March 1996

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The BEA
Part 1 of 2: Defining the Limits of Liability

Recent changes in Part 201 of the Michigan Natural Resources and Environmental Protection Act (NREPA), formerly known as Act 307, are contributing to the productive use of once idle contaminated property, by providing potential buyers and lenders with a means for obtaining liability protection.

The mechanism that makes this liability protection possible is the deceptively simple procedure known as a baseline environmental assessment, which consists of an evaluation of the environmental conditions that exist at a site at the time of purchase, occupancy or foreclosure. By defining the existing conditions at a site, it provides a means for distinguishing subsequent contamination from that which previously existed.

Proper compliance with this new procedure and the associated regulations, however, is much more intricate and more complicated than it may initially appear. Although the new Part 201 regulations do provide more liability protection, they do so with a substantial number of additional qualifiers, conditions, and very specific definitions. Failure to clearly understand the meanings and distinctions among key concepts could prove costly, and may even jeopardize the liability protection provided by this new law.

A New Definition of Liability

The previous standard for liability, which was joint, several, and retroactive, has now changed to a standard primarily based on causation. Under the new Part 201 regulations, liability for remediating environmental contamination is imposed on the person(s) who are responsible for (those that caused) the contamination. Specifically, property owners before the effective date of the new Act (June 5, 1995) will be liable unless they can show that they did not cause or contribute to the contamination. Persons acquiring property after the effective date of the Act are now able to protect themselves from liability for existing contamination if they conduct a baseline environmental assessment. In instances where contamination exceeds acceptable cleanup guidelines for residential development, the purchaser would also have to disclose the results of that assessment to the Michigan Department of Environmental Quality (MDEQ) in the form of a Baseline Environmental Assessment (BEA) document, and to subsequent purchasers.

The old Act 307 stipulated that polluters pay, but lacked a mechanism to determine the originator of the contamination. Property owners or operators ended up paying regardless of whether they were responsible for the contamination or not. Now, with adoption of baseline environmental assessments, whoever caused the contamination is liable for cleaning it up. Buyers are no longer liable for contamination that existed on a site or property before they purchased it.

Two Meanings of BEA

The term baseline environmental assessment is often a source of confusion, since it is used interchangeably to mean either the document filed with the MDEQ (known as a BEA), or the all of the different procedures for evaluating the environmental condition of a site or property. Although the findings of a baseline environmental assessment area necessary ingredient of the BEA petition, conducting a baseline environmental assessment is not a sufficient condition for a BEA petition.

The BEA as Procedure

A baseline assessment, as previously stated, is a means of evaluating the environmental conditions which exist at a site or property at the time of purchase, occupancy, or foreclosure, in a way that reasonably defines the existing conditions and circumstances at the facility, so that in the event of a subsequent release, there is a means of distinguishing the new releases.

Depending on the site history and the available information, this could be limited to an historical investigation such as a Phase I, a limited investigation of impacts, or a complete investigation of soils and groundwater impacts, including a determination of off-site migration.

Typically, a baseline environmental assessment will begin with a Phase I assessment, conducted according the current ASTM standard, in order to determine if there is any reason to suspect that the site may be impacted. If the Phase I does not reveal any suspected impacts, then no further action is required. But if reasons are found to suspect past impacts, then the investigation proceeds to a Phase II assessment which involves actual soil and/or groundwater sampling and analysis to determine the nature of the impacts.

If these tests reveal contamination levels below the residential cleanup guidelines set by the MDEQ, then no further action is required, and a BEA petition may not be filed with the MDEQ. However, if the levels of contamination exceed those guidelines, then the site qualifies as a 'facility', and the purchaser must submit a BEA petition to obtain liability protection.

The BEA Document

The BEA petition is a detailed document that is prepared and submitted to the MDEQ using a specific format. The BEA document is only applicable to a site or property that has qualified as a 'facility' (i.e., any area, place or property where a hazardous substance exceeds the residential cleanup criteria). Although a BEA document is distinct from a Phase I Assessment, it relies on the information obtained during the Phase I and Phase II investigations. The MDEQ has established three categories of BEA documents: