J. Michael Sowinski, J.D., Author at Terradex

The Continuing Evolution of Continuing Obligations

J. Michael Sowinski, J.D. — Tue, 08 Jul 2025 01:47:23 +0000

With a continuing obligations panel presentation at Brownfields 2025 coming soon and with updates to ASTM’s continuing obligations standard guide scheduled for 2025, it seemed like a good time to quickly cover some key points about continuing obligations.

Here, I summarize continuing obligations in the context of CERCLA liability – most notably, managing releases, not committing more disposal, and complying with institutional controls (a topic we obviously deal closely with at Terradex). Then, I summarize the ASTM Guidance covering continuing obligations. Though I only focus on the basics here, the forthcoming ASTM Guidance updates and the Brownfields 2025 panel presentation dive into more nuances (and there are many) – ranging from the relation of CERCLA continuing obligations to agency-oversight cleanups, to non-CERCLA drivers for continuing obligations, to the enduring continuing obligations related to institutional control compliance.

CERCLA Liability & Continuing Obligations

CERCLA’s 2002 Brownfield Amendments provided new defenses to CERCLA liability that were and continue to be particularly relevant for property purchasers. These defenses protect property owners from liability as long as they can show that they did not cause the property’s contamination, performed pre-purchase All Appropriate Inquiries (AAI) and, importantly, that they met post-purchase continuing obligations. In other words, these defenses require adherence to both AAI and continuing obligations. CERCLA doesn’t actually use the phrase “continuing obligations.” Instead, it lists ongoing post-purchase requirements, like taking “reasonable steps” to manage releases and complying with land use restrictions, which EPA collectively dubbed continuing obligations in its Common Elements Guidance.

CERCLA’s Core Continuing Obligations

While CERCLA enumerates at least seven distinct elements for continuing obligations, all of which must be satisfied to successfully assert liability protection, the core continuing obligations (the ones that have arisen the most in courts and in practice) include those listed here.

Release Management. CERCLA’s continuing obligations for release management involve taking “reasonable steps” to stop releases, prevent threatened ones, and limit exposure to prior released contamination. Release management continuing obligations tend to arise during the cleanup and redevelopment process and, I think it’s fair to say, have so far captured the most attention in the courts.

No Disposal. CERCLA’s continuing obligations also require that no “disposal” occurs after property purchase. This requirement has triggered some concern and confusion regarding the exact meaning of “disposal” because in some contexts, courts found disposal to involve more than just new spills – interpreting “disposal” to also mean leaking from tanks and spreading around contaminated soil.

Institutional Controls. CERCLA’s continuing obligations for institutional controls require that the new owner comply with any land use restriction established or relied on in connection with the response action, and do not impede the effectiveness or integrity of any institutional control. While a key CERCLA continuing obligation, institutional control compliance also proves relevant and important in many other situations, even where CERCLA continuing obligations/liability defenses is not of concern.

What the Courts Say About Continuing Obligations

In the more than 20-year span since the 2002 Brownfield Amendments, only a handful of cases directly address continuing obligations. With only one exception, the balance of opinions go against defense seekers. That said, the cases help to illustrate the types of steps that can and should be done to satisfy CERCLA’s continuing obligations.

In Ashley II of Charleston, Inc. v. PCS Nitrogen, Inc., 791 F. Supp. 2d 431 (D.S.C. 2011), the federal court found that the new owner had not met its continuing obligations during cleanup and redevelopment activities (which were being performed under agency oversight) because: (1) it exposed contaminated sumps (which had been identified during AAI) to the elements after building demolition, which potentially exacerbated the conditions at the property; (2) failed to maintain a limestone rock cover that served to prevent dispersion of contaminated soil; (3) failed to address a debris pile at the site.

In 3000 E. Imperial, LLC v. Robertshaw Controls Co., 2010 U.S. Dist. LEXIS 138661 (C.D. Cal. Dec. 29, 2010), however, a different federal court found that even though it took about a year and a half, the new owner met its continuing obligations by sampling the contents of underground tanks, working with the state environmental regulatory agency under its voluntary cleanup program, and ultimately emptying and removing the tanks. Relatedly, the court approvingly cited the fact that the defendant had enrolled in and was successfully following the state’s voluntary cleanup program requirements.

