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Brownfield Tenants Gain CERCLA Liability Protection

Good News:  Brownfield Tenants Gain CERCLA Liability Protection

In December 2012, an Environmental Protection Agency (EPA) Guidance Memo set out a new EPA enforcement policy.  In sum, on a discretionary basis, the EPA will consider extending to tenants protections currently available to bona fide prospective purchasers ("BFPP") of contaminated sites. 

Under the guidance there are two ways in which a tenant may have this "derivative BFPP" status.  First, a tenant may gain derivative BFPP status if the existing owner of the contaminated property is a BFPP.  Second, under specific circumstances, where the tenant leases property from an non-BFPP owner, BFPP liability protection may be allowed where the tenant meets the BFPP requirements itself.

As might be expected, there are conditions to the protection: for example, where the property owner is a BFPP, a condition to the tenant's derivative BFPP status is that the tenant does not impede the cleanup remedy. And, if the owner loses its BFPP status through no fault of the tenant, the tenant may preserve the derivative BFPP status if it meets the BFPP requirements itself.

While the guidance responded to potential liability concerns surrounding development of renewable energy projects on contaminated property, it has the potential to significantly broaden CERCLA liability protection for tenants occupying a wide variety of development projects on contaminated property.