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Despite its limitations, most commercial and industrial property transactions rely on the Bona Fide Purchaser Defense (BFPD) to CERCLA as the principal means of protecting new owners from environmental liability.  While EPA has adopted the “All Appropriate Inquiry” (AAI Rule) to provide some clarity to the steps necessary to qualify for the defense, there is still aspects of the AAI Rule that are open to interpretation.  Therefore, court rulings on applicability of the BFPD can be very instructive to practitioners, developers and property owners.

There have been very few court rulings interpreting application of the BFPD to CERCLA liability. The most notable prior ruling, PCS Nitrogen Inc. v. Ashley II of Charleston, limited the BFPD based on the defendant’s failure to establish certain required elements of the defense.

In a decision issued last month, Von Duprin LLC v. Moran Elec. Serv., Inc., No. 116CV01942TWPDML, 2019 WL 535752 (S.D. Ind. Feb. 11, 2019), the Indiana Federal District Court granted the BFPD even though the party asserting the defense did not obtain a Phase I prior to purchasing the property.  The Court’s ruling is notable in that EPA’s AAI Rule is mostly focused on the required elements of a Phase I environmental assessment to qualify for the BFPD.  The AAI rule also discusses “reasonable steps” that are needed if the Phase I identifies the possibility of any contamination on the property, which include:

  1. Stop any continuing release;
  2. Prevent any threatened future release; and
  3. Prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance

Plaintiff’s argued Defendants should not qualify for the BFPD because the Defendants failed to perform a Phase I in accordance with AAI prior to acquiring the property.  Plaintiff also contended that the Defendants failed to perform necessary “reasonable steps” post-acquisition to address the contamination and, therefore, should not qualify for the BFPD.  The Court rejected Plaintiff’s argument regarding the adequacy of Defendants “reasonable steps” stating that Plaintiff’s contention was not “well developed.”  The Court also held that the Defendants’ performance of a Phase II was sufficient to establish the defense even without a Phase I stating:

CERCLA makes it clear that performing a Phase I Environmental Site Assessment is sufficient to satisfy the all appropriate inquiries prong of the BFPP defense. 42 U.S.C. § 9601(35)(B)(iv)(II). But the law leaves open to interpretation whether a Phase I assessment is the only way to satisfy that prong, saying that a Phase I assessment “shall satisfy the requirements” of the all appropriate inquiries prong. At least one court has determined that a Phase I assessment is not the exclusive means by which a purchaser of land can make all appropriate inquiries. R.E. Goodson Const. Co., Inc. v. International Paper Co., No. 4:02-4184-RBH, 2006 WL 1677136, at *6 (D.S.C. June 14, 2006). The Goodson court determined that the Senate Report on the amendment adding the “shall satisfy” language to CERCLA read that a Phase I assessment “can satisfy” the “all appropriate inquiries” requirement. Id. That court also noted that “Congress could have provided that a Phase I site assessment was required or was the exclusive procedure to satisfy the ‘all appropriate inquiries’ standard; however, Congress made no such mandate…This Court is inclined to agree with Goodson that Congress did not intend to make a Phase I Environmental Site Assessment the exclusive means by which a purchaser could satisfy the BFPP defense’s all appropriate inquiries standard.

Defendants Phase II assessment included collection of seven soil samples and three groundwater samples.  The sampling showed some exceedances of cleanup standards.  The Phase II report recommended removal of an underground storage tank (UST) and the associated contaminated soil in accordance with Indiana Department of Environmental Management (IDEM) regulations.  Defendants did perform the removal and the UST and excavation of the contaminated soil as recommended in the Phase II report.  After excavation, the Defendants backfilled the excavation with clean soil.

What is interesting is that with no Phase I performed how could the Court determine that the Phase II scope was adequate?  What was the basis of the determination that the UST was the only potential source of contamination on site that warranted sampling?  It is possible there was testimony on this issue, but it was not discussed in the opinion.

The ruling is a hopeful sign for the thousands of transactions that rely on the BFPD to address potential liability that the BFPD will be recognized by Courts.  However, despite the ruling, it is still strongly recommended that parties wishing to establish the BFPD do not skip the Phase I assessment process as set forth in the EPA AAI Rule.  Doing so leaves a new owner open to many different avenues of challenging its assertion of the BFPD.  Furthermore, the cost of a Phase I is somewhere between $2,500 to $4,500- a relatively small price to pay for environmental liability protection.

In February 2019, U.S. EPA released its action plan to regulate Per- and Polyfluoroalkyl Substances (PFASs).  The two most well-known PFAS chemicals are perfluorooctane sulfonate (PFOS) and perfluorooctonoic acid (PFOA).