In Voggenthaler v. Md. Square LLC, 2010 U.S. Dist. LEXIS 138661 (C.D. Cal. Dec. 29, 2010), the federal court found that the new shopping center owner failed to meet its CERCLA continuing obligations by failing “to prevent further harm” related to past contamination. There, the owner, who was aware of the contamination, exposed contaminated soil to the elements when it demolished a building and took no steps to remove the contaminated soil or limit the spread until many years later.

In Saline River Props, 2011 U.S. Dist. LEXIS 119516 (E.D. Mich. Oct. 17, 2011), the federal court similarly found that the new owner failed to satisfy continuing obligations because it took no reasonable steps after removing a concrete slab that covered contamination, allowing rainwater into the contaminated ground and exacerbating the conditions. Also, even though the prior owner originally disposed of the contaminants, the court reasoned that the new owner’s actions of removing the slab and, in turn, causing contaminants to migrate could constitute “disposal” by the new owner.

In Cranbury Brick Yard, LLC v. United States, 2018 U.S. Dist. LEXIS 171458 (D.N.J. 2018), the federal court also found that the new owner failed to meet CERCLA continuing obligations because it committed “disposal.” There, during redevelopment, the new owner ruptured an underground storage tank, spilled twenty gallons of petroleum and, in turn, excavated the contaminated soil, stockpiled it on site, and then mixed it with noncontaminated soil for use as fill on the site. The court found this – the spreading of contaminants due to subsequent activity – to constitute a “disposal.”

CERCLA Continuing Obligations for ICs

CERCLA’s continuing obligations for institutional controls require that the new owner “complied with any land use restriction established or relied on in connection with the response action, and did not impede the effectiveness or integrity of any institutional control.” No case law has directly addressed this, leaving some uncertainty as to exactly what is required to comply with a land use restriction or not impede an institutional control.

However, EPA guidance on advanced approaches for IC monitoring lists many IC monitoring approaches meant to assure land use restriction and institutional control effectiveness, which could prove instructive to future courts. If courts prove as exacting as they have been for other continuing obligations, it seems likely that institutional control compliance questions will be similarly analyzed. Also, as noted immediately below, EPA’s Common Elements Guidance points out the importance of IC monitoring in the context of continuing obligations.

EPA Common Elements CERCLA Guidance

EPA’s Common Elements Guidance provides a detailed discussion of CERCLA continuing obligations and, as noted above, coined the phrase. A valuable resource, the guidance summarizes case law, legislative intent, and EPA’s enforcement discretion view of how to interpret CERCLA’s continuing obligation requirements.

In particular, aside from scholarly articles, including one I helped write, EPA’s Guidance uniquely addresses two key continuing obligation topics: the requirement for no disposal and the requirements for compliance with ICs.

EPA’s Guidance divides disposal into four categories: (1) a brand new or initial disposals, (2) secondary disposals such as movement/dispersal of contaminated soil, (3) secondary disposals in the specific case of redevelopment, and (4) leaking or migrating contaminants, even without any direct human involvement. For each situation, EPA offers enforcement discretion views on whether and which should be interpreted as “disposal” in the context of continuing obligations.

For institutional controls, EPA discusses the relation between the terms “land use restrictions” and “institutional controls,” each of which has apparently separate (though subtly different) continuing obligations requirements. Parties must (1) comply with “land use restrictions” and (2) not impede the effectiveness or integrity of “institutional controls.” On this, EPA’s Guidance describes land use restrictions as a subset of institutional controls, and goes on to describe continuing obligation scenarios. Also, EPA’s Guidance discusses the importance of monitoring. It states “[w]hile monitoring the property and associated ICs or land use restrictions is not a distinct requirement under the statute [CERCLA], doing so is one way to ensure that a party continuously complies with the land use restrictions and does not impede the effectiveness or integrity of the ICs.”

ASTM Guide: Four-Step Continuing Obligation Process

While EPA Common Elements Guidance interprets the contours and bounds of CERCLA’s continuing obligations, ASTM’s Standard Guide for Identifying and Complying with Continuing Obligations (E2790-20) sets a standardized four-step process (working complementary to EPA’s guidance) for navigating through the CERCLA contours while at the same time recommending procedures that help meet state requirements or good risk management practices.

