[CPEO-BIF] All Appropriate Inquiry Rulemaking Report and Another Perspective...

[kkamlet@hotmail.com]

Lenny Siegel says that the AAI rule must do more than the ASTM Phase I 
standard because the legislation is designed to accomplish two distinct 
purposes in addition to demonstrating that a land owner has looked, but 
hasn't found contamination.  These additional purposes are (1) to define 
reasonable steps that prospective purchasers must take to address potential 
contamination [I agree], and (2) to guide site characterization and 
assessments funded by EPA grants [I couldn't find this].

As I read the statute, the major thrust of the AAI rule is to define a 
standard of conduct for investigating contamination by a prospective 
purchaser who later acquires the property, where previously undiscovered 
contamination later materializes and is a basis for a CERCLA prosecution.  
It is the new landowner's burden to demonstrate to a court's satisfaction 
that, prior to acquiring the property, he/she carried out "all appropriate 
inquiries... into the previous ownership and uses of the facility in 
accordance with generally accepted good commercial and customary standards 
and practices."  The statute then goes on to enumerate 10 criteria which the 
EPA Administrator must consider in issuing an AAI final rule.  [These 
criteria include "interviews with past and present owners, operators, and 
occupants of the facility for the purpose of gathering information regarding 
the potential for contamination at the facility."  Interviews with 
neighborhood residents are pointedly absent from this enumeration--although 
there is a separate criterion to cover "commonly known or reasonably 
ascertainable information about the property."]

The point is that the focus is on carrying out an inquiry that accords with 
"generally accepted good commercial and customary standards and practices."  
The value of the ASTM Phase I standard is that, by the very mechanism of its 
development and periodic updates, and the broad private and public sector 
participation in these efforts, it was designed to reflect and embody 
generally accepted good commercial practices.

However, as Larry Schnapf correctly points out, the bona fide prospective 
purchaser must take reasonable steps [Lenny's purpose #2] with respect to 
contamination or it could lose its status as a BFPP.  This is also true for 
the "innocent landowner."  In the case of a BFPP, the documented presence of 
contamination is not enough to defeat the liability exemption if the other 
requirements of Section 101(40) are satisfied.  These include taking 
"reasonable steps" to stop any continuing release, prevent any threatened 
future release, and prevent exposure to any previously released hazardous 
substance.  Bob Hersh is undoubtedly correct that "no reputable developer 
would buy a property and choose to invest money in it without a very 
thorough assessment and investigation"--at least if preliminary inquiry 
revealed the potential for significant contamination.

Even in the case of the proverbial "innocent landowner" whose status is 
defeated if he/she had reason to know of any contamination (which might 
otherwise militate in the direction of a "hear no evil, see no evil" 
approach), the incentives favor thorough rather than superficial 
investigation because if previously undetected contamination is later 
discovered, the landowner retains his/her "innocence" only if he/she took 
"reasonable steps" to stop any continuing release, prevent any threatened 
future release, and prevent exposure to any previously released hazardous 
substance.  (The only difference in this regard between the BFPP and the 
innocent landowner is that the BFPP, having found contamination prior to 
taking title, must take these "reasonable steps" right away [at least as 
soon as the purchase has been consummated], while the innocent landowner 
need only take these steps when and if contamination is found.  In both 
cases, failure to take the required steps--which could be extensive and 
expensive--defeats the exemption and exposes the owner to liability.  Far 
better to be aware of the problem before going ahead with the land purchase.

Another reason it is in the self-interest of the landowner or prospective 
purchaser to fully characterize the site is that the liability exemption for 
offsite source contamination also depends on the same "all appropriate 
inquiry" standard and on taking the same "reasonable steps" as apply to the 
BFPP and innocent landowner defenses.

That is still not a reason for adopting an AAI rule that goes beyond what 
the statute requires or that injects the federal government into land use 
regulation that intrudes on the traditional domain of states and localities. 
 However, in providing grant assistance to states, the statute defines the 
elements of adequate "state response programs" necessary to qualify for such 
assistance.  These include oversight and enforcement authorities adequate to 
ensure that a response action will protect human health and the environment 
and that meaningful opportunities are provided for public participation.

This is not akin to the civil rights laws, where private and public 
interests clash (or are perceived to clash).  It is also not a case where 
one need worry excessively "if the AAI requirements are very easy and basic 
and do not really adequately assess the contamination on a property."  The 
statute, as well as the self-interest of the purchaser or redeveloper, 
precludes an approach that is too easy or too basic.

If the historical record is "not too good" for some sites (as Peter Strauss 
worries) is that a sufficient reason to burden the innocent prospective 
purchaser with costly testing as a mandate of the AAI rule?  If there are 
data gaps, isn't it really up to the risk tolerance of the purchaser to 
decide whether to proceed with the deal and take a chance on incurring 
costly mitigation steps later?  Although neighboring landowners also have a 
stake in this risk of contamination (and this risk goes beyond mere dollars 
and cents), how is this risk alleviated by placing so many burdens on the 
prospective purchaser that the land (and any hidden risk) remains 
undeveloped (and unabated)?

If contamination is found and the prospective purchaser chooses to not 
acquire the property, Peter Strauss worries that the information will be 
lost and the risk will go unabated.  This is a legitimate concern--although 
if the risk is significant enough most state laws surely require 
notification.  Under New York's expected-to-be-passed-in-September new 
Brownfields law, the state DEC will also be required to maintain a 
computerized database of brownfield sites in which such information would be 
preserved (at least for sites that come to DEC's attention through New 
York's stringent notification requirements).  Larry Schnapf is again correct 
that, under most redevelopment scenarios, even if no additional remediation 
were required (which won't be an option under New York's new law), the 
redeveloped site will signficantly limit and mitigate exposure to 
contaminants compared to maintaining the status quo.  This is another 
argument for encouraging rather than discouraging redevelopment.

Where non-profits (whether or not faith-based) assume ownership of 
brownfield sites and discover that they have inherited a contamination 
problem, those who caused or contributed to the contamination should be the 
ones to clean it up--or, if they can't be found or are financially 
non-viable, the state should step in.  This is not something the AAI rule 
can be expected to single-handedly address.

Where "innocent citizens are bearing the costs of past private business 
activity," the solution is not to punish and preclude future business 
activity by unrelated innocent businesses.

The "six blind men and the elephant" metaphor applies only up to a point.  
In this case the legislation serves as a kind of "seeing eye dog" limiting 
the interpretations and flights of fancy that might otherwise emerge.  
There's another metaphor about "riding on the back of a tiger" that should 
be remembered by those who seek to subject real estate transactions to 
all-encompassing federal regulations in order to guard against every 
conceivable environmental risk.  (I wonder if there's a story about "six 
blind men and the tiger.")


Ken Kamlet

-----------------------------------
   Kenneth S. Kamlet, Esquire
   Director of Legal Affairs
   Newman Development Grp., L.L.C.
   3101 Shippers Road, P.O. Box 678
   Vestal, New York 13851-0678
   607-770-1010, FAX: 607-770-3482
   kkamlet@hotmail.com

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