Consumer products have long used PFASs for things such as non-stick cookware, waterproof carpeting, clothing, and some firefighting foams.  While PFASs made great consumer products, it was later discovered that the chemicals don’t break down in the environment and they have been linked to possible health impacts.  Humans are exposed to PFASs in drinking water, fish consumption and inhalation of dust.

Back in 2016, EPA issued an advisory under the Safe Drinking Water Act (“SDWA”) that recommended levels of 70 parts per trillion in the bloodstream.   An “advisory” is non-regulatory and unenforceable. While EPA adopted this recommendation, some states did adopt drinking water standards.  In the last few years it appeared EPA would defer to the states in regards to establishing standards for PFASs.

On February 14, 2019, after mounting calls for regulatory action on PFAS, EPA releases its PFAS Management Plan.  The plan calls for a number of regulatory actions, but most notably:

  • EPA will adopt a national drinking water standards for PFOAs and PFOS under the Safe Drinking Water Act sometime in 2019.  EPA only regulates approximately 90 chemicals under the SDWA, therefore, this is the most significant aspect of EPA’s announced management plan.
  • EPA will being to take the steps necessary to list PFOA and PFOS as hazardous substances under CERCLA (also known as “Superfund”).  Listing PFOA and PFOS as hazardous substances will leverage CERCLA’s broad joint and several liability scheme for sites across the U.S. with significant groundwater contamination; and
  • EPA is considering including PFASs on the Toxic Release Inventory (TRI) and rules to prohibit the use of certain chemicals.

While adopting an MCL for PFOA and PFOS under the SWDA would be very significant, EPA must go through rulemaking, including a notice and comment period, to put a standard in place.  Any such standard will be controversial because EPA must consider the cost of treatment compared with public health benefits.  Also, any established standard will almost certainly be challenged in the courts.

While EPA is moving forward to adopt regulations pertaining to PFASs, lawsuits have already been filed across the United States against manufacturers of PFASs.  In Ohio, a large private party class action suit against DuPont, a PFAS manufacturer, was settled for $670 million resolving 3,550 personal injury lawsuits related to exposure to PFASs into the environment. In 2018, now Governor Mike DeWine, when he was Attorney General, filed a suit against DuPont for releases of PFASs into the Ohio River.

From the newly announced EPA Management Plan, state regulatory actions and litigation, PFAS issues will be unfolding over the next few decades.

On February 14, 2019, the IRS will hold a public hearing on its regulations governing Qualified Opportunity Zones.  The public comment period closed on December 28, 2018.  The IRS is expected to finalize regulations soon after the public hearing.

One of the most notable comments received during the public comment period on the IRS regulations for Opportunity Zones (QOZ) came from the Deputy Director of U.S. EPA’s Office of Brownfields and Land Revitalization (See, epa_comments_on_qoz_regs).   The comment letter did an excellent job of pointing out that the regulations could, in large part, freeze out brownfields from leveraging the significant advantages of the OZ classification.  This is best highlighted by the following comment in the letter:

EPA’s OBLR encourages the IRS to clarify in the final guidance that investments in the assessment, remediation, and redevelopment of brownfields properties located in Qualified Opportunity Zones (QOZs) are included within the scope of Qualified Opportunity Funds (QOFs).  This clarification will provide an incentive to invest funds in the assessment, remediation, and reuse of brownfield properties.

As discussed in EPA’s comment letter, without proper treatment of costs associated with investigating and cleanup of brownfields, developers will have very little incentive to tackle properties with any significant environmental contamination.  At issue are regulations regarding which properties or improvements allow a property to qualify for the tax incentives associated with QOZs.  Under the draft regulations, properties must meet certain requirements to qualify:

  1. Substantial Improvement Test- the investor must substantially improve the real estate by doubling the tax basis of any building on the property without regard to the value of the land itself.    Under current regulations, if the investor/developer spends funds to investigate or cleanup contamination on the property and, as a result, the land value increases, that increase cannot be counted toward the substantial improvement test;
  2. 30-Month Window for Improvements- the draft regulations establish a 30-month window to complete the investments (i.e. building improvements) used to qualify under the Substantial Improvement Test.  Since most brownfield cleanups will add substantial time to a redevelopment project, the 30-month window requirement would also act to exclude brownfield redevelopment projects; and
  3. Original Use- the original use must commence with the applicable QOZ investment. The draft regulations put the focus on the vertical structure on the property, not the land itself.  By focusing on buildings, the QOZ would provide little incentive to cleaning up contaminated land.