Steps 1 and 2 cover processes to ingest the Phase I report and any other pre-transaction due diligence, and recommend steps to understand and evaluate the RECs or CRECs (recognized environmental conditions and controlled recognized environmental conditions). Then, with that understanding, steps 3 and 4 recommend a process for addressing what the Standard Guide describes as initial and ongoing COs.

Initial COs are those required during the redevelopment timeframe, before end use. This category, which covers “reasonable steps” and “disposal” (the topics that have received the most attention in the courts), includes measures to responsibly manage and prevent the exacerbation of contamination.

Specifically, step 3 asks what reasonable steps are needed to control residual contamination until the property’s end use is in place, cleanup is certified, institutional controls are in place, and redevelopment is largely complete.

Ongoing COs, detailed in step 4, are those that apply after the end use is in place and help ensure the property owner is in compliance with the institutional controls. While the initial COs/step 3 situation is normally short-lived, ongoing COs (institutional control compliance) can last for a very long time. The Standard Guide helps stress and recommend programs for monitoring and ensuring institutional control compliance, which I’m personally seeing as becoming more routine as stakeholders increasingly come to appreciate the need for and the risks involved with institutional control failure.

CO Practice Adapting, Taking Hold

As I watch the evolution of CO practice, I think the distinction between initial COs (pre end-use) and ongoing COs (post end-use) has become more solidified and understood, with CO procedures adapting accordingly. The case law highlights the importance of initial COs (e.g., preventing exacerbation during redevelopment), and the slow but steady increase in attention to IC monitoring and compliance (speaking from personal experience) continues to motivate stakeholders to incorporate IC compliance into their cleanup and redevelopment strategies. In short, CO practice is taking hold.

Interested in learning more about how continuing obligations apply to your sites? Reach out directly to Mike at m.sowinski@terradex.com.

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Brownfield Developer Fails to Meet BFPP Defense; Found Liable Under CERCLA for Removing Concrete Slab Above Contaminated Soil

J. Michael Sowinski, J.D. — Tue, 25 Oct 2011 10:17:33 +0000

This Saline, Michigan case adds another decision to similar recent cases such as Ashley II and Robertshaw, which assess whether current owners of contaminated property met CERCLA’s Bona Fide Prospective Purchaser (BFPP) defense. It also showcases the interesting legal question concerning the relation between BFPP requirements to (1) take reasonable steps, after acquisition, to prevent “releases” and (2) to show that, all “disposal” occurred prior to acquisition.

In Saline River Props., v. Johnson Controls, Inc., 2011 U.S. Dist. LEXIS 119516 (E.D. Mich. Oct. 17, 2011)
a Federal District Court in Michigan considered, among other issues, whether a current owner could be liable under CERCLA for exacerbating pre-existing contamination caused by the prior owner. The prior owner, Johnson Controls, Inc. (JCI), claimed that the current owner, Saline River Properties, LLC (Saline) could be liable under CERCLA for exacerbating existing vinyl chloride contamination by removing a building’s concrete slab and thereby “allowing additional rainwater into the ground that the building and slab might have partially diverted…” The prior owner prevailed.

Introduction

Saline, the current owner, purchased a 22 acre parcel from JCI. Years before, EPA issued an administrative order on Consent (AOC), which required JCI to perform various cleanup measures. Saline sued JCI for failing to comply with the AOC but JCI counterclaimed that Saline, as the current owner, was liable under CERCLA for response costs because, JCI claimed, Saline exacerbated existing vinyl chloride contamination by removing a concrete slab that covered contaminated soil and thereby “allowing additional rainwater into the ground that the building and slab might have partially diverted…”

No Evidence Offered for BFPP Defense

Saline, as a brownfield developer, argued that it qualified as a BFPP. As the Court here explained, to qualify as a BFPP the BFPP defense-seeker must show, by a preponderance of the evidence, each of the enumerated BFPP criteria which includes a list of “continuing obligations“, including, among many others, but as most relevant here:

All disposal of hazardous substances occurred before the person acquired the facility, and
After acquisition, the person seeking the defense exercised appropriate care with respect to hazardous substances found at the property by taking reasonable steps to prevent any threatened future release.

Saline, the Court explained, offered no evidence that it took any reasonable steps to prevent releases of existing contamination. Without any evidence of reasonable steps, Saline instead argued that any exacerbation it caused could not qualify as either a “release” or a “disposal” of hazardous substances because Saline didn’t actually put vinyl chloride in the ground. Rather, they argued, because the contamination already existed in place, they couldn’t have released or disposed it.

