Transmittal of the Policy Towards Landowners and Transferees of Federal Facilities
June 13, 1997
Transmittal of the Policy Towards Landowners and Transferees of Federal Facilities
Timothy Fields, Jr. /s/
Acting Assistant Administrator
Office of Solid Waste and Emergency Response
Steven A. Herman /s/
Office of Enforcement and Compliance Assurance
Regional Counsel, Office of Regional Counsel
Director, Office of Site Remediation and Restoration
Director, Emergency and Remedial Response Division
Director, Hazardous Waste Management Division
Regions III, IX
Director, Waste Management Division
Director, Superfund Division
Regions V, VI, VII
Assistant Regional Administrator, Office of Ecosystems Protection and Remediation
Director, Environmental Cleanup Office
This memorandum transmits EPA's "Policy Towards Landowners and Transferees of Federal Facilities", (Policy) which addresses potential liability concerns of landowners and transferees (e.g., lessees) who acquire Federal facility property. With the nationwide reduction in the number and size of these facilities, primarily closing military bases, acquisition of such property by non-federal parties has become increasingly common.
The Policy was developed in cooperation with a number of Federal agencies, including the Department of Defense and the Department of Energy, and is intended to alleviate uncertainty regarding potential enforcement by the Agency against such landowners and transferees for contamination existing as of the date of property acquisition. The Policy should also further reduce transaction costs by eliminating the need for the negotiation of prospective purchaser agreements for such property.
The Policy applies only to the transfer of property at federally owned facilities. EPA's existing "Guidance on Agreements with Prospective Purchasers of Contaminated Property", 60 Fed. Reg. 34792 (July 3, 1995), addresses property transfer between private parties where an EPA action has been taken, is anticipated, or is currently underway.
If you have any questions or comments regarding the attached Policy, please have your staff contact Seth Thomas Low of the Federal Facilities Restoration and Reuse Office at (202) 260-8692, Bill Frank in the Federal Facilities Enforcement Office at (202) 564-2584, or Joe Tieger in the Office of Site Remediation Enforcement at (202) 564-4276.
Sherri Goodman, DoD
Patricia Rivers, DoD
Robert Taylor, DoD
James Van Ness, DoD
Alvin Alm, DOE
Martha Crosland, DOE
John Mandell, GSA
Steve Rogers, DOJ
Stephen Luftig, OERR
Barry Breen, OSRE
Craig Hooks, FFEO
Jim Woolford, FFRRO
Linda Garczynski, OSPS
Regional BRAC Contacts
Federal Facilities Leadership Council
POLICY TOWARDS LANDOWNERS AND TRANSFEREES OF FEDERAL FACILITIES
This policy is issued to promote the expeditious transfer and reuse of real property where the United States has ceased Federal government operations. It also implements the President's initiatives to facilitate the redevelopment and reuse of closing military bases and brownfields. Concern over potential environmental liability may have an adverse impact on the ability of local communities to develop or reuse such property. This policy is intended to alleviate those concerns, reduce uncertainty regarding the potential for CERCLA enforcement actions by the Agency, and to reduce transaction costs by precluding the need for the negotiation of prospective purchaser agreements. This policy applies only to the transfer of property at federally owned facilities. EPA's existing "Guidance on Agreements with Prospective Purchasers of Contaminated Property", 60 Fed. Reg. 34792 (July 3, 1995), addresses property transfer between private parties where an EPA action has been taken, is anticipated, or is currently underway.
STATEMENT OF POLICY
It is the Agency's position that where a person or entity acquires property from the United States that is subject to the covenants provided in Sections 120(h)(3) or 120(h)(4) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), or the indemnity provided in Public Law 102-484, as amended by Public Law 103-160, EPA will not take enforcement action against that person or entity, or its transferees or successors (hereinafter referred to as "landowners or transferees"), to require the performance of response actions or the payment of response costs incurred to respond to contamination existing as of the date that person or entity acquires the property from the United States. However, EPA may take a CERCLA enforcement action against landowners and transferees who cause, contribute to, or exacerbate the release or threat of release of any hazardous substances, through act or omission, and EPA may seek information and access from any person pursuant to CERCLA.
EPA believes that the protections afforded landowners and transferees through the above mechanisms, together with this policy, are sufficient to eliminate the need to enter into prospective purchaser agreements with them.
CERCLA Liability for Owners
In general, any person owning property on which hazardous substances have come to be located faces potential uncertainty with respect to liability as an "owner" under Section 107(a)(1) of CERCLA, 42 U.S.C. 9607(a)(1), even where such owner has had no participation in the handling of hazardous substances, and has taken no action to exacerbate the release.
Closing Military Bases and Other Federal Facilities
With respect to Federal facilities, purchasers receive certain covenants or indemnifications regarding environmental liability from the United States or the Department of Defense. In spite of the deed covenants and indemnifications, however, some prospective purchasers or lenders view the potential for becoming the subject of an EPA CERCLA enforcement action as a significant risk. The Agency is aware that such concerns may impact the ability of local communities to develop or reuse such property.
