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Land and Natural Resources
May 16, 1990
MEMORANDUM
TO: Edward S. G. Dennis, Jr.
Assistant Attorney General
Criminal Division
FROM: Richard B. Stewart
Assistant Attorney General
Environment and Natural Resources Division
SUBJECT: Environmental Liability in Relation to Federal Property
Ownership; New EPA Regulation
Attached is a comprehensive memorandum regarding new regulations
which will affect federal agencies that own contaminated property and
later sell or transfer it. As you know, concerns about such liability
prompted former Acting Associate Attorney General Whitley to issue a
letter which limits law enforcement forfeiture activities due to such
liability.
The new EPA regulation should allow greater use of forfeiture
without liability for contamination which was not caused by the agency
which takes ownership.
After you review this memorandum, I propose discussing it with the
Advisory Committee of United States Attorneys (at the upcoming meeting
on May 21) as well as other appropriate components in order to help
develop operational guidelines for law enforcement agencies, and
determine the best way to communicate these guidelines. We have already
been engaged in discussions with the Asset Forfeiture Office.
Please let Deputy Assistant Attorney General Barry Hartman or me
know if you have questions or concerns.
cc: Barry N. Stern
Cary Copeland
Land and Natural Resources Division
May 16, 1990
MEMORANDUM
TO: Edward S. G. Dennis, Jr.
Assistant Attorney General
Criminal Division
FROM: Richard B. Stewart
Assistant Attorney General
Environment and Natural Resources Division
SUBJECT: Environmental Liability in Relation to Federal Property
Ownership; New EPA Regulation
SUMMARY
This is to advise you of a recent regulation promulgated by the
Environmental Protection Agency (EPA) concerning the hazardous substance
activity reporting requirements for federal agencies when selling or
transferring federal real property. The regulation implements Section
120(h) of the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA or Superfund), 42 U.S.C. 9620(h). The regulation
should assist the law enforcement components in the Department in
establishing procedures for seizure and forfeiture of property that may
be contaminated with hazardous substances.
EPA's regulation governs the notice federal agencies must give when
selling or transferring real property on which hazardous substances have
been stored, released or disposed of. Federal agencies must include in
the contract of sale or transfer notice of any hazardous substance which
"during the time the property was owned by the United States" was
"stored for one year or more, known to have been released, or disposed
of." The notice must include the "type and quantity of such hazardous
substance and notice of the time at which such storage, release, or
disposal took place, to the extent such information is available on the
basis of a complete search of agency files." 55 Fed. Reg. 14212 (April
16, 1990), to be codified at 42 C.F.R. 373.1. Because the regulation
focuses on hazardous substance conditions which occurred during
the federal ownership, federal law enforcement agencies will not bear
the burden of concern over waste problems created by prior owners.
The regulation constitutes a government interpretation of Section
120(h), which establishes special conditions for federal agencies when
they transfer property. Many agencies, including the Department, have
been concerned over their exposure to clean up and other costs under the
environmental laws, in particular CERCLA, when they obtain real property
particularly as a result of forfeiture proceedings in connection with
law enforcement activities. To assist the Department in both
understanding this regulation, and assessing its potential liability for
environmental contamination on real property, I am providing an
additional explanation of the pertinent provisions of federal
environmental law.
CERCLA BACKGROUND
Liability Scheme. CERCLA establishes both funding and
authority for EPA to undertake clean up of hazardous substance sites,
and also structures a liability scheme under which persons who fund
clean up of hazardous substances may recover their costs. EPA's funds,
known as the Superfund, are generally not available for response actions
on federally owned property.[FN1] As a result, federal agencies must
plan and budget for clean up of hazardous substances at their own
property.
FN1. See Section 111(e) (3), 42 U.S.C. § 9611(e) (3), E#.O.
12580 §§ 2(a), 2(e), 9(i). Short term or emergency responses,
known as removal actions, may be undertaken by the Superfund at
federally owned properties at the discretion of EPA.