To allow flexibility for brownfield projects, EPA proposes the following changes to the IRS proposed regulations:

  • Brownfield = Original Use- Allow “brownfields” (as that term is defined under CERCLA) to qualify for the “original use” thereby putting the focus on the land when the land is contaminated.  EPA also states that allowing brownfields to qualify as the “original use” will address  30-month deadline for improvements which may be too restrictive if substantial cleanup is needed prior to development;
  • Vacant or Underutilized Properties = Original Use-  Allow properties that have been vacant or underutilized for a period of one year or more to meet the definition of “original use” under the regulations.  “Underutilized” would mean the entire property or a portion thereof which is only used at irregular periods or intermittently.  Expansion of the definition of “original use,” as suggested by EPA, would address concerns related to properties that add to blight even if they don’t meet the definition of a “brownfield;”
  • Foreclosed or Land Bank Property Should Qualify– if a property has gone through foreclosure or is being held by a land bank, EPA encourages the IRS to allow those properties to qualify for QOZ investment by treating them as “Underutilized or Abandoned Property” under the regulations;
  • Sampling and Cleanup Costs = Substantial Improvements- EPA requests that the IRS regulation treat assessment, cleanup and other site preparation costs as expenses that meet the “Substantial Improvement” Test under the QOZ regulations;
  • Allow Redevelopment Ready Brownfield Projects to Qualify-  EPA asks that the regulation allow a project to qualify that is solely assessment and cleanup of a brownfield property in preparation for future development.  Such a change could add a major incentive to spur cleanup of brownfields and positioning such property for future development;
  • Allow Gains from QOZ Investment Related to Brownfield Cleanup to Be Carried Over to Vertical Improvements on the Property-  EPA requests that the regulations allow the gains realized from the sale or exchange of QOZ Property to be deferred if they are reinvested in replacement QOZ Property within a 12-month period.  Without such clarification EPA is concerned that a Redevelopment Ready Brownfield Project may have to delay actual building construction for ten years after cleanup is complete to access the benefits of the Opportunity Zone incentive; and
  • Stack Window for Cleanup with Window for Redevelopment-  EPA requests that the IRS allow a 30-month window for brownfield cleanup to show substantial improvement to the land value and a separate 30-month window for building improvements for costs to count toward the Substantial Improvement Test.

If the IRS does not revise its regulations to address EPA regulations there is a strong possibility that brownfield projects will not be able to leverage the significant tax incentives provided by QOZs.

Since the sunset of the very successful Clean Ohio Brownfield Revitalization Program, brownfield redevelopment has slowed in Ohio.  At a time when the economy is finally doing well, and real estate development is in full recovery mode, brownfields are still being passed over for less costly redevelopment options.

This past week, Representative Arndt introduced House Bill 737 (Click on link hb737_00_IN) which would incorporate the CERCLA Bona Fide Purchaser Defense into Ohio Law.  The Greater Ohio Policy Center (GOPC) has been working with Rep. Arndt on the legislation.  As discussed below, if passed, the legislation would fill a gap in Ohio law that discourages brownfield redevelopment.  The current legislation also includes an option to obtain a “concurrence letter” from Ohio EPA that would help provide comfort to businesses, developers and lenders as to whether the proper due diligence steps were performed to establish the environmental liability defense.

Background

The cost to cleanup historical contamination at brownfield properties has long discouraged reuse and redevelopment.  As discussed in prior posts, brownfield properties are often bypassed to develop on greenfield space moving jobs out of urban cores and promoting urban sprawl.

In 2002, Congress created the “Bona Fide Purchaser Defense” (BFPD) as an amendment to CERCLA to encourage brownfield redevelopment.  Under the BFPD, a buyer of property can establish a defense to environmental liability under CERCLA if the buyer performs environmental due diligence prior to purchase in accordance with U.S. EPA standards.

U.S. EPA adopted the “All Appropriate Inquiries” rule which establishes the mandatory level of environmental due diligence a buyer must perform to qualify for the liability defense.  If the due diligence (i.e. Phase I and Phase II assessments) identifies an ongoing release or risk to human health or the environment, the buyer must take “reasonable steps” to address those issues.

A key aspect of the BFPD is that “reasonable steps” does not mean full cleanup of the property.   Rather, the goal is to make the property safe for reuse and to prevent any ongoing threats to the environment.  In this manner, the BFPD offers a much more cost effective means to putting brownfields back into productive use than traditional full blown cleanup programs such as the Ohio EPA Voluntary Action Program (VAP).

