Relief For Contaminated Propertyby
Original Publication Date: January 1996
Major changes in Michigan's "Polluters Pay Law" (also known as Act 307 or the Michigan Environmental Response Act, MERA) will provide relief from expensive and time consuming remediation for many property owners. Two changes in the Law will be of particular interest to owners of contaminated property; they include protection for landowners that did not cause the contamination, and more lenient clean-up guidelines for landowners required to remediate.
However, changes in the new Law are also important for purchasers, and for owners of property that has not been contaminated. The new Law establishes protection from future liability for purchasers that follow the prescribed procedure for inspecting property prior to purchase. In addition, it contains new procedures for notifying the Michigan Department of Natural Resources (MDNR) in the event of a release to the environment, and establishes new clean-up criteria for remediations.
Assessing Liability
One of the most significant changes to the former Act 307 concerns the liability of lenders and property owners. The current standard for liability, which is joint, several, and retroactive, will change to a standard based on causation. Under the new Act, liability for response activities necessary to address environmental contamination will be 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 will be liable only if it can be shown that they caused or contributed to the contamination. Persons acquiring property after the effective date of the Act will be able to protect themselves from liability for existing contamination if they conduct a baseline environmental assessment, and disclose the results of that assessment to the MDNR.
In addition, exemption from liability for lenders has been extended to any person that loans money for a property purchase, and other persons acting as fiduciaries. This protection would apply as long as the lender did not participate in the management or control of the facility before becoming a fiduciary.
Procedures for Liability Protection
The exact content of an acceptable baseline environmental assessment is not included in the Act, but the MDNR has agreed to issue guidance in the near future. It will most likely include a combination of the procedures contained in the Phase I Site Assessments (as defined by the American Society of Testing and Materials (ASTM) guidelines) and Site Evaluation programs currently provided by qualified environmental consulting firms.
A basic Phase I assessment should include a review of a site's past ownership and uses, any improvements and facilities located on the property, and current use of the property as well as its compliance with environmental laws. The Phase I inquiry looks for any indications of hazardous substances (i.e. asbestos or lead-based paints), petroleum products, underground storage tanks, or PCB electrical equipment on the site. The assessment should generally identify all site conditions that indicate the advisability of further investigation or conclude that no further investigation is deemed necessary.
Many sources of inquiry are standard and "readily available" such as: title search, aerial photographs, Sanborn maps, soil surveys, topographic maps, state and federal regulatory databases and a review of state and local records. However, while sources of inquiry are generally standard, the availability of information depends on the degree of inquiry and the persistence of the consultant. Changes in state and local regulatory personnel and in departmental policies often make it very difficult for a consultant to obtain site information, unless he or she is willing to look beyond the standard sources of information.
The scope of the Site Evaluation will vary, depending on the findings in the Phase I Site Assessment. In general, the Site Evaluation will include the collection of four to eight surface and shallow soil samples to determine the nature or extent or any impacts caused by surface releases of regulated compounds. Sometimes, especially for large or older releases, this phase of an investigation will include the installation and sampling of groundwater monitoring wells. The location of these samples will be determined by site history, observations of current surface conditions, and knowledge of local hydrogeological conditions.
The results of these baseline assessments are required to be submitted to the MDNR, but the MDNR is not required to take any action on the findings of the assessment. However, a purchaser may request that the MDNR review the assessment and determine if it satisfies the liability exemption. As part of this review, the MDNR would issue a written response to the assessment for a fee of $750. This "$750 insurance policy" will undoubtedly become a standard part of any pre-purchase assessment.
Assigning Responsibility
The new law will require the owner/operator of a property that he or she knows is contaminated, but for which he or she has no liability, to comply with all of the following guidelines:
For responsible parties, the new provision of the law will require an affirmative duty to "diligently" remediate contamination beyond clean-up guidelines. It is still unclear how diligent that effort must be in order to comply with this provision.
Response activities will now be required to be implemented regardless of whether or not the property owner has obtained the prior approval of the DNR. The DNR has the option to approve remedial action plans (RAPs) that do not meet the letter of the law, but which would still be protective of public health, safety, or welfare of the environment.
Remediating the Site
Clean up standards will no longer be based on the Type A (background levels), Type B (risk based, chemical specific) or Type C (risk based, site specific) scheme in the current regulations. Instead, all sites will be categorized by reuse criteria. The new clean-up standards will be based on "residential", "recreational", "commercial", and "industrial" uses. Residential sites would have to be cleaned up so that they would be suitable for any intended future use (possibly equivalent to current Type A or B) while other sites would have to be cleaned up to a level consistent with their particular intended future use (possibly equivalent to the current Generic Type C criteria). In addition, two subcategories of sites, "limited" and "unlimited" will be available. The limited category will indicate that exposure controls (such as paving or deed restrictions) will be necessary, while the unlimited category will indicate that the property meets the criteria without any additional controls.
Given the new classification scheme, the first steps in a successful remediation of an impacted site will be to establish the objectives of the remediation based on current site usage, and to assess potential future site usage in order to establish clean-up targets. If the site requires remediation after the objectives of the remediation and remediation targets have been established, the next step will be to identify a cost effective method to achieve those objectives and targets. The evaluation of remediation methods should consider both the initial installation costs and the annual costs in order to minimize the impact on business operations. After the remediation method has been selected the Remedial Action Plan (RAP) would be prepared and implemented. One objective of the RAP should be to minimize impacts to current site operation. For long term remediations, the program would then switch to daily operation and maintenance, tasks that can be completed by the property owners staff after minimal training. The final step is sample collection to document the effectiveness of the remediation.
Based on new toxicological risk assessment, the clean-up criteria are proposed to become less stringent. For example, the risk factor for carcinogens will go from 1 in 1,000,000 to 1 in 100,000, permitting a higher level of contaminant to remain on-site. This will result in more lenient remediation targets, increasing the existing clean-up levels by a factor of 10 for carcinogens and a factor of 5 for non-carcinogens for most, but not all, listed compounds.
Taking Advantage of the New Act
For owners of contaminated property, the new Act provides more flexible and realistic remediation guidelines. For those owners that have been waiting to return property to a marketable condition, this is the time to assess site impacts and determine if the site can benefit from the new provisions of the Act. If impacts at a site still exceed the guidelines for the intended use of the property, now is the time to retain a qualified environmental consulting firm to develop and implement a remediation program.
For potential property purchasers, the standard Phase I Site Assessment should be completed as the minimum liability protection. Some sites will require soils or groundwater sampling to establish baseline site conditions, but that requirement can be determined during the Phase I Assessment.
The reliability of any Phase I Assessment however depends on the qualifications, tenacity and thoroughness of the individual conducting the assessment. Since the quality of individual consultants varies, so does the dependability of their Phase I assessment reports. Consequently, a property owner still needs to be vigilant when selecting the individual consultant or firm to conduct a site assessment.