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The Comprehensive Environmental Response, Compensation, and

Liability Act (“Superfund”) and Kentucky House Bill 465: Exemptions and Protection

From LiabilityGeorge L. Seay, Jr.Wyatt, Tarrant & Combs, LLP250 West Main Street, Suite 1600Lexington, KY 40507(859) 288-7448gseay@wyattfirm.com

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CERCLA

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Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA): Purpose

Federal law passed in 1980 that provides the federal government with the authority to deal with uncontrolled releases of hazardous substances into the environment.Major provisions:

Allows the government to compel or perform remedial cleanup of sites containing hazardous substances.Governs the distribution of cleanup costs among parties who generated and handled the hazardous waste.

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SARA: Amendments to CERCLASARA is the Superfund Amendments and Reauthorization Act of 1986. It provides:

Mandatory Cleanup Standards;Settlement Provisions on how to promote voluntary settlement with the EPA;Increased state involvement in cleanup actions;Gave the public the right to bring a citizen suit, comment on settlement agreements, petition the EPA to have a risk assessment done, and several other rights;The Innocent Landowner Defense (discussed later)

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CERCLA: JurisdictionCERCLA comes into effect when the following occurs:

1) A release or substantial threat of release ;2) Of a hazardous substance;3) From a facility.

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CERCLA: “hazardous substance” definition

Hazardous substances include:Any toxic pollutants or hazardous substances designated by the Clean Water ActAny hazardous wastes under RCRAAny hazardous air pollutants under the Clean Air ActAny hazardous substances to which the EPA has taken action under the Toxic Substances Control ActAny substance specifically designated by the EPA.

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CERCLA: “Hazardous Substance” examples

Hazardous substances can include lead, copper, chlorine and fluorine as well as more harsh contaminants.Does not apply to petroleum, crude oil, or natural gas. No concentration requirements

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CERCLA: What may be Done once Jurisdiction Exists

EPA has 4 options:EPA may investigate or clean up a site itself by using money from the Superfund and then seek reimbursement from any “potentially responsible parties” (PRP).EPA may seek to compel any PRP to conduct investigations/clean up the site by seeking a court order.EPA may issue one or more PRPs a unilateral order requiring them to conduct investigations/cleanupEPA may negotiate a settlement with some or all of the PRPs and undertake response actions itself.

States and private parties can also undertake a cleanup and then seek recovery of costs/contribution from PRPs.

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The National Priorities List (NPL)Before a site can be remediated by EPA, it must be on the NPL. NPL is a list of the nation’s most critical hazardous waste sites. Sites that are being considered for inclusion on the NPL are ranked by a variety of factors. If they do not rank high enough, they are not included.EPA may still order removal actions at sites that do not rank high enough to make the NPL.

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CERCLA: The “Superfund”Used by EPA for cleaning up hazardous waste sites. Private parties are also entitled to money from the Superfund for cleanups they have performed.The Fund is created by:

taxes on petroleum industries;taxes on chemical industries;taxes on corporations (environmental tax);General tax revenue.

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CERCLA: National Contingency PlanIf EPA performs a removal or remedial action it can only recover costs from PRPs if its “costs of response” are consistent with the National Contingency Plan. (defendant’s burden of proof)If private parties perform a removal or remedial action, they can only recover costs from PRPs if their “costs” are consistent with the National Contingency Plan. (plaintiff’s burden of proof)There is a lot of litigation over whether parties followed the national contingency plan and can be reimbursed for costs.

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CERCLA: Who may be a PRP?Owners or operators of a facility at the time response costs were incurred;Owners or operators of the facility at the time of disposal of any hazardous substance at the facility;Any person who arranges for the disposal, treatment, or transport of the hazardous substance at or to any facility owned or operated by another party if such facility contained hazardous substances; andany person who accepted hazardous substances for transport to the treatment or disposal facility, or other site, if that person selected that facility or site.

