New EPA Guidance Broadens Tenant Protections at Brownfield Sites

In response to concerns that liability protection for tenants was not clear enough to encourage development of renewable energy on brownfield sites, EPA issued a guidance document on December 5 in order to broaden protections of tenants who meet certain criteria, even if the site owner does not qualify for protection as a Bona Fide Prospective Purchaser (“BFPP”).  Signed by EPA’s enforcement head Cynthia Giles and waste chief Mathy Stanislaus, the new protections are outlined in a memorandum entitled “Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision.”

Under 2002 brownfield amendments to CERCLA, Section 107(r) of CERCLA provides liability protection for BFPPs if they exercised due diligence before buying contaminated or formerly contaminated property and took other steps outlined in the law.  Section 222(a) of CERCLA defines a BFPP as “a person (or tenant of a person) that acquires ownership of a facility after the date of enactment of this paragraph.”  In response to confusion over the liability of tenants who rent from landowners at brownfield sites, EPA issued guidance in 2009.  The new guidance was prompted by EPA’s encouragement of the development of alternative energy at brownfield sites under EPA’s Re-Powering America’s Land Initiative.  Although prompted by the concern about protection of tenants at renewable energy sites, the guidance applies across all industries.

Under the updated guidance, EPA provides liability protections to tenants through the use of enforcement discretion under which certain tenants will be treated as BFPPs, though EPA can decline to exercise that discretion in situations under which the Lease is seen as an effort to allow a landlord or tenant to avoid CERCLA liability, or the tenant has liability for reasons independent of the lease arrangement.  A tenant can obtain BFPP status in different ways, including deriving it from an owner who satisfies the BFPP criteria, meeting BFPP criteria when the landowner has lost its BFPP status, and meeting BFPP criteria even though the owner never had BFPP status.  In the latter situation, the tenant must be able to show that all disposal of hazardous substances at the site occurred prior to lease execution; that it conducted all appropriate inquiry before executing the lease; that it will cooperate and provide assistance and access at the site; that it will comply with land use restrictions and institutional controls; that it will comply with information requests and administrative subpoenas; that it has no potential liability for response costs at the facility and is not affiliated with PRPs other than through the lease with the owner; and that it has taken no actions to impede response actions or natural resource restoration at the site.

The guidance also provides three new model comfort/status letters for lessees involved in renewable energy development on contaminated sites.

For more information regarding the new guidance, or more generally regarding the development of renewable energy projects on brownfield sites, contact Steve O’DayAndy Thompson or Phillip Hoover.  For a copy of the U.S. EPA’s guidance document, click here.

One thought on “New EPA Guidance Broadens Tenant Protections at Brownfield Sites

  1. The tenancy interest that does not enjoy the BFPP protections of CERCLA is a tenant who leases from a potentially responsible party (PRP), has some site control but not enough to be a de facto owner, and who somehow “turns dirt” to a degree where that tenant could be liable as either an operator or transporter. This circumstance is likely to be the rule, rather than the exception, at many renewable energy Brownfield projects. In those situatiions, the tenant is basically just out of luck from a BFPP safe harbor standpoint, at least according to existing EPA Guidance.

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