The heart of CERCLA rests in its liability scheme, found
primarily in Section 107, which establishes classes of persons who. may
be liable for clean up costs. Liable parties include (1) owners and
operators of facilities; (2) certain prior owners and operators; (3)
generators, i.e., those who arrange for the disposal of waste; and (4)
transporters of waste. 42 U.S.C. § 9607(a). Facility is a
broadly.defined term, including landfills, pits, buildings, vehicles,
and "any site or area where a hazardous substance has been deposited,
stored, disposed of, or placed, or otherwise come to be located." 42
U.S.C. § 9601(9). Consumer products in consumer use are excluded.
Liable parties may be held liable for the costs of removal or
remedial actions, natural resource damages and health assessments, as
each of these terms is used in CERCLA. 42 U.S.C. § 9607(a).
Generally these costs are incurred by a federal or state governmental
entity, which then seeks to recover from liable parties. CERCLA also
permits actions for contribution among and between liable parties. 42
U.S.C. § 9613(f)(1). In such suits, the court is to "allocate
response costs among liable parties using such equitable factors as the
court deems are appropriate." id.
Defenses Available. CERCLA recognizes few defenses. Under
Section 107(b), the only defenses to liability require proof that the
"release or threat of release of a hazardous substance and the damages
resulting therefrom were caused solely by --
- an act of God;
- an act of war;
- an act or omission of a third party other than an employee or agency
of the defendant, or than one whose act or omission occurs in connection
with a contractual relationship, existing directly or indirectly with
the defendant. . ."
To invoke the CERCLA "third party" defense, the liable party must
also demonstrate (1) exercise of "due care with respect to the hazardous
substance concerned" and (2) taking of "precautions against foreseeable
acts or omissions" of possible third parties. See 42 U.S.C. §
9607(b)(3).[FN2]
FN2. Federal agency compliance with EPA's Section 120(h) property
transfer regulations does not constitute a defense to liability for cost
recovery under CERCLA. The liability regime governs when someone else
may seek to hold a party liable for cleanup costs. The property
transfer regulation, on the other hand, does effect the federal
agencies' obligation to clean up property, since the pendency of suits
or claims by third parties is irrelevant to Section 120
responsibilities.
Government "innocent landowner" defense. In 1986, when
Congress amended CERCLA, it supplemented the third party defense to
address the so-called innocent landowner. Concerned that the contracts
for sale and transfer of property would put subsequent purchasers in a
"contractual relationship" that would vitiate the availability of the
third party defense, Congress added detailed definitional requirements
to address such circumstances. Section 101(35) defines "contractual
relationship" to include land transfer arrangements with specified
limitations; a party meeting these limits is, notwithstanding the land
transfer, eligible to invoke the third party defense.
The conditions established in Section 101(35) for the innocent
landowner defense are as follows:
- acquisition of the property "after the disposal or placement of the
hazardous substance on, in, or at the facility," and;
- either:
no knowledge of the hazardous substance, or
"The defendant is a government entity which acquired the facility by
escheat, or through any other involuntary transfer or acquisition, or
through the exercise of eminent domain authority by purchase or
condemnation"
or acquisition of the property by inheritance or bequest,
but;
"if the defendant obtained actual knowledge of the release or
threatened release of a hazardous substance at such facility when the
defendant owned the real property and then subsequently transferred
ownership of the property to another person without disclosing such
knowledge" no defense under Section 107(b) will be available.
Together, Section 107(b) (3), with the definitions in Section
101(35), allows a government entity which acquires through involuntary
means (this includes seizures and forfeitures, which are "involuntary"
to the law enforcement violator) to invoke a defense from liability for
hazardous substance contamination found on real property as a result of
prior owner's activities if that federal agency (1) exercises due care
once it owns the property, (2) secures the property from other third
party actions, and (3) provides notice to any transferee of those
hazardous substance conditions about which it knows.[FN3]
FN3. Steps necessary to meet these conditions will, of course, vary
from site to site.
