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All Appropriate Inquiry The New Rules . SARA BETH WATSON Steptoe & Johnson LLP Washington, D.C. American Bar Association Teleconference Wednesday, November 16, 2005 12:00 pm -1:30 pm EST . [email protected] (202) 429-6460. Brownfield Amendments.

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All Appropriate InquiryThe New Rules

SARA BETH WATSON

Steptoe & Johnson LLP

Washington, D.C.

American Bar Association Teleconference

Wednesday, November 16, 2005

12:00 pm -1:30 pm EST

[email protected]

(202) 429-6460


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Brownfield Amendments

  • The Small Business Liability Relief and the Brownfields Revitalization Act of 2002 (Brownfield Amendments)

    • Potential for federal CERCLA liability relief

    • Hurdles to qualify for the relief before the acquisition of the property

    • Long-term commitments to maintain the relief

    • State law liability issues must be considered separately


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How Does One Meet the Qualifying Criteria?

  • Evaluation of compliance preformed on a “careful, fact-specific analysis”

  • Statutory Criteria for compliance:

  • “All Appropriate Inquiry” Criteria

  • Full Cooperation

  • Compliance with Land Use Restrictions and Institutional Controls

  • Did Not Cause, Contribute or Consent to a Release/Disposal Occurred Prior to Acquisition

  • Compliance with All Requests for Information

  • All Legally Required Notices

  • No Affiliation with a Potential Liable Party

  • Reasonable Steps

    42 U.S.C. § 9601(35)(B)(iii)


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To whom is AAI applicable?

All Appropriate Inquiry is applicable to 3 categories of property owners:

  • Innocent purchasers

  • Contiguous property owners

  • Bona fide prospective purchasers

  • * provided that the property owner meets the statutory criteria, which will be analyzed on a fact-specific basis

  • Certain Brownfield grant recipients


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    To whom is AAI applicable?

    • All Appropriate Inquiry is applicable to relief from CERCLA liability for the 3 categories of property owners i.e. limited to CERCLA hazardous substances definition

    • Need to consider other liability schemes for non-CERCLA substances such as petroleum

    • Grant recipients have a broader range of substances under AAI


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    Statutory Criteria For Compliance – All Appropriate Inquiry

    Statute requires EPA to promulgate regulations and consider several factors in developing the regulations

    • Results of the inquiry of an environmental professional

    • Interview with past and present owners, operators and occupant regarding the potential for contamination

    • Review of historical sources

    • Searches for recorded environmental clean-up liens

    • Reviews of federal, state and local records

    • Visual inspections for the facility and adjoining properties

    • Relationship of the purchase price to the value of the property if not contaminated

    • Commonly known or reasonably ascertainable information about the property

    • The degree of obviousness of the presence or likely presence of contamination and the ability to detect contamination by appropriate investigation


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    All Appropriate Inquiry Regulations

    • EPA instituted a negotiated rulemaking to develop All Appropriate Inquiry regulations.

    • The Federal Advisory Committee represented a variety of interests

      • The negotiating committee included representatives from commercial real estate, mortgage bankers, engineers and geologists, Tribes, state and local government, environmental groups, conservation groups and environmental justice groups

      • SEER served as a resource

      • Insurance interests served as a resource

    • Consensus draft in November 2003

    • Proposed Regulations published August 26, 2004 69 Fed. Reg. 52,542

    • Final Rule published November 1, 2005 70 Fed. Reg. 66,070

    • Effective date of regulations is November 1, 2006.


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    All Appropriate Inquiry Regulations

    • The inquiry is time sensitive

      • AAI must be conducted prior to the acquisition of the property (date on which person acquires title to the subject property)

      • AAI must be conducted within one year before the acquisition (earlier information can be used in the report)

      • Certain elements must be current within 180 days prior to acquisition

    • Time components may impact other aspects of the deal

    • Performance based; not a checklist


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    All Appropriate Inquiry Regulations

    Results of the inquiry of an environmental professional (EP)

    • What is an environmental professional?

    • EP must identify data gaps, identify sources used to address gaps and comment on significance of the data gaps on the ability to identify conditions

    • Results must be documented in a written report which must include an opinion as to whether conditions are indicative of a release and signed by EP


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    All Appropriate Inquiry Regulations

    The inquiry of the EP must include

    • Interviews with past and present owners, operators, and occupants regarding the potential for contamination

      • Must interview current owner and occupant, if multiple occupants must include major occupants and those likely to use, store or handle hazardous material

      • To extent necessary to achieve objectives include current and past managers, past owners, and current and former employees

      • Special rules for “abandoned properties”


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    All Appropriate Inquiry Regulations

    • Review of historical sources

      • As far back in history as the subject property had structures or was first used for residential, agricultural, commercial, industrial or government purposes

      • EP can use judgment as to how far back in time EP needs to go to meet objectives


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    All Appropriate Inquiry Regulations

    • Reviews of federal, state and local records

      • Specific search distances provided in regulations.

      • EP may modify if written justification in the report

      • Includes tribal records in some circumstances


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    All Appropriate Inquiry Regulations

    • Visual inspections for the facility and adjoining properties

      • Physical limitations on the inspection such as weather must be documented

      • Must have on-site inspection of subject property except in unusual circumstances

      • Visual inspection of adjoining property from subject property line or other vantage point

    • The degree of obviousness of the presence or likely presence of contamination and the ability to detect contamination by appropriate investigation


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    All Appropriate Inquiry Regulations

    • Information that can developed by others

      • Specialized knowledge or experience on the part of the defendant

      • Relationship of the Purchase Price to the value of the property if not contaminated (need not share with EP)

      • Searched for recorded environmental clean up liens

      • Commonly known or reasonably ascertainable information about the property

    • Documentation of information developed by others is critical to liability relief defense


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    Important Points to Remember Regarding All Appropriate Inquiry

    • Is AAI relevant to my site?

    • Specified time frames

      • i.e. the All Appropriate Inquiry must be completed before ownership is acquired

      • Inquiries have a shelf life

      • Ongoing obligations after acquisition required by the amendments

    [email protected]

    (202) 429-6460


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    Important Points to Remember Regarding All Appropriate Inquiry

    • State law programs may be relevant and have different criteria

    • Site specific issues

    • Constraints of the deal

    [email protected]

    (202) 429-6460


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