Gap in Ohio Law

While the BFPD exists to protect a buyer from liability under CERLCA, a federal law, it does not extend protection from liability under state laws.  Currently, even if a buyer performs “All Appropriate Inquiries” on a property in Ohio, the buyer will receive no legal liability protection under Ohio law.

H.B. 737 would fill this gap.   It would extend protection from liability under Ohio law for pre-existing “hazardous substances” contamination on property to buyers who take all the necessary steps to qualify for BFPD.  By strengthening protections under the BFPD, buyers will have a greater incentive to reutilize brownfields in Ohio.

In extending the BFPD to liability under Ohio law, Ohio would be playing catch up with many other states, such as Indiana and Michigan, which already have incorporated the BFPD or BFPD like legal protection into state law.

Concurrence Letter

Under federal law, the BFPD is self-implementing, meaning a buyer completing “All Appropriate Inquiries” does not submit anything to U.S. EPA to verify they complied with the rule.  Rather, the buyer relies on advice from their environmental consultant and attorney that they have taken the proper steps to qualify for the BFPD.   The first time a buyer will learn whether they did fulfill the necessary steps to qualify for the BFPD is when it is challenged in court.  Ashley II is an example where a buyer didn’t fare well in asserting the BFPD.

While there are positives with a self-implementing program (i.e. no regulatory sign-off), many clients I work with are more conservative with regard to taking on risk.  Some may like the option to have Ohio EPA review their Phase I and Phase II (if needed) to confirm they have done enough to qualify for the BFPD.  Other clients would be comfortable without such a comfort letter.

H.B. 737 provides an optional track to receive a concurrence letter from Ohio.  Buyers still have the option of following the traditional self-implementing approach.

Indiana already has such an option available, referred to as a “comfort letter,” and it is widely used by buyers.  Providing such an option under Ohio law would provide more tools for brownfield redevelopment.

Congress does not often pass environmental legislation, so the passage of the Brownfields Utilization, Investment, and Local Development Act (BUILD Act) is noteworthy.  While the amount of federal funds available will still be far less than needed to move the needle, there are important changes to the law that will help facilitate brownfield redevelopment.  The most notable of these changes include:

  1. Protections for Local Governments-  Local governments will no longer trigger CERCLA liability as “owners or operators” by simply taking title to property through law enforcement activity, seizures, bankruptcy, tax delinquency, or other circumstances.  The big change is that the BUILD act removed the term “involuntary” as a qualifier for local government protection from CERCLA liability if it takes ownership of contaminated property.  This allows local government to be more proactive in taking ownership of brownfield to promote redevelopment without triggering CERCLA liability.
  2. Extends Bona Fide Purchaser Defense (BFPD) to Tenants- U.S. EPA has used enforcement discretion to extend BFPD to tenants.  The BUILD Act now formalizes that protection into the law.
  3. More Money- The Act more than doubles funding available up to $200 million each fiscal year through 2023 and additional $50 million per year for state response program funding;
  4. Expanded Eligibility-  Certain nonprofit organizations, limited liability corporations, limited partnerships and community development entities are now eligible to receive grant funding;
  5. Increases the Funding Limit-  Max grants were raised from $200,000 to $500,000;
  6. Eligibility of Administrative Costs- up to 5% of a grant can be used for administrative costs, not including investigation or identification of site, design and performance of response action, or monitoring of a natural response;
  7. Petroleum Contaminated Site-  Sites with petroleum contamination are eligible when there is no viable responsible property;
  8. Prioritizes “Clean Energy” and Waterfront Projects-  Projects that involve clean energy or are located on the waterfront will receive more points when scoring applications thereby prioritizing these projects.

While each of the improvements have benefits, the most significant are the expanded liability protections for local governments and tenants.  Allowing cities to proactively target and acquire property without fear of CERCLA liability is a major development that will help facilitate redevelopment.

As discussed in my prior post, in September Ohio EPA announced that it would be sending “hundreds of letters” to property owners that have trichloroethylene  (TCE) contamination, including property owners that cleaned up their property under the Voluntary Action Program (VAP).  At the September meeting of VAP professionals the Agency announced that it could take legal action against property owners with TCE contamination even if the property owner received a Covenant-Not-to-Sue (CNS) under the VAP (i.e. a legal release).

Since the September meeting many in the environmental community have questioned whether the Agency has undermined a cornerstone of the program- the ability to rely on a legal release through a VAP CNS that no additional cleanup would be required.  The Agency was careful to state it would not be reopening the CNS to apply the more stringent TCE VAP cleanup standard.  The Agency still agrees the VAP CNS locks in the cleanup standards once the CNS is issued (even if standards get more stringent for certain types of contamination based on the more up-to-date science).