The Court disagreed, reasoning that Saline could be liable under CERCLA even if it didn’t actually put the contamination into the ground, because it took the action to remove the concrete slab which in turn, according to allegations supported by evidence, caused hazardous substances beneath the slab to migrate.

Taking Reasonable Steps to Prevent “Releases” Could Have Put the Current Owner In A Better Position To Show Post-Acquisition “Disposal” Did Not Occur

If Saline took reasonable steps to prevent “releases”, it probably would have been much better off. Taking reasonable steps, while not the sole BFPP criteria needed to be met, is a critical element of the BFPP defense and could support the additional required showing that all “disposal” occurred prior to acquisition.

Notice, the BFPP defense requires both that (1) after acquisition, the defense-seeker took reasonable steps to prevent future threatened releases, and (2) all disposal occurred before acquisition. 42 U.S.C. 9601(40). This dual requirement addressing “release” and “disposal” raises interesting legal issues.

First, consider reasonable steps to prevent “releases.” While it’s difficult to predict what a Court would find as appropriate “reasonable steps,” hypothetically in this case reasonable steps could have involved measures to prevent rain form contacting the soil and/or the timely installation of other engineering controls to act in a manner similar to the concrete pad. ASTM’s E 2790 guides users and environmental professionals through the process of preparing a continuing obligations plan to, among other things, address site-specific threatened releases. Further, EPA’s Common Element guidance explains that when taking reasonable steps new owners “are not expected to … undertake other response actions that would be more properly paid for by the responsible parties who caused the contamination.”

If reasonable steps were taken, new owners in positions like Saline’s could turn to the more focused (and some would say legally interesting) question of whether the reasonable steps to prevent “releases” were enough to show that no post-acquisition “disposal” occurred.“Release” and “disposal” while defined differently, overlap. As the Court here explained (and as other Courts explain, see e.g., Carson Harbor Village, Ltd. v. Unocal Corp., 270 F.3d 863, 878 (9th Cir. 2001)) the definition of “release” is broader than “disposal” because “disposal” is included within the definition of “release” – even though both definitions have several words in common. Disposal, the Saline Court explained (under precedent for 6th Circuit), requires “human intervention,” meaning that “disposal” doesn’t occur simply because contamination “passively migrates” but, rather, requires human intervention – such as destroying the building foundation to help cause migration. With its broader meaning, “release” the Court explained (as have others) could possibly occur even without human intervention.

If new owners like Saline could offer evidence to show that they took reasonable steps to prevent “releases” (a broader term), they could be in a position to argue the preventative reasonable steps eliminated any “human intervention” and, therefore, prevented “disposal.”

Whether this argument would carry the day remains uncertain – no BFPP cases address whether post-acquisition “disposal” nonetheless occurred even when the BFPP-seeker exercised post-acquisition reasonable steps to prevent “releases”. But without any evidence of having performed reasonable steps, new owners reduce their chance of showing that no post-acquistion disposal occurred and, otherwise, seem to have slim chances of successfully asserting the BFPP defense.

Extrapolating to the Case for Engineering and Institutional Controls

If the removal of a concrete pad above contaminated soil can trigger CERCLA liability because rainwater could spread contamination, it’s hardly a stretch to imagine that excavating into or failing to prevent or fix cracks in engineering controls (such as concrete or asphalt “caps”) could similarly impose CERCLA liability on new owners. Indeed, in Ashley II, the Court cited the failure to maintain a stormwater-diverting crushed rock and gravel “ROC” cover as one factor to support its imposition of CERCLA liability upon the new owner.

Parties failing to adhere to engineering controls would potentially have the added problem of not complying with Land Use Restrictions (LURs) or impeding the effectiveness of Institutional Controls (ICs), because LURs and ICs typically accompany engineering controls – recording the requirement, for example, to maintain engineering controls in good condition or to prevent their destruction. Failing to comply with LURs or impeding the effectiveness of ICs are also grounds to lose the BFPP defense.

ASTM’s E2790 advises users to monitor and perform field inspections of LURs and ICs for activities that could compromise engineering controls or conflict with land use limitations. See LandWatch for Continuing Obligations for more details on the monitoring and inspection process.