Section 120 Obligations. In 1986, Congress expressed
particular concern about the slow pace of clean up at major federal
facilities. For the most part, the debate concerned large federal
properties such as military bases and defense production facilities,
nuclear and conventional. CERCLA had, since its enactment in 1980,
included a waiver of sovereign immunity, subjecting federal agencies to
the requirements of the federal statute. However, compliance had been
slow. Congress responded in 1986 with detailed provisions in Section
120, designed to assure that federal facility clean up was made subject
to EPA oversight, and that federal agencies thoroughly inventoried and
reported on hazardous substance practices in their operations.
The Section 120 obligations are organized around reporting of
hazardous waste facilities and subsequent clean up schedules for those
sites posing sufficient threat to warrant inclusion on EPA's National
Priorities List. Thus Sections 120(b) and (c) require federal agencies
to report to EPA, for maintenance on a Federal Agency Hazardous Waste
Compliance Docket, facilities engaged in the storage, treatment or
disposal of hazardous waste (see 42 U.S.C. § 3016); any information
provided in permit applications or other reports required for the
storage, treatment or disposal of hazardous wastes (see 42 U.S.C.
§§ 3005, 3010)[FN4]; and any information required to be reported
when notice is given of a hazardous substance release (see 42 U.S.C.
§ 9603). From this information, EPA is to oversee the conduct of
"preliminary assessments" of the federal properties, and evaluate such
facilities to determine if they should be listed on the National
Priority List. 42 U.S.C. § 9620(b), (c).
FN4. These basic reporting requirements are found in a companion
statute, the Resource Recovery and Conservation Act, addressed briefly
below.
For federal facilities on the National Priority List, Section 120(e)
provides a detailed arrangement for conduct of appropriate remedial
investigations and feasibility studies (the RI/FS) necessary to select a
remedy, and schedules for the conduct of such remedial actions as are
found to be needed. 42 U.S.C. § 9620(e).
Section 120(j) allows the President to issue special orders
exempting Department of Defense and Department of Energy facilities from
any CERCLA requirements, if necessary to protect the national security
interests of the United States. There are conditions on this authority,
including notification to Congress and a limitation of one year, with
the authorization to extend. 42 U.S.C. § 9620(j).
Section 120(h) Requirements. Section 120(h) addresses
property transferred by Federal agencies. The section, which has been
construed in EPA's recent regulations, provides in brief the following:
Subsection (1) requires notice in the contract of sale or transfer of
hazardous substances stored, released or disposed of at federally owned
property; Subsection (2) requires EPA to promulgate regulations
establishing the form of the notice required; Subsection (3) requires
notice in any deed transferring federal property of the hazardous
substances on the property and any remedial action taken. It also
provides that such deed will include a covenant that necessary remedial
action has been undertaken and that the United States will conduct any
additional remedial action found to be necessary after the transfer of
the property.
On its face, Section 120(h) might be read to impose onerous
obligations on federal property owners, resulting in a situation where
the United States would be perpetually responsible for hazardous
substances found on any of its properties, without regard to how long
the property was held or what government function was performed at the
property. It appears from the legislative history of the 1986
amendments, however, that in Section 120 Congress was principally
concerned with federal facilities engaged in waste generating practices.
There is no indication that Congress intended law enforcement agencies,
who come to own property temporarily and in the course of punishing
violations of the law, to carry the burden and expense of perpetual
clean up of such properties. As a result, EPA's regulation construes
Section 120(h) to provide a more reasonable reading, consistent with
legislative purpose.
The preamble to the regulation explains this interpretation:
EPA believes that the concern of Congress in enacting section 120(h) was
with federally owned facilities whose own operations might involve
storage, disposal or release of hazardous substances. The types of
facilities cited in Congressional discussion of section 120 included
military bases, Department of Energy nuclear production facilities, and
other civilian installations. Moreover, nothing in the text or
legislative history of the statute suggests that Congress meant to
require agencies which had not in some manner been responsible for the
storage, release or disposal of hazardous substances to unilaterally
assume the obligation in section 120(h) (3) of remedying the
contamination prior to sale and warranting that contamination that came
to light after sale would also be corrected. In addition, section
120(h)(l) requires the notice to contain information about the type and
quantity of hazardous substance stored, released, or disposed of, and
the time at which such storage, release or disposal took place. It is
unlikely that the agency would be expected to have such detailed
information with respect to an activity which took place before the
agency held the property.