The ability to lock in cleanup standards has always been viewed as one of the most significant incentives for submitting a VAP No Further Action (NFA) letter to Ohio EPA to obtain a CNS.   Without the ability to rely on the legal release, the VAP would provide very little incentive to make public information about levels of contamination at your property.

While the Agency said it would not reopen a CNS issued under the VAP to apply the more stringent TCE cleanup standard, the Agency also said it has an obligation to protect public health and the environment.  The Agency indicated it has separate legal authority, outside the VAP program, to take action at properties it believes present a threat to public health and the environment.  The Agency stated it could perform cleanup itself and recover its costs under this separate legal authority if property owners refused to do anything more to address TCE at their sites.

Legal End Around?

While Ohio EPA says it would not reopen VAP covenants to apply more stringent cleanup standards, it said it could use other legal authority to take action to address TCE.  Most property owners won’t care which legal authority the Agency utilizes. Most will be upset that they are being told to perform more investigation or cleanup after they thought they had met all their obligations.

Does this the Agency’s recent announcement weaken the VAP program?  It certainly diminishes the incentive of entering the program.

For years, many outside attorneys and consulting firms have advocated simply cleaning up the property to VAP standards and obtaining an NFA, but electing not to submit the NFA to Ohio EPA to obtain a CNS.  What are the perceived advantages to this approach:

  • Meeting VAP standards provides a technical argument that the property does not present a threat to public health or the environment;
  • While not a legal release, the Ohio EPA or U.S. EPA would have a much more difficult time taking enforcement against a property that is deemed protective of the public health or the environment (as indicated by issuance of the NFA);
  • By not submitting the NFA to Ohio EPA all sampling data can remain confidential.  No information will be accessible by the public regarding the condition of the property; and
  • By not submitting the NFA, the owner avoids the costs associated with Ohio EPA’s review of a CNS

While there are advantages to not submitting an NFA to obtain a CNS, these must be balanced against the limitations of such an approach:

  • The CNS still locks in cleanup standards.  Obtaining only an NFA leaves the property open to application of more stringent cleanup standards;
  • A CNS still provides a much stronger legal defense against EPA enforcement for cleanup
  • A property with a CNS is more easily transferred to a new owner because the property still has a sign-off from the Ohio EPA that the property meets standards;
  • Financing is more easily obtained for a property with a CNS versus an NFA; and
  • While the VAP is self-implementing, it is very common for VAP Certified Professionals and Ohio EPA to disagree over whether the cleanup was sufficient.  Obtaining a VAP CNS provides the assurance the Agency signed off on the cleanup.

This laundry list of pro’s and con’s make this a complex decision for the property owner.  The recent announcement regarding notices to property owners holding a CNS with TCE contamination adds another factor to be considered.

The numbers don’t lie, the number of VAP CNS have gone down over the last few years.

VAP CNS Issued by Year
Year

NFA Letters
Requesting a CNS

CNS Issued Review Pending
2014 65 60 2
2015 33 33 0
2016 28 18 7
2017 to date 14 2 12

The cost and complexity of the program results in only a limited number of sites entering the property each year.  As has been discussed in prior blog posts, Ohio need to develop more options to address liability from pre-existing contamination to accelerate reuse of brownfields in Ohio.

While the Trump Administrations primary environmental agenda has been focused on deregulation, one area EPA Administrator Scott Pruitt has prioritized is Superfund (i.e. CERCLA).  Superfund is meant to investigate and cleanup the dirtiest sites in the country.  However, its long and complicated investigation, remedy selection and cleanup implementation processes have slowed cleanups to a crawl.  It is certainly a program much in need of an overhaul.

Administrator Pruitt created a task force to provide recommendations for improvement of the Superfund program.  The Administrator stated his goal was to "restore the Superfund program to its rightful place at the center of the agency’s core mission."  

The task force was given five goals:

  • Expedite cleanup and remediation;
  • Reinvigorate cleanup and reuse efforts by PRPs;
  • Encourage private investment to facilitate cleanup and reuse;
  • Promoting redevelopment and community revitalization; and
  • Engage with partners and stakeholders.

