A Lesson Learned – Important considerations for your commercial real estate due diligence checklist

Two commercial property owners find themselves responsible for decades-old environmental contamination because they failed to conduct proper environmental due diligence before their purchase and they bought short-tail, claims-made insurance policies with a claims-in-process exclusion that did not offer any protection against long-tail environmental claims.

Under federal and state environmental laws, people who buy a contaminated property are strictly liable for the investigation and remediation of every molecule of environmental contamination on the property from the beginning of time, no matter how it got there and no matter how much it costs to clean it up, until they achieve regulatory closure.

If, however, a buyer can establish that he is a bona fide prospective purchaser, then he may be able to buy the property free and clear of such liability, provided that he meets certain conditions, such as not impeding remedial efforts and not aggravating the spread of contamination.

In an article that I recently published, I cover the issues these property owners faced, discuss what happened to the purchasers and provide my thoughts on how the outcome could have been different.

EPA Publishes the Hazardous Waste Generator Improvements Rule

The Environmental Protection Agency recently published the Hazardous Waste Generator Improvements Rule (“HWGIR”), offering improvements to the Resource Conservation and Recovery Act’s (“RCRA”) Hazardous Waste Generator Regulatory program enacted in 1980. The new rule brings over 60 changes, which are intended to clarify existing requirements, increase flexibility and improve the rule’s usability by the regulating community. I invite you to read an article that I recently published that summarizes a few of the more significant changes.

EPA Announces Final Ecological Effects Test Guidelines (Series 850) Under TSCA, FIFRA and FFDCA

On Dec. 29, 2016, EPA’s Office of Chemical Safety and Pollution Prevention (OCSPP) announced the availability of new final test guidelines in Series 850 Group A, pertaining to measuring the Ecological Effects of chemicals on Aquatic and Sediment-dwelling Fauna and Aquatic Microcosms. The new test guidelines include revised standards as well as several name changes to the Group A sub-categories. OCSPP’s changes to the guidelines will affect the registration of pesticides under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), the setting of tolerances/tolerance exemptions for pesticide residues under the Federal Food, Drug and Cosmetic Act (FFDCA), and EPA’s decision-making process in determining potential regulation of industrial chemicals under the Toxic Substances Control Act (TSCA).

OCSPP’s test guidelines serve as a compendium of accepted scientific methodologies and protocols for providing data to inform regulatory decisions regarding pesticides and chemical substances under FIFRA, FFDCA, and TSCA. The test guidelines are used by EPA, the public and companies that submit data to EPA. As guidance documents, the guidelines are not binding on EPA or any other outside parties, and EPA is allowed to depart from the test guidelines where circumstances warrant and without prior notice. Nonetheless, the procedures contained in the test guidelines are still recommended by EPA for generating the data that are the subject of the test guidelines (although EPA recognizes that departures may be appropriate in specific situations). Alternatives to the test guidelines may also be proposed by members of the regulated community, and EPA will assess them for appropriateness on a case-by-case basis.

Regulated companies, and in particular, pesticide manufacturers, should take note of EPA’s new guidelines when performing testing of chemicals under FIFRA, FFDCA, and TSCA.

You can access the Federal Register Notice here.

EPA Removes 72 Pesticide Inert Ingredients from its Approved List

EPA recently identified 72 inert ingredients that it is removing from its approved list for use in pesticide products. While removal of these ingredients from the approved inert ingredient list does not, by itself, restrict their use in a pesticide product, it does change the way a pesticide registration containing such inert ingredients will be processed in the future.  Once removed from the approved list, an inert ingredient is considered a “new” inert ingredient, which must be approved by EPA before it can be included in a registered pesticide product. The type of data needed to evaluate a “new” inert ingredient may include, among other things, studies to evaluate potential carcinogenicity, adverse reproductive effects, developmental toxicity, genotoxicity, and environmental effects associated with any chemical that is persistent or bioaccumulative. As such, removal of these inert ingredients from the approved list will increase the cost (and time) for companies seeking to use them in pesticides in the future.

While EPA’s records indicate that none of the 72 inert ingredients are used in currently-registered pesticide products, pesticide manufacturers should nonetheless confirm that their products do not contain such ingredients. In addition, companies seeking in the future to register pesticide products containing any of the 72 inert ingredients should plan accordingly to develop the necessary data to demonstrate to EPA’s satisfaction that the use of such inert ingredients is safe.

A summary of all 72 inert ingredients removed from EPA’s approved list can be accessed here.

U.S. EPA Adds Vapor Intrusion to the Superfund Hazard Ranking System, But Will It Last?

U.S. EPA Administrator Gina McCarthy signed the rulemaking to add Subsurface Intrusion (i.e., vapor intrusion and contaminated groundwater intrusion) to the Superfund Hazard Ranking System on Dec. 7, 2016. EPA issued a statement that it does not intend to systematically re-evaluate previously scored sites, but there is nothing to preclude the re-scoring of such sites to be eligible for the Superfund National Priorities List. Here are the links for the Federal Register Pre-Publication Notice, Frequently Asked Questions, and the Interim Subsurface Intrusion SCDM Values for Eligible Substances Table.