Therefore, it is EPA's belief, in light of the overall statutory scheme,
that section 120(h) (1) was meant to apply where the storage, release,
or disposal referred to in the statute occurred during the time the
property was owned by the Federal government.
55 Fed. Reg. 14210. Consistent with this interpretation, EPA's
regulation requires:
. . . whenever any department, agency, or instrumentality of the United
States enters into any contract for the sale or other transfer of real
property which is owned by the United States and at which, during the
time the property vas owned by the United States, any hazardous
substance was stored for one year or more, known to have been released,
or disposed of, the head of such department, agency, or instrumentality
must include in such contract notice of the type and quantity of such
hazardous substance and notice of the time at which such storage,
release, or disposal took place, to the extent such information is
available on the basis of a complete search of agency files.
55 Fed. Reg. 14212 (emphasis added).
The regulation does not directly address the Section 120(h)(3) deed
and covenant requirement. Although it could be argued that subsection
(h)(3) should be read more broadly than subsection (h) (1)[FN5], we
believe that it should be read in consonance with subsection (h)(1). As
a result, the obligation to include information in the deed, including
warranties with regard to clean up, will cover only those hazardous
substance activities which are subject to the notice requirement of
Section 120(h)(1). On the same reasoning which supports not requiring
agencies to give Section 120 (h)(1) notice of events which did not occur
during their ownership, the statute does not support requiring the
agencies to provide warranties for hazardous waste activities which did
not occur during their ownership.
FN5. The deed must provide information about the nature of hazardous
substance activity, "to the extent such information is available on the
basis of
a complete search of agency files." The covenant is to warrant that "(i)
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 that any additional remedial action found to be
necessary will be conducted by the United States. See 42 U.S.C. §
9620(h)
(3) (A), (B). Since Congress again tied the federal agency's obligations to
a
search of its own files, using language parallel to subsection (h)(1), it is
logical that the obligation to clean up and warrant the clean up applies to
the
same property as the obligation to give notice. A broader reading would
make the
United States perpetually the guarantor of the environmental health of any
property that ever enters government inventories, even if the agency had no
knowledge of the conditions and no obligation to provide notice. It is more
likely that Congress intended governmental responsibility under subsection
120(h)(3) to cover the same property as the notice requirements of
subsection
120(h) (1).
This reading also makes sense since Section 120(h) does not
exculpate federal agencies from CERCLA liability parties under Section
107(a) even where it does not have a notice or covenant responsibility
under Section 120(h), although those circumstances should be rare. Thus,
in the event an agency provides notice and covenants based on a complete
search of its files, but additional information demonstrates other
hazardous substances for which the agency is a responsible party, the
agency may bear liability for cleanup costs incurred.
Relationship of CERCLA Notice Requirements.Although EPA's
regulation limits the burden of notice required of federal agencies
under Section 120(h), federal agencies must take care to assure that
they can invoke the so-called "innocent landowner" defense described
above. In order to do so, notice' of known hazardous substance
activities on federal properties must be provided prior to sale or
transfer. We recommend that Departmental components establish routine
practices of assembling sufficient information to give notice to
prospective purchasers of those hazardous substance activities which the
agency knows have occurred on the property, even where our information
reflects that the hazardous substances were stored, released or disposed
of prior to governmental ownership. Even though the EPA Section 120(h)
regulation might permit an agency to give notice of solely those
hazardous substance activities which occur during governmental
ownership, Section 107(b), as clarified by Section 101(35) mandates that
the governmental entity who seeks to invoke an 'innocent landowner'
defense must provide notice to purchasers of known hazardous substance
activities. For Section 120(h) disclosure, practices during federal
ownership are sufficient; to qualify for the defense, however, any
information about activities prior to federal ownership should also be
disclosed.[FN6]
FN6. For example, property used as a drug lab may be seized with certain
hazardous chemicals on site, which law enforcement officers will dispose of
properly. Information obtained from witnesses or informants may address
where
other drugs were processed, where wastes or bad batches were dumped or other
information about contamination at the site. The information concerning
what we
do with hazardous substances during our ownership is pertinent to the
Section
120(h) requirements. The information concerning previous disposals is
pertinent
to invoking the "innocent landowner" defense and should be disclosed for
that
reason only.