Ideas were evaluated in each of these areas.  The Administrator notes that some of the 42 strategies recommended will take time, including rule changes.  However, he identified strategies that he has directed the task force to immediately implement, including::

  1. Take immediate action at sites where the risk to human health are not fully controlled;
  2. Use interim or removal actions more frequently to address immediate risks;
  3. Prioritize sites for Remedial Investigation and Feasibility Studies (RI/FS) that require immediate action;
  4. Identify contaminated sediment or complex groundwater sites where adaptive management can be implemented;
  5. Evaluate redevelopment potential for NPL sites;
  6. Track remedy selection in real time with Superfund Enterprise Management Systems;
  7. Focus resources on NPL sites with most reuse potential;
  8. Identify sites for PRP-lead cleanup to spur redevelopment;
  9. Submit the total indirect costs charged to PRPs for 2016 and 2017
  10. Encourage PRPs to work with end users to voluntarily perform assessment and cleanup to spur redevelopment;
  11. Use purchase agreements for potential Bona Fide Prospective Purchasers outlining their actions necessary to preserve their BFPP status;
  12. Use unilateral orders against recalcitrant PRPs to discourage proactive negotiations of response actions; and
  13. Maximize deletions and partial deletions of sites that have been cleaned up.

For the task force’s full report click here.

What can we learn from the List of Priority Items?

Vapor Intrusion 

The most immediate take away is that sites that present vapor intrusion risks to on-site or adjacent property owners will be a priority.  In the last five years, vapor intrusion has become a major focus of both U.S. EPA and State EPA’s.  

The vapor intrusion pathway is often seen as the most immediate and direct public health threat presented by sites.  Therefore, it is logical to assume that and Superfund sites that present vapor intrusion risks will be prioritized.  Based on the strategies outlined above, it is very likely that we will see an increase in the use of unilateral enforcement by the EPA Region’s to address vapor intrusion risks.  

Slow Moving Sites

The task force has targeted sites that have taken "far too long to remediate."  The task force will establish a "Administrator’s Top Ten List" that will get weekly attention.  Sites that have been on the NPL for five years or longer without "significant movement" will be reviewed.  

Unfortunately, without a major overhaul to the National Contingency Program (NCP) which governs Superfund, the report and recommendations are highly unlikely to result in significant acceleration of cleanups.

Sites with Redevelopment Potential

Several of the Administrator’s recommendations focus on targeting sites with redevelopment potential.  For these sites it is possible that the Agency will be more flexible to voluntary cleanup programs that could put land back into productive use more quickly.  Following the traditional long and drawn out investigation, remedy selection and implementation will not put property back into productive use quickly.

EPA has shown greater flexibility toward accepting state brownfield voluntary cleanup programs.  The focus on redevelopment by the task force provides an opening to PRPs and developers to, perhaps, leverage greater acceptance of these state voluntary brownfield cleanup programs. In reality, leveraging state voluntary cleanup programs may be best opportunity to accelerate cleanup at Superfund sites.

On August 24th, Ohio EPA released new guidance that incorporates an unprecedented approach to vapor intrusion.  Under the new guidance, Recommendations Regarding Response Action Levels and Timeframes for Common Contaminants of Concern at Vapor Intrusion Sites in Ohio, the Agency is for the first time demanding immediate action when contaminant levels exceed certain established "trigger levels."  In the case of one particular contaminant, trichloroethylene (TCE), the Agency expects action within days if the associated trigger levels are exceeded.  The guidance, as outlined below, has major implications for businesses, property owners, consultants and attorneys.

The guidance establishes specific trigger levels for sub-slab and indoor air.  With regard to TCE, it establishes trigger levels for groundwater in addition to sub-slab and indoor air.  Groundwater or sub-slab exceedances will require immediate indoor air sampling.  If indoor air trigger levels are exceeded, immediate action is required in the form of installation of a remedy and/or notifying regulators.  The response times for exceedance of indoor air trigger levels are set forth below.

Response Times for Common Indoor Air Contaminants

Exceeds Indoor Air Risk Standard
Chronic Response Resample or install remedy within 3-90 days
Accelerated Response Coordinate with appropriate state, local and health authorities on response action

 

* Common contaminants include: vinyl chloride, tetrachloroethylene, chloroform, carbon tetrachloride and naphthalene

 

Response Times Specific for TCE

Exceeds Indoor Air Risk Standard
Accelerated Early and interim response actions evaluated within weeks
Urgent Response actions evaluated within days. Consider relocation of residents/occupants
Imminent Immediately contact state, local and public health officials.  Relocate residents/occupants

The Agency made the following public statement following release of the new guidance:

The Division of Environmental Response and Revitalization (DERR) has developed a memorandum on action levels and response timeframes for sites that are being investigated for vapor intrusion of trichloroethylene (TCE) and other associated chemicals. These actions levels and time frames are based primarily upon the short term exposures to TCE and the potential for cardiac malformations in developing fetuses. DERR developed this guidance in consultation with USEPA and use these risk levels and response times when conducting Ohio EPA lead investigations for the CERCLA and RCRA programs. This guidance does not have the force of law, but Ohio EPA recommends its use to outside stake holders, including the Voluntary Action Program (VAP), in evaluating the concentrations of volatile compounds in ground water, soil gas or indoor air in residences and commercial buildings.(emphasis added)

What is unprecedented about this new guidance is the requirement to take immediate action, within days in some cases, based upon risk based screening values.  Historically, vapor intrusion risks were vetted through sampling and analysis, a process that could take a year or more before cleanup was implemented.

Guidance on TCE

TCE is a very common metal degreaser.  As set forth above, the response timeframes for exceedances of TCE trigger levels are particularly aggressive.  Ohio EPA bases its urgent call to respond upon a specific evaluation of the risks of TCE exposure:

“In September, 2011, [U.S. EPA] updated the toxicity assessment for TCE which concluded, in part, that women in the first trimester of pregnancy are one of the most sensitive populations to TCE inhalation exposure due to the potential for fetal cardiac malformations. Because the key steps for cardiac development occur within the first 8 to 10 weeks of pregnancy, exposure to TCE during early pregnancy is of concern.”

To give some perspective as to the number of sites in Ohio that may have some level of TCE contamination, earlier this year, Massachusetts recently announced a TCE initiative in which it reviewed 1,000 closed cleanup sites across the State.  Ohio, a much larger and more industrial state, likely could have more TCE impacted sites. 

Implications of New Vapor Intrusion Guidance

The guidance has major implications for businesses/property owners, consultants and attorneys:

  • Property owners have increased liability risk, in particular if they are aware that trigger levels may be exceeded.
  • Through guidance and training sessions, Ohio EPA has pressured consultants to come forward with data even in instances when their clients may not want the information to be public;
  • It will be critical for attorneys to ensure adequate evaluation of vapor intrusion is included in Phase Is.  While it is a requirement to evaluate vapor intrusion risks under the current Phase I standard (ASTM 1527-13), inconsistencies persist among consultants in evaluation of vapor intrusion in their Phase I reports.
  • Where Ohio EPA has data and wants further evaluation of vapor intrusion risks, the Agency is notifying property owners they must take action or the Agency will proceed with sampling.
  • In early summer, Ohio EPA revoked portions of its prior vapor intrusion guidance that relied upon use of the Johnson & Ettinger model (a less conservative model than U.S. EPA Vapor Intrusion Screening Level (VISL) Calculator).  Ohio EPA still hasn’t been clear as to whether it will reopen previously closed cleanup sites that relied upon the Johnson & Ettinger model.
  • While the guidance states it does not have the force of law, EPA is taking action based upon the new guidance.  

 

On November 2, 2015, President Obama signed into law the Federal Civil Penalties Inflation Adjustment Improvement Act of 2015.  The law required all federal agencies to increase civil penalties with inflation. While there were previous requirements to increase civil penalties, the new law provides for more dramatic increases attributable to the following changes:

  • Requires adjustments annually instead of every four years as had been previously been required;
  • Institutes a "catch-up" period to increase penalties assuming the more accelerated schedule had previously been in place with a cap on total increases of 150% (which is quite dramatic)
  • Formula for the "catch-up" period is based on how much the October 2015 Consumer Price Index (CPI) exceeds the 1990 CPI (called the "cost-of-living multiplier")

The EPA promulgated the Civil Monetary Penalty Inflation Adjustment Rule to establish a schedule for penalty increases including implementation of the "catch up" provision.  The schedule began implementation on August 1st.  EPA described the purpose of the rule as follows:

The primary purpose of the rule is to reconcile the real value of current statutory civil penalty levels to reflect and keep pace with the levels originally set by Congress when the statutes were enacted.  

EPA’s Adjustment Rule includes the following increases (there are a range of potential penalties in the Adjustment Rule.  The ranges shown below are for some of the more common violations):

  • TSCA toxic substances violations – go from $25,000 per day to $37,000
  • RCRA-  from $25,000 per day to anywhere from $56,467 to $70,117 depending on the nature of the violation
  • Clean Air Act-  from $37,500 (set in 2009) to $44,539 for EPA administrative penalties and a maximum of $93,750 for penalties assessed by a court (the maximum increase of 150% allowed under the rule)
  • Clean Water Act- from $37,500 to anywhere from $44,539 to $51,570
  • ECPRA and CERCLA- from $37,500 to $53,907

To understand the specific penalty increases for particular violations of the statutes set forth above, consult Table 2 of 40 CFR Section19.4 of the EPA Civil Monetary Penalty Inflation Adjustments Rule.

