservation of, or addition to parks, greenways, undeveloped property, other recreational property, or other property used for nonprofit purposes. Id. At 9601(39)(C).

Who Qualifies as an "Eligible Entity" for Funding?

This term "eligible entity," who can apply for brownfields grants, is defined to include:

• a general purpose unit of local government;

• a land clearance authority operating under the supervision and control of a general purpose unit of local government;

• a government entity created by a State legislature;

• a State chartered (or state sanctioned) redevelopment agency;

• a State;

• an Indian Tribe (except in Alaska); and

• an Alaska Native Regional or Village Corporation.

Id. at 9604(k)(1). Notably, private entities are not included in this definition. As noted below, however, funds for a revolving loan fund can be given to an eligible entity (e.g., local government), which can then use those funds to make one or more loans to private parties. Id. at 9604(k)(3)(B)(i).

Brownfield Assessment Grants.

In the Act, Congress directed EPA to establish a program to provide grants to inventory, characterize, assess and conduct planning related to brownfields sites, and to perform targeted site assessments. Id. at 9604(k)(2)(A). Such grants may be awarded to an eligible entity on a community-wide or site-by-site basis, not to exceed $200,000 for a particular site (subject to increase of $350,000). Id. at 9604(k)(4)(A)(i).

Brownfield Revolving Loan Funds.

Congress also directed the President to establish a program to grant funds to eligible entities to be used for capitalization of revolving loan funds. Id. at 9604(k)(3)(A)(i). A recipient of such a grant can use the funds to assist others with brownfields remediation, in the form of either:

• loans to another eligible entity, or a site owner, developer, or another person; or

• one or more "subgrants" to another eligible entity or other nonprofit organization to remediate a site owned by the subgrant recipient.

Id. at 9604(k)(3)(B).

An eligible entity receiving revolving loan funding must contribute a matching share of at least 20% from non-federal sources, unless EPA determines this requirement would place an undue hardship on the eligible entity. Id. at 9604(k)(9)(B)(iii).

A grant for revolving loan funds cannot exceed $1,000,000 per entity per year, applying certain factors in determining whether to make any further grants to the same entity. Id. at 9604(k)(4)(A)(ii).

Brownfield Remediation or Cleanup Grants.

The final type of grant is for:

eligible entities or nonprofit organizations, where warranted, to be used directly for remediation of one or more brownfield sites owned by the entity or organization receiving the grant, in amounts not to exceed $200,000 for each site to be remediated.

Id. at 9604(k)(3)(A)(ii). As with a grant for revolving loan funds, the recipient of such a grant must contribute a matching 20%. Id. at 9604(k)(9)(B)(iii). The matching share can be "paid" by providing labor, materials or services.

In determining whether to make such a brownfields remediation grant, EPA must take into account:

• the extent to which a grant will facilitate the creation of, prevention of, or addition to a park, greenway, undeveloped property, recreational property, or other property used for non-profit purposes;

• the extent to which a grant will meet the environmental remediation and redevelopment needs of a low income or small population community;

• the extent to which a grant will facilitate the use or reuse of existing infrastructure;

• the benefit of promoting the long-term availability of funds from a revolving loan fund for brownfield remediation; and

• such other factors considered appropriate.

Id. at 9604(k)(3)(C).

Prohibitions and Other Conditions for Brownfield Grants.

No part of any brownfield grant or loan may be used to pay:

• any penalty or fine;

• a federal cost-share requirement;

• an administrative cost;

• response costs at a brownfield site for which the recipient is a PRP (under Section 9607);

• a cost of complying with any federal law.

Id. at 9604(k)(4)(B).

Each recipient of a loan or grant under the Act will be required to comply with the National Contingency Plan ("NCP") in conducting any assessment and remediation "only to the extent that the requirement is relevant and appropriate" to this brownfield revitalization program. Id. at 9604(k)(9)(A). Compliance with the NCP can add significantly to the costs of assessment and remediation of contaminated site. Congress clearly expressed its desire that federal brownfields funds be maximized by avoiding such costs if possible. It will be interesting to see the degree to which EPA imposes NCP requirements, such as community involvement in the remedy-selection process, in any loan or grant agreements.