- In sum, while CERCLA Section 120 addresses supplemental
responsibilities for federal agencies, governmental entities must also
observe
their obligations under other sections of CERCLA. Departmental components
should
take the steps necessary to assure that they can invoke the one defense from
liability which Congress made specifically available to the governmental
property
acquirer.[FN7]
FN7. As addressed above, CERCLA subjects federal agencies to potential
suit
from any party who incurs costs as a result of cleaning up hazardous
substance
contamination. Federal agency compliance with Section 120(h) is not a
defense
to claims by these governmental or private entities that they have spent
money
to clean up contamination resulting from governmental property or
activities.
Rather, allegations of non-compliance with the section 120(h) obligations
would
provide a different .cause of action against the federal agency, likely
arising
under the "citizen's suit" provision, 42 U.S.C. § 9659(a)(1).
RCRA BACKGROUND
- While the primary purpose of this memorandum is to advise you of
requirements under CERCLA, federal agencies handling hazardous substances
also
need to be familiar with the companion statute, the Resource Conservation
and
Recovery Act (RCRA), 42 U.S.C. §§ 6901 - 6992. RCRA is designed
generally to manage ongoing activities involving handling of solid and
hazardous
waste. A few provisions are pertinent to this memorandum's discussion of
CERCLA.
Broadly, while the CERCLA provisions addressed herein concerned federal real
property, RCRA concerns itself with the personal property--the hazardous
substances, containers, equipment or other materials.[FN8]
FN8. Under RCRA, sovereign immunity has been waived to state and local
regulation of solid and hazardous waste. Federal agencies must therefore
comply
not only with federal law, but with state and local law as well. See 42
U.S.C.
§ 6961.
- Where federal agencies have hazardous waste on their property, they
will
generally have to comply with RCRA in the handling and disposal of that
waste.
RCRA governs storage, treatment and disposal of hazardous waste, requiring
entities who conduct such activities to have permits. All persons must
assure
that hazardous waste is stored, treated or disposed of at permitted RCRA
facilities. For Department components taking property in the course of law
enforcement efforts, this will generally mean securing and disposing of any
hazardous waste in accordance with RCRA, usually by contracting for
transport and
disposal in a permitted facility. Without going through all of the details
of
RCRA regulation, it is important to note that storage of most hazardous
wastes
at a location for longer than 90 days requires that the facility be
permitted as
a storage facility. As you review Departmental practices, please assure
that
waste materials are being handled lawfully and are not maintained or
disposed of
at unpermitted facilities.
- You should also be aware that federal agencies engaging in hazardous
waste activities may be required to give notice of those activities to EPA.
As
summarized above, RCRA Section 3016 requires federal agencies to maintain an
inventory of sites at which hazardous wastes are stored, treated or
disposed. 42
U.S.C. § 6937. Under these requirements, for example, a federal entity
which
takes real property on which hazardous waste has been stored could, after
the
passage of time, itself become responsible for a RCRA storage facility, and
have
to give notice to EPA.
CONCLUSION
- Department components involved with property on which hazardous
substances are found must consider the potential responsibility under
federal
environmental laws outlined in this memorandum. The recent EPA Federal
Property
Transfer Regulations reflect an effort to reduce the burden that CERCLA
places
on law enforcement agencies. As there are a multitude of specific
circumstances
in which the statutes and regulations are applied, we are happy to continue
to
work with the Department components in applying these laws.
[cited in Criminal Resource Manual 2220] |