Additional Information

Ashley II v. PCS Nitrogen (current owner failed to satisfy BFPP defense)
Imperial v. Robertshaw (current owner satisfied BFPP defense)
USEPA Common Elements Guidance (discussing BFPP defense and Continuing Obligations)
ASTM E 2790 (providing guidance on Continuing Obligations)
United States v. Honeywell Int’l, Inc., 542 F. Supp. 2d 1188, 1198-99 (E.D. Cal. 2008) (development-related excavation and grading qualifies as disposal)
ABA Newsletter, Ninth Circuit and Passive Migration as CERCLA “disposal” (discussing varied Circuit Court holdings on passive migration)
LandWatch for Continuing Obligations (describing procedures and tools for monitoring and inspecting ICs, LURs, ECs, and Reasonable Steps)
Watch What You Do With That Shovel (Or Heavy Equipment): Another Developer Faces Superfund Liability for Site Redevelopment (summarizing the Saline case)

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Tracing the Evolution of the Phrase “Continuing Obligations”

J. Michael Sowinski, J.D. — Mon, 21 Feb 2011 00:29:35 +0000

A new “CERCLA Continuing Obligations” discussion group recently began in Linkedin – actually its a subgroup within the “Environmental Issues in Business Transactions” discussion group that Larry Schnapf manages. Given this, it seemed right to quickly review how the phrase “continuing obligations” came into being and where its heading.

It started with CERCLA’s Brownfield Amendments. However, the phrase “continuing obligations” appears nowhere in the Amendments or in CERCLA generally. Rather, the Amendments list post-purchase requirements that must be shown “by a preponderence of evidence” in order to successfully assert CERCLA defenses made newly available in the Amendements – namely, the Bona Fide Prospective Purchaser Defense, the Contiguous Property Owner Defense, and the Innocent Landowner Defense (which was actually modified from the pre-Amendments version).

EPA’s Common Elements Guide Coins the Phrase “Continuing Obligations.”

About 2 years after the Amendments, EPA appeared to first use the phrase “continuing obligations.” When describing the Agency’s view of the Amendment’s post-purchase requirements, the Common Elements Guide characterized them as “continuing obligations.”

Several of the conditions a landowner must meet in order to achieve and maintain a landowner liability protection are continuing obligations. This section discusses those continuing obligations: (1) complying with land use restrictions and institutional controls; (2) taking reasonable steps with respect to hazardous substance releases; (3) providing full cooperation, assistance, and access to persons that are authorized to conduct response actions or natural resource restoration; (4) complying with information requests and administrative subpoenas; and (5) providing legally required notices. Common Elements Guide, p. 6.

EPA’s AAI Rule Further Discusses Continuing Obligations.

About a year after the Common Elements Guide, in 2004, EPA’s proposed rule for All Appropriate Inquiries also relied on the phrase continuing obligations. In addition to performing AAI, the rule’s preamble explained, “the statute requires that persons, after acquiring a property, comply with continuing obligations …” 69 Fed. Reg. 52542, 52568 (2004). Importantly, the requirement to perform continuing obligations exist even if AAI “fail[ed] to identify an environmental condition or identify a release or threatened release of a hazardous substance…” Id. at 52546. And, for example, [n]one of the continuing obligations “for the bona fide prospective purchaser liability protection is contingent upon the results of the conduct of all appropriate inquiries.” Id. The preamble to the final rule on AAI provides similar statements. See, e.g., 70 Fed. Reg. 66070, 66073.

EPA’s Brownfields Factsheet and OIG Report on Continuing Obligations.

More recently, in April 2009, an EPA Fact Sheet on Brownfield Grants explains that “grantees are prohibited from using grant money to pay response costs at a brownfield site for which the grantee is potentially liable under CERCLA.” In addition to complying with AAI, the Factsheet goes on to explain that to be eligible for CERCLA liability protection property purchasers must comply with continuing obligations. Finally, EPA’s recent Office of Inspector General Report covering AAI compliance also noted continuing obligations. In that report, which has sparked spirited discussions on the Commonground blog and the Center for Public Environmental Oversight listserve, the OIG found that 35 of 35 AAI reports reviewed at EPA grant sites did not meet the AAI rule’s requirements. It further mentioned that it had intended to also review compliance with continuing obligations, but that “[d]ue to priority isssues … we did not complete an evaluation of continuing obligations at brownfield properties.” OIG Report, p. 1.

