EPA Issues Updated Guidance on “Common Elements” of Superfund Innocent Landowner Defenses

On July 29, 2019, EPA issued updated guidance on the “Common Elements” of the innocent landowner defenses under the Superfund statute: the Comprehensive Environmental Response, Compensation, and Liability Act. These defenses are essential to innocent parties that plan to acquire and develop brownfields properties and may be helpful for those who purchased a property they later discovered to be contaminated. The three defenses—which share many “common elements”—are:

1. Innocent landowner (i.e., purchaser) defense—innocent purchaser did not know and had no reason to know of contamination when purchasing the site and has complied with other common elements.
2. Bona fide prospective purchaser (BFPP) defense—innocent purchaser knew of contamination but acquired site after January 11, 2002, and meets all eight BFPP requirements.
3. Contiguous property owner defense—innocent party owns property contiguous with a contaminated site and has complied with other common elements.

The guidance is the first update in the 16 years since the initial March 2003 Interim Guidance. While it does not break new ground on any particular issues, it provides a more complete discussion of the key requirements, gives examples to highlight the ways in which the common elements can be satisfied, and explains how EPA currently intends to exercise its enforcement discretion. It also serves as a significant reference document by combining the old guidance with new case law, rulemakings, and EPA guidance that have issued over the last 16 years.

Throughout the updated guidance, EPA now comprehensively references old and new authority on the common elements, including:

• “All appropriate inquiries” – the common element that parties conduct adequate pre-acquisition due diligence.
• “No affiliation” – the common element that an innocent landowner have “no affiliation” with a party liable at the site.
• No “disposal” – the common element that innocent parties cannot have disposed of hazardous substances at the site.
• Compliance with and implementation of land use restrictions and institutional controls – a common continuous requirement.
• “Reasonable steps” – the common continuous requirement that parties take reasonable steps in response to known contamination at the site (including a substantially updated Attachment B providing many illustrative examples of reasonable steps).
• Comfort/status letters – letters that EPA may provide in its discretion to assure parties that they are taking all reasonable steps at a given site.

To avail themselves of these defenses, one of the biggest challenges that landowners face is determining what constitutes “reasonable steps.” The update seeks to provide direction on this issue, but ultimately leaves it unresolved, stating that “courts have generally concluded that a landowner should take some positive or affirmative step(s)” and that “the determination will involve a site-specific fact-based analysis.” 2019 Guidance at 20. Thus the tension continues between Congressional intent to encourage brownfield development by protecting landowners and concerns about limiting exposure to or controlling the future spread of contamination. It is useful that EPA will continue its policy of making Comfort Letters available for at least some landowners, as these letters or other governmental agreements may explicitly define the site-specific “reasonable steps.” See 2019 Guidance at 20 n. 82. For landowners, having a documented, site-specific roadmap for satisfying “reasonable steps” can help preserve the innocent landowner defenses.

Note that, as in the 2003 guidance, this update only gives EPA staff direction on exercising their enforcement discretion. That said, EPA intends for this guidance to encourage third party investment, and the more comprehensive discussion can give some additional level of understanding of the requirements. Indeed, EPA acknowledges that the guidance “may provide general information to landowners, developers, lenders, investors, or other third-party stakeholders who may wish to become involved with impacted properties.”

Ultimately, EPA “encourages parties to consult with their own counsel and environmental professionals prior to and during property ownership.”

Beveridge & Diamond’s Superfund, Site Remediation, and Natural Resources Damages practice group assists clients in litigation and allocation of CERCLA sites, including complex, large-scale sites. We counsel clients on developing case law and requirements under CERCLA and state-equivalent hazardous waste laws. For more information, please contact the author.