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What are PRP’s liable for?For the cost of response and remediation at a facility from which a release of hazardous substances has occurred. “Response Costs” can include:

Actual amounts expended by the EPA, a state or private parties in cleanup;administrative costs incurred at the site;damages for injury to, destruction of, or loss of natural resources;cost of assessing injury to, destruction of, or loss of natural resources.

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CERCLA: Facets of PRP LiabilityPRPs are joint and severally liable for the response costs of an uncontrolled release of hazardous substances. PRPs do not have to be negligent to be liable. CERCLA is a strict liability statute.Retroactive liability. An individual corporate officer or a parent corporation can be liable under CERCLA if either has exercised control over a corporation’s hazardous waste handling and disposal activities. Individual and corporate liability is larger under CERCLA than other federal statutes.

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CERCLA PenaltiesCivil penalties:

Class I Administrative Penalty: up to $25,000/violationClass II Administrative Penalty: $25,000/day for each day the violation continues for a first-time violation. $75,000/day for a second or subsequent violation.

Criminal penalties:Can be incurred for a failure to report a release to the proper U.S. agency.

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Potential liability for PRPs under CERCLA is huge. What are the defenses to

CERCLA liability?

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CERCLA: PRP DefensesMost courts have concluded that CERCLA defenses are exclusive and affirmative. These defenses must be proved by a preponderance of the evidence standard.

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PRP Defenses: Act of GodThe sole cause of the contamination must be an unforeseeable, entirely natural cause.This defense has never been successfully asserted in CERCLA litigation; courts have found hurricanes, floods, and fires caused by lighting to be foreseeable.

See: Apex Oil Co. v. United States, 208 F. Supp. 2d 642 (E.D. La. 2002), flood conditions of the river that caused the contamination were anticipated.

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PRP Defenses: Act of WarThe sole cause of the contamination must be attributable to events unfolding in a state of war.This defense has only been successfully asserted once. In United States v. Shell Oil Co., 13 F. Supp. 2d 1018 (C.D. Calif. 1998), the U.S. brought a CERCLA action against oil companies for cleaning up a hazardous waste site that was a byproduct of a WWII aviation gasoline program. The court found that WWII was the direct cause of the hazardous waste site, and the federal government was responsible for the cleanup costs.

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PRP Defenses: Act or Omission of a Third Party

The sole cause of the contamination must be due to the act or omission of a third party. The Defendant must prove:

The third party may not be an agent or employee of the defendant.

The third party may not be in a contractual relationship with the defendant.

Contractual relationship includes land contracts, deeds, easements, and other property contracts.

The defendant exercised due care and was not negligent;

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PRP Defenses: Act or Omission of a Third Party, Cont’d

See: United States v. Amtreco, Inc., 809 F. Supp. 959, 969 (M.D. Ga. 1992). Third party defense not available where state of Georgia caused some, but not all, of the contamination. See: United States v. Hooker Chemical & Plastics Corp., third party defense not available where defendant had direct and indirect contractual relationships with the City of Niagara Falls and the Board of Education.

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PRP Defenses: Innocent LandownerCodified by SARA. Defendant must prove that he is an innocent landowner. He must show either:

When he acquired the site, he did not know and had no reason to know that any hazardous substance had been disposed of on the site;

undertaken “all appropriate inquiries” into the previous ownership and use of the property.

That he acquired the site by inheritance or bequest.

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PRP Defenses: Innocent Landowner Cont’d

“All appropriate inquires” must include a Phase 1 Environmental Site Assessment conducted by a licensed and certified environmental professional;mandatory interviews of current owners and tenants;mandatory interviews of neighbors if the property is abandoned;review of historic sources from the present to when the property first contained structures/was used for agriculture, residential, commercial or any other purpose;Government records review;Environmental cleanup liens searched;Visual inspection of subject property and nearby properties;Gathering of commonly known or reasonably ascertainable information;Assessment of the relationship of the purchase price to the fair market value of the property, if the property was not contaminated.

