For years, Michigan’s cleanup laws have set forth a fairly novel approach aimed at protecting new “nonliable” purchasers of contaminated property. The legal and regulatory regime involves a characterization of the pre-purchase contamination as well as post-puchase “due care” procedures. Last month, in December 2010, Michigan added institutional control (IC) compliance and management obligations to the list of required “due care” procedures.
Michigan’s BEA/Due Care Approach for Contaminated Property Purchasers
Michigan’s “Act 41” and particularly Section 324.20107a and 324.20126 (as well as implementing regulations) establish a fairly longstanding process for allowing contaminated property purchasers to remain free from cleanup liability imposed under state law. In Michigan, under a scheme similar to but different from CERCLA’s Bona Fide Prospective Purchaser (BFPP) Defense, if property purchasers perform a baseline environmental assessment (BEA) – which defines the pre-purchase contamination – prior to or within 45 days after purchase, they remain generally free from liability for the cleanup costs related to pre-purchase contamination. Unless, that is, the new owner fails to exercise “due care.” Failure to exercise “due care” could cause the “nonliable” property owner to be liable for (1) cleanup costs “attributable to any exacerbation” as well as (2) potential fines and penalties for failing to take “due care”.
Michigan Adds Institutional Controls to its Due Care Requirements
Michigan’s statute sets forth the elements of “due care” which, prior to last month, focused on preventing “exacerbation,” mitigating “unacceptable exposures” and taking “reasonable precautions.” In December 2010, Michigan added IC language to its “due care” requirements, apparently drawing from similar language in CERCLA’s BFPP defense at section 42 U.S.C. sec. 9601(40)(F). As part of “due care”, Michigan now requires owners of contaminated property to:
- Comply with any land use or resource use restrictions established or relied on in connection with the response activities at the facility.
- Not impede the effectiveness or integrity of any land use or resource use restriction employed at the facility in connection with response activities.
Adding to a growing list of states who set affirmative duties related to IC compliance, these new statutory amendments seem to treat ICs as mechanisms which require ongoing monitoring and inspection. Michigan adds the unique addition of fines and penalties for persons who fail to comply with or who impede the ICs.
Based on the many CERCLA discussions I’ve heard about the proper interpretation of CERCLA’s 42 U.S.C. sec. 9601(40)(F)(i) continuing obligation for compliance with any “land use restriction,” I presume the precise meaning of “land use or resource use restriction” under Michigan’s law may be debated. But however large a universe of ICs becomes captures under the phrase “land use or resource use restriction,” it seems clear that property owners will work to assure that they comply with and “not impede” these controls.
Additional Information on Michigan’s BEA and Due Care Approach and CERCLA BFPPs
The article How much care is due from a nonliable owner under CERCLA and Part 201? discusses the type of state law protections granted by Michigan’s approach – such as common law nuisance or liability for future response costs. A post I wrote recently briefly introduces the BFPP defense and provides links to more detail. Also EPA’s Common Elements Guide is a good source for an overview of the BFPP defense. Generally, the BFPP defense allows purchasers to remain free of CERCLA liability if they perform all appropriate inquiries, don’t “dispose” contamination after purchase and meet a host of “continuing obligations” such as taking “appropriate care” and complying with “land use restrictions”. The BFPP defense differs from Michigan’s BEA/Due Care rules in that it does not demand new owners to perform a BEA. Nor does CERCLA’s BFPP defense set fines and penalties for failing to perform “continuing obligations.”