Finally- an explanation for the CERCLA Indoor Air Exclusion and its implications for ASTM E1527

For years, lawyers and environmental consultants have puzzled over the meaning of the indoor air exclusion of CERCLA. The definition of release excludes any releases which (1) results in exposure to persons solely within a workplace and (2) with respect to a claim which such persons may assert against their employer.

This was a puzzling provision since it refers to exposure to persons yet CERCLA does not provide any remedy for personal injury. Over time, the second clause of the exclusion was ignored so that many consultants came to believe that indoor was not covered by a phase 1 unless the client specifically requested such coverage. Indeed, ASTM E1527 provides that indoor air quality along with radon, lead-based paint and asbestos are non-scope items.

Adding to the confusion is that ASTM E1527 also provides that a recognized environmental condition can include releases into building structures. The uncertainy over the indoor air exclusion was largely ignored until EPA and state remedial programs began focusing on vapor intrusion. Now that vapor intrusion is increasingly becoming a popular tool for toxic tort lawyers, environmental consultants are growing concerned that they may become subject to malpractice actions or breach of contract actions for failing to assess VI during their phase 1 reports.

While doing research on my upcoming article ”Playing Poker With Pollution” which calls for revising the CERCLA reporting obligations and sampling of RECs for owners to satisfy their AAI obligations, I came across language in the preamble to the original section 103 reporting obligations that appears to shed light on the meaning of the indoor air exclusion.

According to EPA, the indoor exclusion was a relic of an earlier House bill that had contemplated that CERCLA would provide a remedy for personal injury. Apparently this section was left in the legislation after Congress decided to drop the provision providing for a remedy for personal injury due to exposure to releases of hazardous substances. This also explains the second clause of the exclusion referring to workers compensation claims. The old bill would have provided relief to person injured in the workplace from releases of hazardous substances unless they could file a workers compensation claim to avoid duplicate claims.

So, the answer to the decades-long answer is that releases of hazardous substances into indoor air should be covered by phase 1 reports. Of course, whether the applicable standard is the OSHA PELs or levels established for state remedial programs is a discussion for another post.

Shopping Center Owner Liable for Vapor Intrusion from Dry Cleaner Tenant

In what may be one of the most far-reaching RCRA cases yet, the federal district court for the district of Nevada ruled that the owner of a shopping center who simply leased space to a dry cleaner could be liable under RCRA’s citizen suit provision.

In Voggenthaler v Maryland Square LLC, residents living near a shopping center filed an action under section 7002 of RCRA seeking an order compelling the shopping center owner and dry cleaner to remediate a PCE plume that had migrated from the shopping center to the residential neighborhood. The plaintiffs had to establish that the defendants ”contributed to” the past or current disposal of hazardous wastes that ”may” pose an imminent and substantial endangerment.

The property owner argued that it was a passive owner and that the ”contributing to” language required active human conduct. However, the court noted that the owner had received rent, was entitled to 6% of the gross sales of the dry cleaner under the lease and owned the pipes and drains below the dry cleaner. The court said the owner had participated in the financial operation of the dry cleaner and therefore had contributed to the handling and disposal of the PCE.

The defendant also argued that the plume did not present an imminent or substantial endangement because the plume was stable, groundwater was not used for drinking water and was vertically isolated from potable water supplies, and that the concentrations were below levels that could result in unacceptable concentrations of vapors. However, the court said RCRA was to be broadly interpreted and the plaintiff only had to establish that the contamination ”may” present a measurable but substantial potential risk of harm. The court also found it somewhat amusing that the owner/defendants had filed their own RCRA action in 2002 against the dry cleaner claiming the PCE was presenting an imminent and substantial endangerment.

This case could have significant implications for property managers, potential purchasers and lenders considering foreclosing on shopping centers that are located near residential properties. The plume was discovered a decade ago during due diligence and the property apparently changed hands several times since the discovery of the plume. During this period the defendants did not take any action to mitigate the plume and the state DEP only started to focus on the site during the past few years when vapor intrusion became a potential concern.

The next step is now for the court to determine what injunctive relief to order.

According to Realpoint, $9 billion in commercial mortgage-backed-securities deals will be impacted by the Gulf Spill-mainly lost revenue

Did you know that the Oil Pollution Act 9OPA) has a secured creditor exemption and that the Coast Guard issued its own AAI rule for oil-related facilities?

