[CPEO-BIF] All Appropriate Inquiry regulation

[Lenny Siegel <lsiegel@cpeo.org>]

U.S. EPA is beginning to implement a little known, but significant
provision of the Brownfields Revitalization Act (H.R. 2869), signed by
President Bush in January, 2002. In Section 223 of the statute, Congress
directs the EPA Administrator to promulgate a regulation, within two
years of enactment of the law, establishing "standards and practices for
the purpose of satisfying the requirement to carry out all appropriate
inquiries" under three sections of the law - those dealing with
Contiguous Properties, Prospective Purchases and Windfall Liens, and
Innocent Landowners. 

The new legislation addresses a longstanding criticism of Superfund,
namely that the law did not define what level of site investigation and
environmental review constituted "all appropriate inquiry" in
determining if a property was polluted. Under Superfund, owners of
contaminated property are liable for cleanup costs even if they did not
cause the contamination. One way, however, to avoid this liability, and
one long coveted by potential buyers of real estate, is through the
"innocent purchaser defense." Under this defense a buyer must establish
that at the time the property was acquired, he or she had no knowledge
or reason to know that any hazardous substance had been disposed of or
released at the site. 

To show there was "no reason to know," the Superfund statute requires
the prospective buyers to undertake all "appropriate inquiry" in the
previous ownership and uses of the property consistent with good
commercial or customary practice. If a buyer performs "all appropriate
inquiry" and contamination is subsequently discovered, the buyer will
not be held liable for cleanup. While there have been no federal
standards for site assessments and or regulations to define "all
appropriate inquiry," one professional organization, the American
Society for Testing Materials (ASTM), has developed guidelines for
conducting environmental assessments that have become widely accepted as
a minimum requirement for environmental due diligence. 

Under the new Brownfield legislation, federal regulations will for the
first time define due diligence, the site assessments generally carried
out by private and other non-federal parties at potentially contaminated
sites. Under the legislation, EPA is required to include the following
criteria in its standard:

* The results of an inquiry by an environmental professional;

* Interviews with past and present owners, operators, and occupants of
the facility for the purpose of gathering information about the
potential for contamination at the facility;

* Reviews of historical sources, such as chain of title documents,
aerial photographs, building department records, and land use records to
determine previous uses and occupancies of the reap property since the
property was first developed;

* Searches for recorded environmental liens;

* Reviews of federal and state and local government environemtnal records;

* Visual inspections of the facility and of adjoining properties;

* Specialized knowledge or experience of the defendant;

* The relationship of the purchase price to the value of the property in
an uncontaminated state;

* Commonly known or reasonably ascertainable information about the
property; and

* The ability to detect the contamination by appropriate investigation.

EPA is expected to develop the new due diligence standard through a
negotiated rulemaking, probably beginning in January 2002. A negotiated
rulemaking is an official process through which parties representing
diverse stakeholder groups attempt to develop consensus on the content
of the regulation. When EPA formally proposes this process in the
Federal Register, CPEO will notify all subscribers on our two
listservers and put the relevant information on our web site. The
Federal Register notice will provide an opportunity for public comment.

We believe this negotiated rulemaking provides public stakeholders an
excellent opportunity to influence the way private site assessments are
conducted. Current due diligence requirements are typically based on the
ASTM standard, which has no public notice or involvement component.  In
many states even completed assessments are not available for public inspection.

In the final rule, it should be possible to incorporate a site's
neighbors into the environmental assessment process.Under the ASTM
standard there is no requirement to interview persons living near or
adjacent to a site. People need to know, however, when nearby properties
are being investigated to ensure that contamination is properly
addressed. The neighbors also may be a unique source of information
about past activities or "midnight dumping" not identified through the
private site assessment process.

The parties that currently rely upon the ASTM standard to conduct due
diligence may be reluctant to include the public. They are likely to
argue that the attention will delay transactions, or discourage
potential developers from even considering a site. It is our hope that
the negotiated rulemaking process will come up with appropriate levels
of public involvement that ensure the public's right to know and ability
to influence environmental response decisions, without preventing
private transactions that protect public health by cleaning up the environment.

At the November 14, 2002 National Environmental Justice/Community
Brownfields Caucus meeting during the Brownfields 2002 conference in
Charlotte, North Carolina, activists from throughout the country
discussed the anticipated negotiated rulemaking. While many of the
participants agreed that the promulgation of the new standards and
practices represents a valuable opportunity, most were skeptical that
their views and concerns would be ignored in the rulemaking process.
They were not satisfied with the proposed inclusion of a couple of
handpicked individuals from the caucus in the rulemaking. They discussed
mechanisms through which a larger group of public stakeholders might
offer input. Whether or not EPA officially seeks that input, this
constituency plans to be heard.

Lenny Siegel
-- 


Lenny Siegel
Director, Center for Public Environmental Oversight
c/o PSC, 278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org

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