Funding For State Response Programs

One of Congress’ objectives in the Act was to facilitate brownfields revitalization through State programs. In that vein, in addition to the grant programs described above, Congress authorized to be appropriated $50,000,000 for each fiscal year 2006-2006 for grants to eligible States or Indian tribes. Id. at 9628(a)(3). States or Indian tribes may use such grants to:

• to establish or enhance their own programs for addressing contaminated sites;

• to capitalize a revolving loan fund for brownfield remediation under Section 9604(k)(3); or

• to purchase insurance or develop a risk sharing pool, an indemnity pool, or an insurance mechanism to provide financing for response actions.

Id. at 9628(a)(1)(B).

To be eligible for these "response program" grants, States or tribes must either sign a memorandum of agreement with the EPA, or have a response program that includes each of the following elements or is taking reasonable steps to include them:

• a timely survey and inventory of brownfield sites in the state;

• oversight and enforcement authorities adequate to ensure that response actions will protect human health and the environment and be conducted in accordance with applicable law, and that all necessary response activities are completed in all response actions;

• mechanisms and resources to provide "meaningful" opportunities for public participation," including public access to relevant documents, prior notice and opportunity for public comment, and a mechanism for permitting and appropriately responding to public requests for site assessments; and

• mechanisms for approvals or clean-up plans and for certification that response actions at brownfield sites have been completed.

Id. at 9628(a). For fiscal year 2004, EPA will consider funding requests up to $1.5 million per state or tribe under this program.

Limitations On EPA Enforcement Actions

The Act also provides that, in cases where a person conducts a response action at a brownfield site that is in compliance with the state or tribal response program, the President may not bring an administrative or judicial enforcement action under 106(a) of CERCLA, or take a judicial action to recover response costs under Superfund 107(a). Id. at 9628(b)(1)(A). However, there are broad exceptions to that prohibition. The President may bring administrative or enforcement action against such persons when:

• the State requests that the President provide assistance in the form of a response action;

• the EPA Administrator determines that contamination has migrated or will migrate across a State line, resulting in the need for further response action, or the President determines the contamination has migrated or is likely to migrate onto federally owned property;

• after taking into consideration the response activities already taken, the EPA Administrator finds that a release or threatened release may present "an imminent and substantial endangerment" to public health or welfare or the environment, and that additional response actions are likely to be necessary to address, prevent, limit or mitigate" the release or threatened release; and/or

• the EPA administrator, after consultation with the State, determines that information, that on the earlier of the date on which cleanup was approved or completed, was not known by the State, as recorded in documents prepared or relied on in selecting or conducting the cleanup, has been discovered regarding the contamination or conditions at a facility indicating it presents a threat requiring further remediation.

Id. at 9628(b)(1)(B).

Before EPA initiates an enforcement action pursuant to one of these exceptions, it must, except in emergency situations, give State officials 48 hours advance notice of the action EPA intends to take. The State, in turn, must notify EPA, within 48 hours, of any State actions that are planned with regard to the brownfield site in question. Id. at 9628(b)(1)(D).

One condition to the prohibition against federal enforcement action at brownfield sites is it only applies in States that maintain and update at least every year, and make available to the public a record of sites (presumably brownfield sites) at which response actions have been completed in the previous year, or are planned. Id. at 9628(b)(1)(C). It might be prudent for anyone conducting remediation under a State brownfields agreement to ensure the State list complies with this requirement.

Deferral of Listing on the NPL

The Act also directs the President "generally shall" defer final listing of a brownfields site on the NPL, at the request of a State, if the President determines that:

• the State or another party under an agreement with or order from the State is conducting a response action at the same site in compliance with a State program that specifically governs response actions for protection of public health and the environment, and that will provide long-term protection to public health and the environment; or

• the State is "actively pursuing" an agreement to perform a response action at the site with a person whom the State believes is capable of performing that response action appropriately.

Id. at 9605(h)(1).

The President may decline the request of deferral, to discontinue the deferral, upon determining that:

• deferral would not be appropriate because the State, as an owner of operator or significant contributor of hazardous substances at the facility, is a PRP;

• the criteria under the NCP for issuance of a health advisory have been met; or

• the conditions for deferral are no longer being met.

Id. at 9605(h)(4).

Also, if after one year following a proposal to list a brownfields site on the NPL, the President determines that the State is not making reasonable progress towards completing a response action at that site, the President may then list the site on the NPL. Id. at 9605(h)(2).

By Keith H. Johnson, Poyner & Spruill LLP, (919) 783-1013, kjohnson@poynerspruill.com and Daniel F. Mclawhorn, Associate City Attorney, City of Raleigh (919) 890-3060; dan.mclawhorn@ci.raleigh.nc.us.