Pursuant to Congressional mandate, numerous military bases are undergoing realignment or complete closure with the potential for severe economic impacts on the affected local communities. Federal facilities, including such military bases, are frequently the subject of response actions under CERCLA. With the nationwide reduction in the number and size of Federal facilities, primarily closing military bases, transfers of such real property by deed or lease to non-federal parties has become increasingly common.
EPA is issuing this policy to address potential EPA CERCLA enforcement concerns raised by lenders, prospective purchasers, landowners and transferees who may acquire portions of Federal facilities. The intent of the policy is to reduce the effect of potential CERCLA liability on the marketability of such property by clarifying that EPA, in an exercise of its enforcement discretion, will not take an action under CERCLA against landowners and transferees who meet the conditions described in this policy for contamination existing as of the date of their acquisition of such Federal facilities. Also, EPA expects the policy to reduce transaction costs by eliminating the need to negotiate prospective purchaser agreements for purchasers of Federal facilities.
As discussed earlier, the Agency has previously published guidance on the issue of prospective purchasers of contaminated property. In addition, in other EPA policies, EPA has asserted its enforcement discretion in determining which parties not to pursue.1
Basis for the Policy
This policy is based on certain existing statutory protections afforded landowners or transferees of Federal facilities. Consistent with such statutory protections, the Agency will exercise its enforcement discretion and not take enforcement action against landowners and transferees (e.g., lessees) of Federal facilities where the United States or the Department of Defense has provided them certain statutory protections regarding environmental liability. Specifically, this policy applies to landowners or transferees receiving any of the following types of statutory protections.
Statutory Covenants for Federal Facilities
Section 120(h)(3) of CERCLA places certain restrictions on the conveyance of United States owned property on which hazardous substances have been stored, released or disposed of.2 Generally, the United States must take all remedial action necessary to protect human health and the environment with respect to any hazardous substances on a property before it can convey the property by deed to another person. The deed transferring the property must include a covenant that all necessary remedial action "has been taken" before the date of transfer and that the United States will undertake any remedial action found to be necessary after the transfer. A remedial action "has been taken" when an approved remedial design has been constructed and EPA determines it to be operating properly and successfully. The requirement to include a covenant regarding remedial action does not apply where the property is transferred to a person who is a potentially responsible party as to that property.
Under certain circumstances, however, contaminated property may be conveyed by deed before all remedial action has been taken. Section 120(h)(3)(C) of CERCLA sets forth the conditions under which either the EPA Administrator with the concurrence of the Governor (for property on the National Priorities List) or the Governor (for property not on the NPL) may defer the requirement of providing a covenant that all necessary remedial action has been taken prior to the date of transfer. In such cases, once the United States has completed all necessary remedial action, it must issue a warranty that satisfies that covenant requirement. A transferee of property conveyed under Section 120(h)(3)(C) also receives assurances at the time of transfer that all necessary remedial action will be taken in the future. Because of that assurance, and the warranty just described, it is appropriate to include these transfers within the scope of this policy.
Section 120(h)(4) of CERCLA provides that where the United States is transferring property on which no hazardous substances and no petroleum products or their derivatives were known to have been released or disposed of, the deed must contain a covenant warranting that any future cleanup activity will be conducted by the United States.3
In Section 330 of the National Defense Authorization Act for Fiscal Year 1993, Public Law 102-484, Congress provided that the Secretary of Defense shall hold harmless and indemnify persons (including lessees) that acquire ownership or control of any facility at a military installation that is closing or closed pursuant to a base closure law from any claim for personal injury or property damage that results from the release or threatened release of hazardous substances as a result of Department of Defense activities. Section 1002 of the National Defense Authorization Act for Fiscal Year 1994, Public Law 103-160, expanded this provision by including releases or threatened releases of petroleum or petroleum derivatives within the indemnification. The indemnification does not apply to persons and entities that contributed to any release or threatened release.4
Use of Prospective Purchaser Agreements for Federal Facilities
The Superfund statute assigns liability to parties who acquire property with knowledge of contamination. Parties interested in acquiring contaminated property, therefore, often request some guarantee from EPA that they will not be responsible for cleaning up contamination they did not cause. EPA recognized the environmental benefit from encouraging the purchase, cleanup and redevelopment of contaminated property and so issued its revised "Guidance on Agreements with Prospective Purchasers of Contaminated Property" ("Guidance"). The Guidance describes five criteria that must be met in order for EPA to enter into an administrative order on consent with a prospective purchaser of contaminated property. Such agreements contain a covenant not to sue from EPA for contamination existing at the time of purchase.
