[CPEO-BIF] Disclosure Obligations

["Schnapf, Lawrence" <Lawrence.Schnapf@srz.com>]

I appreciate and understand Bill's concerns. However, I think that if we
change the rules so that disclosure is required of all owners or
prospective purchasers who learn of contamination in exchange for
liability relief, the marketplace will adjust. Some property
owners/purchasers will disclose contamination they learn about out of an
abundance of caution due to their risk tolerance or perhaps corporate
philosophy. However, others may choose not disclose based on the RQ
loophole. The current structure essentially promotes a moral hazard. 

In contrast, my proposal would level the playing field. If all
owners/purchasers have the same obligations (i.e. disclose of
contamination they learn about that exceeds applicable standards), I
just don't see these sites being ignored because of the value that can
be unlocked. The "animal spirits" will always prevail.  

I think it is only fair that in exchange for liability relief that a
state and community learn about contamination. If the discloser
qualifies for one of the landowner defenses, then the decision would be
up to the state to pay for cleanup or pursue a responsible party.

And, I continue to believe that such an obligation is not an "undue
burden". The liability relief is the incentive to attact capital to
contaminated sites. Disclosure to me seems to be a minimal burden when
compared to liability relief. 

Finally, clearly there needs to be a difference between the kind of
actions that a non-liable party should do to satisfy its "continuing
obligations" and a full-fledged cleanup. Reasonable minds can differ and
that could be an important detail to flesh out.

I do not believe for one moment that this is an easy change. However, I
think it would advance the goal we all have of expediting the cleanup of
sites. 

I appreciate everyone's willingness to discuss and share their thoughts
on this issue. This is the kind of discussion that the nation very much
needs.

Larry 

-----Original Message-----
From: brownfields-bounces@lists.cpeo.org
[mailto:brownfields-bounces@lists.cpeo.org] On Behalf Of Lenny Siegel
Sent: Friday, May 01, 2009 2:15 PM
To: Brownfields Internet Forum
Subject: [CPEO-BIF] [Fwd: RE: Illinois proposal for disclosure of water
contamination]

From: Walsh, William <WALSHW@pepperlaw.com>


I am torn over this proposal.  If there was not a tendency to kill the
messenger (given the broad liability laws), I might be less concerned.
But if there is notice filed and the regulators go against the notifier,
then no one is going develop these areas.

The original thrust of brownfields was not to clean up Brownfields
sites, but to separate new development from liability and allow the new
developer to proceed with an economically beneficial endeavor.  The
price included some limited clean up to prevent exposure to the new
users of the property.

The discussion over the last few days, suggests that Larry and others
think that somehow this will be a vehicle to require excavation and
redisposal (if not treatment) of the historic wastes.

My simple view is that if you want something beneficial such as a
release from future liability for contamination that you did not cause,
the process should require you to pay something, but not as much as the
person who caused the contamination.

I would divide simple property transfers from a true brownfields where
there is a release of liability.  If I purchase a property that has
contamination onsite and I do not seek a release of liability, and I do
not disclose, then I assume liability as a new owner.

If I purchase the property and want a release of liability, then
obviously, I must disclose.

If one requires any purchaser to disclose groundwater or soil
contamination, then no one will purchase.  If one requires the current
owner to disclose (and the current owner did not cause the
contamination), then although the current owner may be legally liable,
it is in fact punishing an innocent party.

I know of no environmental program that requires monitoring by the
original disposer to determine if there is a release.  In most
transactions, there is a phase 1 and if there is any reasonable evidence
of contamination, the purchaser seeks and obtains an indemnification for
that past contamination.  So the bad actor remains liable.  If either
the original owner or purchase must report, why proceed.

What I think you want is a system that encourages (i.e., provides
incentives for) sampling and cleanup, without requiring a mind-boggling
and very expensive set of studies that will at the end of the day say
that the remedy required is what everyone thought was necessary after
looking at it for a week.

William J. Walsh
Pepper Hamilton LLP
600 Fourteenth Street, NW
Suite 500
Washington, D.C.  20005
(202) 220-1424 -direct
(202) 220-1665 - fax
walshw@pepperlaw.com




-- 


Lenny Siegel
Executive Director, Center for Public Environmental Oversight a project
of the Pacific Studies Center 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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