What does “All” mean in All Appropriate Inquiry?

The following was contributed by my colleague, Mark Resch.  Along with Jeff Bolin, Mark leads many of our environmental due diligence efforts.

It’s the age old question; how much is enough when it comes to environmental due diligence?  Some would have thought that establishing a written All Appropriate Inquiry (AAI) “standard” in the Code of Federal Regulations back in 2005 would have answered this question.  Apparently not! 

I saw an interesting article indicating the bona fide prospective purchaser (BFPP) liability defense was recently evaluated by a federal district court (“CERCLA’s BFPP Protections in Question,” www.envirobank.org, December 16, 2010).  For the first time, BFPP was found to be lacking as a persuasive argument for a company defending itself from environmental liability.  This case points to how important it is to adequately establish your BFPP defense and the need to evaluate and implement any “continuing obligations” for contaminated property (there are technical and legal implications; accordingly, we suggest you consult an attorney in addition to your environmental consultant).

The BFPP statutory required continuing obligations include

(1) Have acquired a property after all disposal of hazardous substances at the property ceased.

(2) Provide all legally required notices with respect to the discovery or release of any hazardous substances at the property.

(3) Exercise appropriate care by taking “reasonable” steps to stop continuing releases, prevent any threatened future release, and prevent or limit human, environmental, or natural resources exposure to any previously released hazardous substance.

(4) Provide full cooperation, assistance, and access to persons that are authorized to conduct response actions or natural resource restorations.

(5) Comply with land use restrictions established or relied on in connection with a response action.

(6) Not impede the effectiveness or integrity of any institutional controls.

(7) Comply with any Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) request for information or administrative subpoena.

(8) Not be potentially liable, or affiliated with any other person who is potentially liable for response costs for addressing releases at the property.

So what happened in the case referenced above?  The company had purchased the property after performing a Phase I Environmental Site Assessment that identified several recognized environmental conditions (RECs) including stained concrete and sumps containing chemicals. The company claimed BFPP status for existing contamination (an existing Brownfield), but its subsequent development led to violations of its BFPP continuing obligations. Sampling of the RECs was not performed to verify the REC.  The overlying structures that protected some of the RECs (the stained concrete and sumps) from exposure to the elements (rain, snow, etc…) were demolished by the owner.  This activity was construed as exacerbating the conditions (i.e., the RECs would not have been impacted but for the actions of the owner).  This action was seen as a disposal of hazardous substances and as not exercising appropriate care; two violations of the BFPP obligations.

With all of the above said, as it relates to maintain BFPP status, a written plan of action is recommended in regard to understanding how your proposed operations could be impacted by the RECs associated with the property.

 If you have any questions regarding the BFPP continuing obligations and its potential impact upon your business, feel free to contact the Mark Resch (mresch@dragun.com) or Jeff Bolin (jbolin@dragun.com) at 248.932.0228.

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