EPA P-1 The CERCLA Law and Policy of “Involuntary” and Eminent Domain Acquisitions Brownfields 2006 November 15, 2006

EPA P-2 Overview  Statutory Provisions  EPA Regulations, Policy and Guidance  Federal Case Law  Considerations for Local Governments Moving Forward

EPA P-3 Federal Law  CERCLA provides liability protections specifically for governmental acquisitions of property »“Involuntary Acquisitions” under §101(20)(D) »Third Party Defense for Eminent Domain acquisitions §101(35)(A)(ii)

EPA P-4 §101(20)(D) The term ‘owner or operator’ does not include a unit of State or local government which acquired ownership or control involuntarily through bankruptcy, tax delinquency, abandonment, or other circumstances in which the government involuntarily acquires title by virtue of its function as sovereign. “The exclusion provided under this paragraph shall not apply to any State or local government which has caused or contributed to the release or threatened release of a hazardous substance from the facility, and such a State or local government shall be subject to the provisions of this chapter in the same manner and to the same extent, both procedurally and substantively, as any nongovernmental entity, including liability under section 107…”

EPA P-5 Third Party Cases “Involuntary Acquisitions” Provision  From 1989 to 2000 multiple federal courts opined: »the “sovereign immunity” aspects of 101(20)(D) exception —Generally, provision inapplicable because “caused or contributed”  Cases discussing whether an “involuntary acquisition” took place looked at: »in lieu of condemnation »voluntary purchase to build roads (“function as a sovereign”) »tax delinquency foreclosure (“hands on” remediation)

EPA P-6 §101(35)(A)(ii) Defense There shall be no liability under CERCLA for “an act or omission of a third party other [than] one whose act one omission occurs in connection with a contractual relationship…” ‘Contractual relationship’ excludes “real property … acquired by the defendant after the disposal or placement of hazardous substances … [and]… the defendant is a government entity which acquired the facility … through the exercise of eminent domain authority by purchase or condemnation.

EPA P-7 Third Party Cases involving Eminent Domain Defense  City of Toledo v. Beazer Materials and Services, Inc., 923 F. Supp (N.D. Ohio 1996)  Emeryville v. Elementis Pigments, Inc., 52 Env’t Rep. Cas. (BNA) 1648, 2001 WL (N.D. Cal. 2001)

EPA P-8 Toledo v. Beazer - Failure to Exercise Eminent Domain Authority Precludes Defense  In contribution action City argues that acquisition by eminent domain power occurred when property is ultimately purchased in negotiated sale  Court focus: whether, in the “absence of a state court adjudication [that] the City lawfully exercised its power of eminent domain”  Looked to the State law of Property Appropriations  Law required that “the agency is unable to agree, for any reason, with the owner…” and commence proceedings in a proper court  Purchase is not “appropriation” under State law

EPA P-9 Emeryville v. Elementis Pigments - Exercise Eminent Domain Authority Allows Defense  City sought costs for cleanup of acquired site (sec. 107 and in alternative sec. 113)  City begins negotiating with owners but unable to agree  City initiated state statutorily-required procedures for acquisition by eminent domain  Included: offers, notice of need for acquisition, public participation on whether to use ED, public meeting – resolutions adopted, directed City to file action in state court - Instead City purchases the parcels  Court distinguishes Toledo v. Beazer - looks to state law noting that government entities may exercise eminent domain authority without resorting to litigation. “[T]he City followed all the eminent domain procedures required by state law. It did everything short of filing a complaint and litigating…made ‘every reasonable effort’ to buy land, terminating the dispute without a lawsuit, as required by law.”

EPA P-10 EPA Regulations and Policy Guidance (highlights)  Regulations - Lender Liability Rule Preamble (1992) and 40 CFR sec (1997)  CERCLA Enforcement Against Lenders And Government Entities That Acquire Property Involuntarily (1995)  Policy on Interpreting CERCLA Provisions Addressing Lenders and Involuntary Acquisitions By Government Entities (1997) Bottom Line: “Involuntary” acquisitions refers to the same type of acquisitions in both sections, is defined as “the government’s interest in, and ultimate ownership of, the property exists only because the action of a non-governmental party gives rise the government’s right….”, and but recognizes that ‘involuntary acquisitions’ require volitional act

EPA P-11 Summary: Upfront Considerations When Deciding Whether to Acquire by Eminent Domain  How does your state law define Eminent Domain?  How does this State authority track with the terms “the exercise of eminent domain by purchase or condemnation”  Are all of the other elements of the defense met? »“after the disposal or placement of the hazardous substances on, in, or at the facility” and »“due care”

EPA P-12 ER3  ER3 Initiative »OECA program provides enforcement and liability relief incentives to encourage sustainable redevelopment.  Notwithstanding the goal of minimizing EPA involvement in the vast majority of real estate transactions, EPA recognizes that there are situations where direct EPA involvement is appropriate and can help make revitalization projects happen.  Site specific tools at sites of federal interest. »Prospective Purchaser Agreements »Comfort/Status Letters and WF Lien Resolutions »Model BFPP Removal Agreement

EPA P-13 Contact Info Gregory Sullivan U.S. Environmental Protection Agency Office Site Remediation Enforcement (202)