Wisconsin’s Continuing Obligations Program and CO-like Programs in Other States.

At least one state has adopted the phrase “continuing obligations” to characterize its requirements to manage property during and after cleanup. See WDNR Continuing Obligations to Protect Health and the Environment. Generally, Wisconsin’s COs refer to those required during the state oversight of cleanup and particularly those set forth within cleanup approvals. As Wisconsin explains, “[m]ost continuing obligations originate in the state’s approval of a cleanup that leaves some residual contamination.”

While Wisconsin seems to be the only state to have adopted the phrase “continuing obligations” (at least as far as I know), other states impose continuing obligation-like requirements. See my blog article re Michigan’s “due care” requirements. For example, Michigan requires owners of contaminated property to comply with institutional controls and can even issue civil penalties for failure to do so. Finally, California’s AB 389, like the CERCLA Amendments, offers liability relief for contaminated property purchasers. Though AB 389 doesn’t use the phrase “continuing obligations” it does address the requirement to take “appropriate care” of contaminated properties.

ASTM’s Forthcoming Continuing Obligations Guide.

A forthcoming ASTM Guide on Continuing Obligations (a standard Guide currently in the drafting and balloting phases of the ASTM process) intends to spefically address, with information and guidance, recommended procededures for continuing obligations – particularly continuing obligations for institutional controls and continuing obligations to take “reasonable steps.” The development of this Guide was sparked by an perceived need for guidance in this important yet vague area of post-purchase management of contaminated property.

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Court Finds “Appropriate Care”

J. Michael Sowinski, J.D. — Tue, 25 Jan 2011 00:35:05 +0000

In 3000 E. Imperial, LLC, Plaintiff, v. ROBERTSHAW CONTROLS CO, et al. Defendants, No. CV 08-3985 PA, 2010 U.S. Dist. Lexis 138661 (C.D. Cal. Dec. 29 2010), a Federal District Court in California found a contaminated property purchaser to have exercised “appropriate care” and, in turn, to have satisfied the Bona Fide Prospective Purchaser (“BFPP”) defense when they excavated underground tanks soon after learning that the tanks contained hazardous substances. This decision comes on the heels of Ashley II (finding the purchaser did not exercise “appropriate care”), which I wrote about earlier this week.

Imperial Knowingly Bought Contaminated Property

3000 E. Imperial, LLC (“Imperial”) bought a contaminated site in November, 2006. Prior to the purchase, the court explained, Imperial learned that the site was contaminated but it didn’t yet characterize the contamination’s nature and extent (the court stayed silent on the method or appropriateness of “all appropriate inquiries“). After it bought the property, Imperial’s consultants continued with environmental investigations and published a report in September, 2007, noting TCE (an industrial solvent known for being toxic) and benzene contamination in the soil and groundwater, and that leaks from a 9-tank underground storage tank (“UST”) nest caused the contamination.

Imperial Cleaned the Site and Sued for its Cleanup Costs

Eventually, Imperial spent about $1.2 million dollars cleaning the site. It then sued the former owners for the costs of cleanup. The former owners, among other things, argued that Imperial should help pay because as the current owner Imperial was also a PRP. And, the argument continued, Imperial did not take “appropriate care” because it left the USTs in place for 2 years after it purchased the site.

The Court Found Imperial Took Appropriate Care After the Purchase

The court disagreed with the former owner’s argument, noting (1) Imperial’s compliance with the state agency’s environmental cleanup program as well as (2) Imperial’s actions soon after learning of the UST contamination. On the first point, the court noted that Imperial was complying with the California Department of Toxic Substances Control’s voluntary cleanup program by performing cleanup as directed by DTSC. And that California had found Imperial to qualify for the state version of “appropriate care” – a different standard than set in CERCLA’s 42 U.S.C. sec. 9601(40)(D). The court turned to the CERCLA “appropriate care” standard, which requires Imperial to take reasonable steps to (1) stop any continuing release; (2) prevent any threatened future release; (3) prevent or limit exposure to previously released hazardous substances. Under this standard, the court found Imperial to have taken “appropriate care” by sampling the USTs about six months after purchase and emptying the USTs soon after they gained knowledge (through sampling) of their contents, even though Imperial didn’t actually excavate the tanks for about a year afterwards. The court reasoned as follows:

