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In a tortured journey commenced by a broad coalition of community-based housing and civil rights advocacy groups under the leadership of Senator Gil Cedillo (D-Los Angeles), the California Legislature decisively rejected efforts to conform California’s joint and several environmental liability laws to the Federal Small Business Liability Relief and Brownfields Revitalization Act of 2002.
Instead, it imposed full cleanup obligations on prospective purchasers who qualified for federal liability relief as bona fide prospective purchasers, innocent purchasers or contiguous land owners. There are several differences between the complex new California brownfield legislation and the federal liability reforms enacted in 2002.
Properties Covered by AB 389
The first significant difference between the federal and California brownfield
reforms is that, while the federal liability protections are available to new
owners of any facility at which a hazardous substances release has occurred,
eligibility under AB 389 includes several significant limitations.
Under AB 389, properties are ineligible if they are listed on the federal National Priorities List of Superfund sites or listed by the California Department of Toxic Substances Control (DTSC) as priority hazardous substances release sites.
Also ineligible are properties solely impacted by a petroleum release from an underground storage tank that are eligible for reimbursement from the California Storage Tank Cleanup Fund. Of the remaining universe of sites, the properties must be located in an urban infill area.
Parties Eligible for Liability Protection
Like the federal brownfield reforms, AB 389 covers three categories of property
owners afforded liability protections: Bona fide prospective purchasers (BFPPs)
of property known to be contaminated at the time of acquisition; innocent purchasers
of contaminated property understood to be clean at the time of acquisition;
and owners of property adjacent to contaminated property. However, California
imposes far greater cleanup obligations on each category of property owner as
a condition to receiving immunity.
Scope of Immunity
Also of concern are California’s multitude of liability statutes along
with the overlapping jurisdiction of multiple state and local agencies to regulate
California site cleanups.
In AB 389, advocates for brownfield cleanup lost the political battle to include comprehensive references to all California joint, several and retroactive liability schemes similar to the liability protection for lenders and judiciaries that California adopted in 1996.
As a result, there is no liability relief for all state and local statutes, regulations and ordinances. For example, AB 389 expressly acknowledges that it does not affect the existing authority of a redevelopment agency to compel owners to complete comprehensive cleanups (or pay for such cleanups).
All three categories of parties eligible for limited immunity must comply with the same set of conditions. This is unlike federal law, which places higher burdens on BFPPs than on contiguous property owners and innocent purchasers.
AB 389’s inclusion of contiguous property owners in the same category as innocent purchasers and BFPPs is particularly noteworthy. It effectively increases compliance obligations on contiguous property owners beyond those established under pre-existing statutes, even though they have generally not been held liable for contamination that migrates onto their property from other sources.
Procedural Requirements for Agency
Approvals
AB 389 also responds to some of the criticisms leveled against both the Superfund
review and approval process. The result is a new, hybrid process with many features
that affect real estate transactions as well as site investigation and remedy
activities. Under this new process, participation in AB 389 is wholly voluntary.
Any party seeking immunity under AB 389 must first enter into an agreement to prepare and obtain agency approval of a site assessment. Agency approval is also required for response action plans and their implementation for sites that require cleanup. Without such an agreement, no immunity is conferred.
The city (or county for unincorporated areas) in which the property is located must also be notified of the proposed AB 389 agreement before it is finalized, which requires the pre-closing involvement of local government as a new transactional requirement for parties seeking AB 389 coverage.
Both the DTSC and the Regional Water Quality Control Board (RWQCB) may serve as environmental oversight agencies. Either may enter into an agreement with an owner seeking coverage under AB 389. Regardless of which agency serves as the lead oversight agency, each must apply the substantive standards applicable to both agencies in approving a response plan remedy.
Other Liability Mechanisms
Given the significant limitations in AB 389, there was a concerted effort to
assure that this statute would not be construed as a limitation on the pre-enactment
Protective Purchaser Agreements or other brownfield regulatory tools that have
long been implemented administratively by DTSC and the RWQCBs.
As of January 2005, no decisions were made to abandon any of these existing regulatory tools, but clearly some stakeholders expect that AB 389 will become the primary regulatory path forward for California’s brownfields.
Alfred Fraijo Jr. is an associate at Beveridge & Diamond. Jennifer Hernandez chairs Beveridge & Diamond’s Project Development Practice Group.