The Coast Guard and Maritime Transportation Act of 2004 (CGMTA) added both a secured creditor exemption that parallels that of CERCLA and an innocent landowner defense. However, OPA does not contain a BFPP defense.

The Coast Guard published its own all appropriate inquiries (AAI) rule in 2008 that is similar to EPA’s AAI but does differ in some respects. The rule does say that E1527 will satisfy the OPA AAI.

The Coast Guard AAI rule can be important to owners or operators of bulk storage facilities as well as property owners with petroleum pipelines that cross their land since OPA is not limited to spills from oil wells or tankers but any oil spills that could impact navigable waters such as streams and creeks. If you can float a canoe on the water, OPA could apply.

Buyers Walk Away from contaminated development site

So it is 2004 and you are a community bank that is approached by a politically-connected developer to build 86 homes in Wright Township, PA. TCE is discovered in the groundwater migrating from a former Foster Wheeler site and has impacted the drinking water of 37 homes in the area where the developer plans to build the homes.

Undaunted, you extend a $4.5M construction loan guaranteed by the principals of the developer, including two county judges who are later indicted on racketeering charges and an atorney who later pleads guilty to paying the judges $770K in kickbacks. The developer does not tell purchasers about the contaminated groundwater. In 2007, Foster Wheeler agrees to a modest class action settlement with the existing homeowners.

Four extensions later, only seven homes are built and only one is occupied. Other purchasers are walking away from their mortgages because the homes are now worth only half of the purchase price because of the contamination. The developer had defaulted on its loan. The site is now proposed for listing on the NPL and the state is working with the Agency for Toxic Substances and Disease Registery to perform vapor intrusion analysis. And there is no evidence the bank did any due diligence.

Foreclosing Bank Not LIable Under Vt Law

The Vermont Supreme Court recently affirmed a holding that a purchaser could rely on a negligently prepared phase 1 to assert the state innocent purchaser defense. In an earlier round of litigation, the lower court had ruled that the foreclosing bank that held title for seven months was not liable because the state had failed to prove that there had been a release during the time that the bank held title.

In State v Howe Cleaners, the property had been used as a dry cleaner from 1974-1996. The property was then conveyed to purchaser who converted it to a bakery. When the bakery failed, Granite Savings Bank and Trust (Granite) foreclosed and sold the property seven months later to a pizzeria. The sale was ”as is” and before acquiring the property, the purchaser reviewed a phase 1 prepared for the bank.

Sometime after taking title, an EPA inspector spoke with former employees of the dry cleaner and visited the property. When he raised some floor boards, he observed two tanks in the crawl space that had apparently been used to store PCE and that had leaked.

Vt then implemented response actions and sought cost recovery under the state Waste Management Act. The state argued that the successor to Granite, TD BankNorth, was liable as a person who owned the site at the time of a release. TD BankNorth argued it could not be liable because the state did not have any evidence that there had been a release during its ownership. The state responded that it did not have to prove there was a new release but simply migration of an initial release.

The trial court found that the CERCLA caselaw was not dispositive because liability under CERCLA was triggered by ownership at time of ”disposal” whereas liability under the state Waste Management Act was linked to a ”release”. Moreover, the court found that the state definition of release was narrower than CERCLA and seemed to require an actual spill or discharge during ownership.

Because there was a triable issue of fact if there was a release during the ownership of the bank, the court denied the bank’s motion for summary judgment. The bank then sought to depose the state’s expert on the timing of the release. However, the state refused to make its expert available. After several conferences with the court, the state still declined to make its staff available. As a result, the court issued a sanction prohibiting the state from introducing evidence of the timing of the release which effectively resulted in judgment for the bank.

The case illustrates the importance of understanding the scope of the state superfund or hazardous waste law as well as the extent of the secured creditor exemption. In other states, the bank could have been liable as a past owner and the failure of its consultant to identify the tanks could have exposed the bank to liability.

1 day ago

Rumors are that OMG has rejected the questionnaire EPA proposed to use for its new numerical stormwater standards and that DOJ has found flaws with the EPA process. This could mean that EPA may have to repeat the rulemaking. stay tuned.