Plaintiff had the contents of the USTs sampled in May 2007. In September 2007 Plaintiff’s environmental consultant reported that the TCE was detected in those samples. In October 2007 Plaintiff had the contents of the USTs removed and placed into twenty 55-gallon drums, which were then removed from the Property. TCE was later found to be present in an oily layer that floated on top of the liquid withdrawn from the USTs. Since Plaintiff had the USTs emptied soon after learning that they contained a hazardous substance, the Court finds that the Plaintiff took reasonable steps to stop any continuing leak or to prevent any future leaks of TCE from the USTs. It was not unreasonable for Plaintiff to leave the USTs in the ground at that time, given that they were empty. Defendant contends that Plaintiff should have also excavated the USTs in 2007 to prevent the possibility of surface water infiltration, which could mix with any TCE left in the USTs and then leak into the ground. However, Defendant has not provided any evidence suggesting why Plaintiff would have had reason to believe that the USTs were not emptied of TCE in 2007. In fact, when the nine USTs were excavated in 2009 only one of them was observed to have an oily layer on top. Although some TCE was later detected inside that UST its contents consisted almost entirely of water, which suggests that very little TCE had been left inside since 2007. The Court finds that Plaintiff took reasonable steps to prevent further release of hazardous substances, thus entitling it to bona fide prospective purchaser status.

Other Articles (Providing a Link to the Case) and Additional References

Another article briefly summarizes the case, focusing on other points it addressed. Namely, whether the leaking from the UST occurred during the time when the prior owner held the property and, in turn, whether the leaking was a “disposal” and whether the harm it caused could be divisible. See Dispute as to When and Underground Storage Tank Began Leaking.

See EPA’s “Common Elements” Guide for, among other things, an introduction to and further citations related to the BFPP Defense.

My short article on the Ashley II decision, which addressed the BFPP defense and the forthcoming ASTM Guide on Continuing Obligations.

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Ashley II Court Addresses the BFPP Defense

J. Michael Sowinski, J.D. — Wed, 19 Jan 2011 00:37:56 +0000

In the years I’ve spent helping to draft a Continuing Obligations Guide as part of the ASTM E50 Committee, my colleagues and I have often acutely noted (and perhaps lamented) that no court has ever directly addressed CERCLA’s Bonafide Prospective Purchaser (“BFPP”) defense. Well now there’s a case. In Ashley II of Charlseston LLC v. PCS Nitrogen, Inc. v. Ross Development Corp. et al. (D. South Carolina, Oct. 13, 2010) Civ. Action No. 2:05-cv-2782, a Federal District Court in South Carolina analyzed the BFPP defense – and particularly the “appropriate care” element. There, the court ultimately found that while Ashley II of Charleston LLC (“Ashley”) properly performed all appropriate inquiries (“AAI”) before it bought the Columbia Nitrogen Site, after the purchase they failed to exercise “appropriate care.”

The Site

The Columbia Nitrogen Site covers over 40 acres and holds fairly serious contamination. Dating back to 1905 and until the early 1970s, the site was used as a fertilizer plant causing arsenic and lead contamination as well as low pH (acidic) conditions. After that, the bare soil of the site was eventually (by the late 1990s) covered with “ROC” – crushed rock and gravel – which helped divert stormwater and control the spread of contaminated soil. Much of the site then became used for various outdoor storage and outdoor commercial activities.

EPA categorizes the site as an “NPL caliber” site, meaning the site is hazardous enough to be on EPA’s National Priority List but, instead, is being addressed under EPA’s “superfund alternative approach.” Under this approach, EPA has been closely involved since around 1991, completing a feasibility study in 2002 and a remediation plan in 2005, among other things. Ashley plans to build a mixed use development.

The Purchase and Post-Purchase.

Ashley purchased most of the site in 2003 and then purchased a smaller portion in 2008, and prior to both purchases it properly performed AAI by following the ASTM Phase I process.The 2003 Phase I clearly noted site contamination, and even directly incorporated EPA reports. The 2008 Phase I made the finding that cement pads and sump pits used as part of a former tanker truck cleaning operation were recognized environmental conditions (“RECs”) – a finding that would come back to haunt Ashley.