I fully expect EPA to continue to push new regulations before the Trump-Pence Administration takes office. However, on his first day in office as Governor, Mike Pence issued a “Regulatory Moratorium” ordering that all agencies suspend rulemaking action on any proposed rules for which a notice of intent to adopt a rule or other notice was not properly published before his first day as Governor. Executive Order 13-03. The purpose of the administrative-rulemaking moratorium was to “reduc[e] the regulatory burden [and] promote citizens’ freedom to engage in individual, family, and business pursuits [and] permit [the Office of Management and Budget] to devote resources to a comprehensive evaluation and rigorous cost benefit analysis of existing administrative rules.” It’s fair to expect that President Trump will issue a similar regulatory moratorium, especially given his announcement of Oklahoma Attorney General E. Scott Pruitt to lead EPA. Attorney General Pruitt is nationally well-known for what he has described as fighting EPA’s “leadership’s activist agenda and refusal to follow the law.”

$115,000 in Restitution and Guilty Plea to Resolve Asbestos Charges

2013 Investors LLC and two individuals recently pled guilty in Spokane County Superior Court to multiple violations of the Washington Clean Air Act. Another employee pled guilty in August and was sentenced to 60 days in jail.

The charges relate to renovations at the former 89-room Spokane House Hotel. Despite the presence of asbestos in the hotel, the defendants did not obtain the proper asbestos surveys or city permits to do their renovation work. Investigators became aware of the violations when one of them happened to drive by the hotel and observed the significant extent of the renovation. Investigators found piles of debris containing asbestos sitting out in the open air. Some of these debris piles were exposed to the open air for months, including during times when the area experienced high winds of over 40 miles per hour, which were capable of further spreading the asbestos fibers into the nearby community.

Not only does the enforcement action illustrate the importance of obtaining necessary state and local permits prior to renovation work involving asbestos, but also demonstrates the risk of significant project delays that can occur when contractors and sub-contractors are not adequately vetted or supervised to ensure they are complying with relevant regulations. While the customer may not be legally liable or responsible for its contractor’s violations, it may nonetheless be significantly impacted by project delays and unwanted publicity caused by its contractor’s violations.

You can read more about the case at the Washington State Office of the Attorney General website.

$900,000 Penalty and Felony Guilty Plea to Resolve Wastewater Dumping Charges

On Oct. 26, 2016, A&L Cesspool Service Corporation (A&L) pled guilty to charges in federal court in Brooklyn, New York for violating the Clean Water Act. A&L was alleged to have dumped waste removed from blocked sewer lines into manholes flowing directly into the Gowanus Canal and other waterways in New York City.

The Clean Water Act makes it a crime for anyone to knowingly dump pollutants into a waterway of the United States without a permit or in violation of a permit.  As one of the largest cesspool service providers in New York City, A&L held a permit from the New York City Department of Environmental Protection allowing it to dispose of liquid waste removed from sewer lines at designated wastewater treatment facilities. In violation of this permit, A&L employees were alleged to have repeatedly dumped liquid waste at other locations, including into various manholes throughout New York City.

The penalty and felony guilty plea are a reminder that regulated companies have a vested interest in adequately supervising and training employees to comply with environmental regulations.

You can read more about the case at the Department of Justice’s website.

EPA’s Environmental Justice 2020 Agenda Reflects the “Flint Effect”

EPA released its Environmental Justice 2020 Action Agenda on Oct. 27. The Agenda details EPA’s strategic plan for 2016-2020 to further implement and integrate “environmental justice” considerations into all of EPA’s programs. Much of EPA’s proposed Agenda appears tailored to respond to the recent drinking water crisis in Flint, Mich. The regulated community should take note of potential heightened scrutiny and enforcement by EPA in the areas identified in the proposed Agenda, including: (1) lead exposure; (2) drinking water contamination; (3) air quality; and (4) hazardous waste sites.

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Taft Welcomes Michael C. Mentel

Mentel_Mike_HiresTaft is pleased to announce that Michael C. Mentel has joined the firm’s Columbus office as a partner in the Environmental group.

Mike is the former Columbus City Council President and has represented a wide variety of clients in both private and public sectors for nearly 30 years. He focuses his practice in the areas of environmental law, renewable energy, regulatory compliance, government relations and contract law.

Read more here.

EPA Region 7 Reaches $112,684 Settlement with Albaugh, LLC for Alleged FIFRA Violations

EPA and Albaugh, LLC recently reached a $112,684 settlement to resolve allegations that Albaugh violated the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) by distributing pesticides that were misbranded and contained ingredients that did not match the products’ confidential statements of formulation. The significant penalty underscores EPA’s continued focus on pursuing pesticide registrants for violations of FIFRA – with a particular emphasis on noncompliant pesticide labels. Furthermore, the fact that the alleged violations were the result of a 2013 inspection of Albaugh’s St. Joseph, Missouri facility is a reminder to regulated entities that enforcement may occur years after a violation is discovered. Accordingly, maintaining relevant documentation and institutional knowledge after an inspection can be critical for responding to or defending a future enforcement action.

FIFRA prohibits the distribution or sale of misbranded pesticides. A pesticide is “misbranded” under FIFRA Section 2(q)(1)(A) if its labeling is false or misleading in any particular. This includes, among other things, when a pesticide’s label does not contain necessary directions for use (FIFRA Section 2(q)(1)(F)) and when a label does not contain a warning or caution statement which may be necessary to protect human health and the environment (FIFRA Section 2(q)(1)(G)). FIFRA Section 12(a)(1)(C) also makes it unlawful for any person to distribute or sell a registered pesticide which has a composition that is different than the composition in its confidential statement of formula.

Albaugh’s alleged violations were discovered during an inspection of Albaugh’s pesticide products that were fully packaged and ready for shipment. The inspector photographed product labels, collected certified copies of product labels, took samples of product for analysis, and reviewed and copied invoices for the sale and shipment of products. EPA later used these documents to substantiate its allegations against Albaugh.

A copy of the signed Consent Agreement and Final Order can be accessed here.