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EPA Issues Revised Guidance on Application of Key Superfund Defense to Tenants

By: Devin McDougall

The availability of Superfund defenses to tenants of contaminated properties is often uncertain, raising the potential of lessee liability and impeding the redevelopment and reuse of contaminated lands.  In an attempt to ameliorate this problem and provide assurances to responsible tenants, EPA recently revised and expanded its guidance clarifying when tenants can make use of one of the central liability protections under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the Bona Fide Prospective Purchaser (“BFPP”) defense.

The BFPP defense provides that a party is not liable under CERCLA if it can demonstrate that it has made all appropriate inquiries into the possibility of contamination at the site, has acted in good faith, and has met various other requirements.  As the definition of BFPP under CERCLA refers to both qualifying purchasers and “tenants of such [purchasers],” EPA has previously stated that where a landlord qualifies for BFPP status, the tenant automatically qualifies as well. If the landlord loses BFPP status through no fault of the tenant, EPA has indicated it will treat the tenant as a BFPP if the tenant himself meets all the requirements for BFPP status other than the requirement for all appropriate inquiries.

The new guidance goes on to provide that if the landlord does not qualify for the BFPP defense, a tenant can still qualify if he meets the requirements for BFPP status. However, it is important to note that the BFPP defense is only available to a tenant in these circumstances if the lease was executed after January 11, 2002. This date requirement is derived from the CERCLA statute, which provides that BFPP status is available to persons who “acquire[d] ownership” of a facility after January 11, 2002.

In addition, the guidance indicates that EPA will, in appropriate circumstances, issue comfort letters or prospective lessee agreements in order to clarify the nature of a tenant’s potential liability. EPA has explained that the guidance is intended to complement a broader EPA initiative to facilitate the development of renewable energy on contaminated lands, and has released se several sample comfort letters for renewable projects. However, this guidance is applicable much more broadly, as it provides useful direction for managing the environmental liability of tenants of contaminated lands in general.

 

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