With the Phase Is in hand, Ashley took title and moved forward as a BFPP. And it took many responsible, some would say even prudent, steps. Ashley hired an engineer specifically for the purpose of satisfying the BFPP requirements. It also hired other consultants to complete site assessments and get going with actual cleanup. Ashley put a fence around the site, placarded it with no trespassing signs, responded to requests for information from EPA, granted access to EPA, and performed a large-scale post-purchase assessment of 452 soil samples – in all spending $192 million – and completed costs estimates for full cleanup at about 8 million dollars.

The Lawsuit.

Ashley filed a lawsuit trying to recoup its $192 million from the “former-former” owner – not the seller that is, but rather the prior owner who originally caused the site’s contamination – and also asked the court to make this “PRP” fully liable for the costs of future cleanup.The PRP, in turn, filed a contribution action claiming that Ashley was partially responsible and should help pay.

The BFPP Defense.

Ashley claimed it need not help pay because it met the elements for the BFPP defense at 42 U.S.C. sec. 9601(40) and, therefore, was not a responsible party. As to some of the elements, the court agreed that Ashley put forward the proper showing – the court held that Ashley performed AAI, made all legally required notices, provided full cooperation and assistance, complied with all information requests and subpoena’s, and complied with land use restrictions and did not impede the integrity of institutional controls (there were no apparent land use restrictions or institutional controls).

But on the element of “appropriate care,” the court held differently.As the court explained, the defense seeker must show they exercised appropriate care by taking reasonable steps to (1) stop any continuing release; (2) prevent any threatened future release; (3) prevent or limit exposure to previously released hazardous substances.The court called out three reasons to support its conclusion that Ashley failed to exercise appropriate care.

The Sumps.First (and this factor seemed most bothersome to the court) Ashley demolished on-site structures but left behind the concrete pads and sumps (which had been previously identified as RECs) and, as the court explained, did not clean out the sumps, left them open to the elements, and “may have exacerbated” the conditions. Notably, the court pointed out that Ashley did not test the concrete pads or sumps to see if a release had occurred. And, experts testified that this open sump condition could have caused a release and that it posed a threat of a release.

Pile of Debris.Second, Ashley allowed a debris pile of barrels, tires, and discarded vehicles to accumulate and sit for over a year. When Ashley eventually removed the debris, the manifests accompanying it to the landfill showed some of the debris as hazardous waste, including hydrochloric acid and waste paint.

Failure to Maintain ROC Cover.Third, Ashley “failed to adequately maintain the ROC cover” allowing it to deteriorate over portions of the site and, in turn, undermining its function of diverting storm water and controlling the spreading of contminated soil.

Because it did not satisfy the BFPP defense, Ashley will need to help pay for the cleanup.

A Continuing Obligations Guide?

Would a Continuing Obligation Guide have helped Ashley?The forthcoming Guide intends to do exactly that. Of the many BFPP elements, the CO Guide focuses on (1) taking “appropriate care”, (2) complying with land use controls, and (3) not impeding the integrity or effectiveness of institutional controls. It recognizes that the procedures for achieving these goals are site specific, so it offers guidance as to the types of procedures known to be good practices and it suggests the preparation of a continuing obligation plan. Armed with the examples of good practice, the continuing obligations plan begins with the Phase I’s findings and devises strategies, both immediate and long term, for taking appropriate care and managing LURs and ICs. The examples of good practice and the process of continuing obligation plan could help future Ashleys of the world to take the appropriate – “appropriate care.”

As the draft Guide moves towards the home stretch – with an ASTM vote planned for February or March 2011 – the Ashley II Court helps us remember (or realize) the value a guide like this can bring to buyers of contaminated land, and their consultants.

Other Articles on Ashley II

Other articles discuss the decision and raise other good points, including (1) the quality of Ashley’s Phase I, (2) the issue of whether Ashley’s activities qualified as post acquisition disposal and (3) whether its relation to the sellers (Ashley indemnified the sellers) and Ashley’s related communications to EPA about cost recovery from the sellers made Ashley “affiliated with” responsible parties.

When All Appropriate Inquiry Isn’t Enough: Court Highlights the Significance of Other Factors in the Bona Fide Prospective Purchaser Defense.

Getting – and Keeping – CERCLA Liability Protections for Prospective Buyers

First Test: Prospective Purchaser Defense Fails

In addition, see Court Finds “Appropriate Care” which discusses another recent Federal opinion where the court found that the BFPP defense-seeker did take “appropriate care.”

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