While EPA still has discretion to seek less than the per day maximum civil penalty set forth in the Adjustment Rule, the rule shows an intent that penalties for environmental violations will be significantly larger even when EPA exercises is discretion.

This is the final post discussing the current state of brownfield redevelopment in Ohio.  It provides suggested changes to the regulations and incentives in Ohio to accelerate brownfield redevelopment. The prior posts in this series discussed the following:

  1. The Issues Presented by Brownfields- In particular the impact to Urban Centers
  2. The Current State of Brownfield Redevelopment in Ohio-  Including the issues of urban sprawl and the number of brownfield sites in Ohio.
  3. Progress made in Addressing Brownfields in the Twenty Years Since Ohio’s Voluntary Action Program was Adopted

As discussed in these prior posts, Ohio needs to accelerate brownfield redevelopment in Ohio.  So how does that occur?  

  • Need to be Faster- The ability to address the environmental, public health and liability risks presented by brownfield properties needs to occur much faster.  A cleanup under Ohio’s Voluntary Action Program (VAP) can take anywhere from 1, 2, 3 or even more years to complete.  
  • Need Lower Costs to Redevelop Brownfields-  According to the Cleveland Department of Economic Development the per acre are significant.  These costs push businesses to consider greenfield sites
    • On average it can cost $13,000 per acre to perform sampling to determine how contaminated a brownfield site may be
    • It can cost on average $66,000 per acre to remediate a brownfield site
    • Brownfield redevelopment projects currently require a minimum of 32 -35% in public subsidies 
  • Effectively Address Liability-  VAP can be effective but takes too long and costs too much. The Bona Fide Purchaser Defense under CERCLA provides no regulatory sign-off that due diligence and cleanup were adequate.
  • Broad Based Incentives-  Current incentive programs require creation of jobs or specific types of redevelopment such as manufacturing.  More value needs to be placed on simply returning idle property to productive use.
  • Cleanup Grants should Target Public Health or Catalyst Projects–  Some portion of brownfield funding should be used to address highly contaminated sites that present public health risks to local communities or catalyst projects that may attract more development.

Rethinking Ohio’s Incentive Programs

The first major hurdle to a brownfield redevelopment project is the unknown cost of cleanup.  Therefore, a large portion of incentives need to fund assessment activities.  

Ohio should drop the complicated VAP automatic tax abatement.  There are too many implementation issues (discussed in the prior posts) and the abatement does not cover new structures.  In its place, Ohio should adopt a brownfield based tax credit program that allows developers to take assessment and cleanup costs as a tax credit.  Such a credit would start to even the playing field between brownfield and greenfield sites.

Rethinking Ohio’s Tools to Address Environmental Liability

The VAP should remain in place with an effort to reduce the current complexity of Ohio’s primary brownfield cleanup program.  The VAP is a very good program for full assessment and cleanup of a property.  However, full assessment and cleanup isn’t always necessary to put property back into productive use.  

U.S. EPA’s Bona Fide Purchaser Defense under CERCLA does not require a complete Phase II assessment or full remediation.  Under the program, a buyer must take "reasonable steps" to address any threats to public health or the environment.  Reasonable steps is far less than full remediation of soil and ground water.  It typically means preventing ongoing release and eliminating complete pathways for human health exposures.  Such flexibility dramatically lowers to the cost of redevelopment.

The major issue with the BPFD is that it is a legal defense with no regulatory review or sign-off.  Some purchasers are comfortable with no oversight.  However, many would prefer the comfort of knowing their assessment and cleanup strategies received regulatory sign-off.

Ohio should adopt a State version of the BFPD that includes some level of regulatory oversight.  A similar program was adopted in Michigan- Baseline Environmental Assessments (BEAs).  While Michigan’s program could be improved, it has greatly accelerated brownfield redevelopment. 

According to figures provided by Joe Berlin, BLDI Environmental Engineering, here is a comparison between the Michigan BEA and Ohio VAP Programs:

  • Michigan BEA
    • 1995-2015 there has been 20,634 BEAs completed
    • Average of 1,032 per year
  • Ohio VAP Covenant-Not-to-Sue (CNS)
    • 1995-2015 there has been 527 CNS issued
    • Average of 26 per year

The proof is in the numbers.  Maybe its time Ohio look to its neighbor up north for new ideas to accelerate brownfield redevelopment.