Erik S. Fisk Whitfield & Eddy, P.L.C.

fisk@whitfieldlaw.com www.linkedin.com/in/eriksfisk twitter: eriksfisk

 Applicable Legal Requirements For Cleaning Up Contaminated Property (Inactive Hazardous Sites), and Why It Matters Type of Containment Determines Which Law Applies, Which Governs Clean Up Requirements and Apportioning of Liability

Defenses and Innocent Landowner Protection

All Appropriate Inquiry Requirement (AAI)

Buyer and Seller Strategies In Real Estate Transactions

General Areas of Inquiry on Due Diligence Issues

 Iowa Law
City Requirements County Requirements

Federal

 Present owner not liable for expenses unless present owner caused the contamination Present owner can be liable for assessment expenses Administered by the Iowa Department of Natural Resources if issue falls into one of the following:
Emergency Response Underground Storage Tank Solid Waste programs Federal RCRA program Evidence of contamination that is not under the purview (unlikely)

Statues- Iowa Code Chapter 455 A-K Regulations- Iowa Admin. Code 567 Chapters 1-218 Petroleum Underground Storage Tank (UST) Cleanup liability for release of a regulated substance Owners of UST are responsible for clean up of a regulated substance

 Ordinances Water Wells Wastewater permits

County Requirements
Ordinances County sanitarian (enforces, inter alia, septic system requirements) Linn and Polk County (require air operating permits for individual sources)

 Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 USC 9601-9615
CERCLA Section 107 stating which parties are liable Liability for clean-up is joint and several CERCLA section 101(20) Average clean-up expense totals in the millions of dollars Applies to historic releases of hazardous substances and current releases and reporting rquirements Superfund Amendment and Reauthorization Act (SARA), 42 USC 11021

Resource Conservation and Recovery Act (RCRA)

Applies to hazardous waste when generated or stored on premises Environmental harm or damage required to establish a violation

Federal Regulations

 Petroleum and hydrocarbons- State law

Administered by DNR

Hazardous waste and hazardous substances- federal and state law

CERCLA Hazardous Waste-RCRA Iowa Code 455B.381-455B .469 (provisions applying to hazardous wastes and substances

 Iowa Federal Law

Cost Recovery Advantage of Voluntary Clean Up- Iowa

No Independent pre-sale Environmental Site Assessment (ESA) Obligations Buyers, sellers, lenders choose ESAs Lender Liability Exemption Third Party Liability Protection (Iowa Code 455B.751)

Innocent Landowner Defense (ILO) Under CERCLA Bona Fide Prospective Purchaser Defense (BFPP)

Contiguous Property Owners (CPO) Under CERCLA

Comparison of elements of defense (provided on EPA website)

CERCLA- only avenue to reapportion costs Section 113- intended to standardize the statutory right of contribution.

Iowa DNR Phase I and Phase II of ESA Grants of up to $200,000 are available to cover the costs of assessment for hazardous substances, pollutants or contaminants and up to $200,000 to deal with a site contaminated by petroleum.

 Iowa Land Recycling Program (LRP) Legislatures attempt to address assessment/cleanup of sites for productive use. If standards are met, party receives a No Further Action (NFA) which puts limitation on the conditions under which DNR can reopen regulation of a site NFA also provides liability protection to protected parties Any party who can prove they are willing and financially able to complete the LRP assessment and remedial actions necessary to reach NFA classification are eligible to enroll Limitations on reopening sites after NFA

 AAI rule became effective in 2006 and established regulatory requirements and standards for conducting an environmental assessment. AAI Rule states that all appropriate inquiries must include:
An inquiry by an environmental professional Collection of information pursuant to 312.22 Searches for environmental cleanup liens against the property that are filed or recorded under federal, tribal, state or local law.

ASTM Phase I ESA Standards: ASTM International, formerly known as the American Society for Testing and Materials. EPA recognizes two standards that comply with AAI:
ASTM E1527-05 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process; and E2247-08 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process for Forestland or Rural Property.

Amendment to Superfund Act included Continuing Obligations

 Drafting Options for Structuring Transactions:

Cut out contaminated portion of the deal when carved out property is not needed; Leasing v. purchasing the property; Asset v. stock purchase; Reduced price purchase, appealing if sellers continuing financial status is uncertain; Funds can be escrowed and/or deducted from purchase price; Letters of credit (form of financial assurance); Environmental Insurance ; Contractual representations, warranties and indemnities.

 General- general features and issues identified, e.g., legal description, history, title, etc. Transactional- transfer issues, e.g., foreclosure, option, quit-claim, etc. or special financial issues, i.e., seller financing, wrap, etc. Distress- accident, tragic or crime issues? Legal- Legal issues related to title, threatened or pending claim or litigation issues, regulation issues? External- area land use issues or nuisance issues? Structure- Building issues and/or repair issues. Site- Soil issues, geotechnical issues, I.e., grading, cut and fill, compaction, drainage, etc. Environmental- any hazardous substance, radon, mold environmental illness or contamination, or environmental agency issues? Conservation- Natural resource issues, historic or cultural resource issues. Natural- natural hazard issues or drainage issues.