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PRP Defenses: Bona Fide Prospective Purchaser

Codified by the Brownfields Amendment.Elements:

Must have acquired the facility after January 1, 2002;All disposal of hazardous substances at the facility occurred before the person acquired the facility;All appropriate inquiries were made;All legally required notices were provided;Appropriate care was taken with respect to the hazardous substances;The defendant has fully cooperated with persons that are authorized to conduct response actions;The defendant is not impeding the effectiveness of any institutional controls and all institutional controls are being followed;the defendant has complied with subpoenas;no direct/indirect family relationship, contractual relationship, corporate/financial relationship, business reorganization relationship with another PRP.

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PRP Defenses: Contiguous Property Owners

Codified by the Brownsfield AmendmentElements:

Did not cause, contribute, or consent to the release or threatened release;Did not know and had no reason to know of the release or threatened release at the time of purchase after making all appropriate inquiries. No potential liability or connection with the neighboring PRP.

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PRP Defenses: De Micromis DefenseApplies to generators and transporters that can demonstrate they contributed less than 110 gallons of liquid materials or 200 pounds of solid materials to a site, all or in part before April 1, 2001.

materials must not have significantly contributed to the cost of the response action;defendant must not have failed to comply with any information request/impeded any response action;defendant must not have been convicted of a criminal violation for conduct to which the exemption applies.

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PRP Defenses: Municipal Solid Waste Exception

Excludes owners, operators, and lessees of residential property, small businesses, and small non profit organizations. The same eligibility requirements that apply to de micromis defenses apply to this defense as well.

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HB 465

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HB 465: PurposeIncreased certainty regarding future liability by adding a defense to liability and a limitation of a duty to take corrective action.

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What the Bill does Not ChangeParties that caused a release of hazardous material into the environment remain responsible for the release.The requirements for corrective action after a release do not change.

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What the Bill Changes: Brownfields Redevelopment Program

Creates a new chapter of the Kentucky Revised Statutes that contains a “Brownfield Redevelopment Program”

“brownfields” are land that is being underused because of environmental contamination.The Kentucky Department for Environmental Protection estimates that there are 8,000 brownfields in the Commonwealth.

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What the Bill Changes: Brownfields Redevelopment Program Defense

The chapter adds a new defense to liability. It provides that an owner of real property where a petroleum or other hazardous substance spill occurs shall not be liable for the cost of the spill if owner certifies to the Cabinet and the Cabinet finds the following elements:

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Brownfields Redevelopment Act Defense Elements

The release occurred prior to acquisition of the property;“All appropriate inquiries” were made;All legally required notices have been provided;In compliance with all land use restrictions;Has complied with any information requests by the Cabinet;Has not been affiliated with another PRP;

familyContractual/corporate relationshipreorganization of business

Has not caused or contributed to the release;The Cabinet concurs that the intended use of the property will not interfere with remediation/increase the impact on human health or the environment; andOwner provides access to the Cabinet.

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Limitations on the DefenseThe defense does not apply to any real property for which a false certification is made to the Cabinet.The Cabinet may make administrative regulations regarding the defense; the Cabinet expects to file draft regulations by October.

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What the Bill Changes: Limitation of duty to take corrective action

The bill amends KRS 224.60-135 to read, “A property owner who is not also the petroleum storage tank owner or operator shall have no obligation to perform corrective action for a release into the environment from a petroleum storage tank.”

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Conclusions: How Does HB 465 Shield Landowners from Liability under CERCLA?

In Kentucky, landowners enjoy more protections from liability under CERCLA as a result of HB 465. If Kentucky landowners comply with the elements of HB 465’s new defense, they will not be PRPs under CERCLA or its state counterpart. The new limitation on liability codified in KRS 224.60-135 also limits landowner’s duties and responsibilities for hazardous materials contamination.

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Thank you!