Brownfields 101: Liability EPA Brownfields 2006 Conference November 12, 2006 Barbara Kessner Landau, Esq. Bernstein, Cushner & Kimmell, P.C. Presented by: Kathleen J. Freeman, Esq. Bowditch & Dewey, LLP

1. Due Diligence Why is CERCLA Liability Such a Big Deal? Joint and several: If more than one person is responsible, any one of them may be held liable for the entire cost of cleanup. Strict: Without regard to fault. You will be liable if you are one of the 4 types of liable parties listed in CERCLA. Retroactive: Liability can extend to acts that occurred before Superfund enactment in 1980.

1. Due Diligence Potential Liability For Contamination Potential Liability Under CERCLA: A release/threat of a release of hazardous substances at a facility; Response costs have been/will be incurred The person is a liable party, as defined in CERCLA Potential Liability Under State Law: State laws vary Oil is “hazardous substance” in many states, but not under CERCLA

1. Due Diligence Who is Potentially Liable? Four Categories (42 USC §9607(a)) : 1. Current owners or operators of a contaminated facility; 2. Owners or operators of facility when hazardous substances were disposed; 3. Person who generated or arranged for the disposal, treatment or transport of the hazardous substances; and 4. Transporter of hazardous substances if selected the disposal site.

1. Due Diligence What Can Happen If I Am Liabile? Potentially responsible parties are liable for: Cleanup costs incurred by government and other parties; Health assessments costs; Damages for injury to or destruction of natural resources; Injunctive relief if there is an imminent and substantial threat of endangerment.

1. Due Diligence Liability Relief Defenses to Liability: An act of God,act of war (42 USC §9607) An act or omission of a third party (42 USC §9607) Innocent Landowner (42 USC §9601(35)) Conditional Exemptions: Bona Fide Prospective Purchaser - potential windfall lien ( 42 USC §9601(40)) Contiguous Property Owner ( 42 USC §9607(q)) Other: persons conducting cleanup, de micromis, municipal solid waste (42 USC §9607(d),(o),(p)) State Liability Exemptions and Defenses

1. Due Diligence Bona Fide Prospective Purchasers BFPP: an innocent purchaser with no connection to liable party and who: Acquired facility after 1/11/02 and after disposal occurred Conducted “all appropriate inquiry” before acquisition Makes all required notices Exercises appropriate care and cooperates with cleanup Complies with institutional controls, information requests All Appropriate Inquiry (AAI): Must meet all requirements of AAI (42 USC §9601(35)(B))

1. Due Diligence Use of Due Diligence Information How a lawyer uses environmental due diligence information: Establish liability exemptions and defenses Establish baseline (pre-transfer) conditions Pre-construction site characterization Identify and quantify risk and liability Allocate and manage the risk Price adjustment Structure (or terminate) the deal

2. Acquisition Structuring the Deal Determine who will retain liability for: Onsite contamination Offsite or migrating contamination Third Party Claims Costs incurred by State or Federal Government How will this be implemented? Release and/or Indemnification Escrow Reduced purchase price Environmental Insurance policies

2. Acquisition: Structuring the Deal Determine Buyer’s Risks (post closing): Discovery of additional contamination Migration to another property Third party claims Maintenance of remedy and institutional controls Mitigate Buyer’s Risk Site assessment/clean up to regulatory requirements BFPP status or EPA Comfort Letter State Liability Relief (Cov. Not to Sue, state incentives) Environmental Insurance Seller Release/Indemnification

3. Design Develop Cleanup Plan: Compatible with reuse, institutional controls if needed Regulatory closure within redevelopment timelines Obtain necessary permits and approvals Obtain environmental insurance Develop Redevelopment Plan: Obtain necessary permits and approvals Finalize covenant not to sue, settlement agreements Obtain state/federal financial incentives

4. Remediation and Construction Remediation Oversight - ensure cleanup meets regulatory requirements Address newly discovered contamination Comply with terms of financial assistance, loans, insurance Institute any required institutional controls Construction Contractor compliance with environmental regulations, insurance requirements, institutional controls Appropriate construction for site (vapor controls, engineered barrier)

Exit Strategy Lease Marketing strategy Liability relief for tenants under certain state laws Covenant Not to Sue Sale Incentives – indemnification, transfer covenant not to sue Maintenance of institutional controls Protect against third party claims (insurance, indemnification)