To prevent EPA's involvement in purely private real estate transactions, two threshold criteria are used to evaluate the appropriateness of entering into a prospective purchaser agreement: 1) whether information regarding releases or potential releases of hazardous substances at the site indicates that there is a substantial likelihood of EPA response or enforcement action and 2) whether other available avenues may exist to sufficiently alleviate the threat of Superfund liability at the site without the need for EPA involvement. It is EPA's intention to limit the use of such agreements to situations where there is a realistic probability that a prospective purchaser may incur Superfund liability and the covenant not to sue is essential in order for cleanup and productive use of the site to occur.
As previously discussed, landowners and transferees of Federal facilities are protected by statutorily required deed covenants and/or indemnifications. Consequently, such prospective purchasers are not at the same risk for incurring Superfund liability as prospective purchasers of private property. Given these protections, EPA has determined that a prospective purchaser agreement as envisioned by the Guidance is not necessary for landowners and transferees of Federal facilities.
Use of the Policy
This policy does not constitute rulemaking by the Agency and does not create any legal obligations and is not intended and cannot be relied upon to create a right or a benefit, substantive or procedural, enforceable at law or in equity, by any person. Furthermore, the Agency may take action at variance with this policy. The extent to which the Agency applies this policy will depend on the facts of each case. On a case-by-case basis, the Agency may take enforcement action to ensure the protection of human health and the environment, such as when development or activity on the property exacerbates the existing contamination, interferes with, or is inconsistent with, a federal response action, or poses a health risk to the community.
For further information concerning this policy, please contact Seth Thomas Low in the Federal Facilities Restoration and Reuse Office at (202) 260-8692, Bill Frank in the Federal Facilities Enforcement Office at (202) 564-2584, or Joe Tieger in the Office of Site Remediation Enforcement at (202) 564-4276.
See, e.g., Policy Towards Owners of Residential Property at Superfund Sites, OSWER Directive #9834.6, (July 3, 1991) (stating Agency policy not to take enforcement actions against an owner of residential property unless homeowner's activities led to the release); Final Policy Toward Owners of Property Containing Contaminated Aquifers, 60 Fed. Reg. 34790 (July 3, 1995) (stating Agency policy not to take enforcement action against owners of property contaminated solely by migrating groundwater). Return to Document
Please refer to the Appendix for relevant provisions of Section 120(h)(3) of CERCLA. Return to Document
Please refer to the Appendix for relevant provisions of Section 120(h)(4) of CERCLA. Return to Document
Please refer to the Appendix for relevant provisions of Public Law 102-484, as amended by Public Law 103-160. Return to Document
Relevant Statutory Provisions
Footnote 2: Section 120(h)(3) of CERCLA, 42 USC 9620(h)(3), states in relevant part:
"...in the case of any real property owned by the United States on which any hazardous substance was stored for one year or more, known to have been released, or disposed of, each deed entered into for the transfer of such property by the United States to any other person or entity shall contain --
a covenant warranting that --
all remedial action necessary to protect human health and the environment with respect to any such substance remaining on the property has been taken before the date of such transfer, and
any additional remedial action found to be necessary after the date of such transfer shall be conducted by the United States; and
...The requirements of subparagraph (A)(ii) shall not apply in any case in which the person or entity to whom the real property is transferred is a potentially responsible party with respect to such property."
Footnote 3: Section 120(h)(4) of CERCLA, 42 USC 9620(h)(4), states in relevant part:
"In the case of real property to which this paragraph applies...the head of the department, agency, or instrumentality of the United States with jurisdiction over the property shall identify the real property on which no hazardous substances and no petroleum products or their derivatives were known to have been released or disposed of.
In the case of the sale or other transfer of any parcel of real property identified under subparagraph (A), the deed entered into for the sale or transfer of such property by the United States to any other person or entity shall contain -- (I) a covenant warranting that any response action or corrective action found to be necessary after the date of such sale or transfer shall be conducted by the United States."
Footnote 4: Public Law 102-484, as amended by Public Law 103-160, states in relevant part:
"Indemnification of Transferees of Closing Defense Property
Except as provided in paragraph (3) and subject to subsection (b), the Secretary of Defense shall hold harmless, defend, and indemnify in full the person and entities described in paragraph (2) from and against any suit, claim, demand or action, liability, judgment, cost or other fee arising out of any claim for personal injury or property damage (including death, illness, or loss of or damage to property or economic loss) that results from, or is in any manner predicated upon, the release or threatened release of any hazardous substance, pollutant or contaminant, or petroleum or petroleum derivative as a result of Department of Defense activities at any military installation (or portion thereof) that is closed pursuant to a base closure law.
The persons and entities described in this paragraph are the following:
Any State (including any officer, agent, or employee of the State) that acquires ownership or control of any facility at a military installation (or any portion thereof) described in paragraph (1).
Any political subdivision of a State (including any officer, agent, or employee of the State) that acquires such ownership or control.
Any other person or entity that acquires such ownership or control.
Any successor, assignee, transferee, lender, or lessee of a person or entity described in subparagraphs (A) through (C).
To the extent the person and entities described in paragraph (2) contributed to any such release or threatened release, paragraph (1) shall not apply."