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U.S. EPA Guidance Memorandum Clarifies Applicability of CERCLA Bona Fide Prospective Purchaser Liability Exemption to Tenants

12.01.2009

On January 14, 2009, the United States Environmental Protection Agency (“U.S. EPA”) issued to its Regional Administrators an enforcement discretion guidance memorandum entitled Enforcement Discretion Guidance Regarding the Applicability of the Bona Fide Prospective Purchaser Definition in CERCLA § 101(40) to Tenants (“Guidance Memorandum”). The Guidance Memorandum instructs the U.S. EPA’s Regions on how the U.S. EPA intends to exercise its enforcement discretion with regard to the applicability of the Bona Fide Prospective Purchaser (“BFPP”) liability exemption under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., to the following categories of tenants: (1) tenants whose lease gives sufficient indicia of ownership to be considered an “owner” and who meets certain BFPP requirements and obligations; and (2) tenants of owners who are BFPPs.

The Guidance Memorandum provides that where a tenant has sufficient indicia of ownership to be considered the “owner” of a contaminated property (e.g., a long-term lease), the U.S. EPA will exercise its enforcement discretion and consider the tenant a BFPP, provided that the tenant complies with the threshold requirements and on-going obligations applicable to a person acquiring actual control over the property. The Guidance Memorandum states that a tenant must comply with the requirements set forth under CERCLA §§ 101(40)(A)-(H) and 107(r)(1) in order to be considered a BFPP by the U.S. EPA. Specifically, the Guidance Memorandum indicates that a tenant with sufficient indicia of ownership must satisfy the following requirements in order for the U.S. EPA to consider the tenant a BFPP: (1) enters into the lease agreement after January 11, 2002; (2) does not dispose of hazardous substances at the property; (3) conducts all appropriate inquiries into the previous ownership and uses of the property prior to executing the lease; (4) provides legally required notices; (5) takes reasonable steps with respect to hazardous substance releases; (6) provides cooperation, assistance and access to the property; (7) complies with land use restrictions and institutional controls; (8) complies with information requests and administrative subpoenas; (9) is not affiliated with a liable party at the leased property; and (10) does not impede the performance of a response action or natural resources restoration at the property.

The Guidance Memorandum also clarifies the applicability of “derivative” BFPP status to tenants. Under the BFPP definition provided in CERCLA § 101(40), a BFPP includes the “tenant of a person” who qualifies as a BFPP. The U.S. EPA states that such derivative BFPP status applies to a tenant so long as the property owner maintains its BFPP status and the tenant does not dispose of hazardous substances at the facility or impede the performance of a response action or natural resource restoration. According to the Guidance Memorandum, if a tenant qualifies for derivative BFPP status and the owner loses its BFPP status through no fault of the tenant, the U.S. EPA may exercise its enforcement discretion not to pursue the tenant under CERCLA § 107(a)(1) for remediation and removal costs. The U.S. EPA may exercise its enforcement discretion in this scenario if the tenant complies with the following requirements: (1) does not dispose of hazardous substances on the property; (2) provides legally required notices; (3) takes reasonable steps with respect to hazardous substance releases; (4) provides cooperation, assistance and access; (5) complies with land use restrictions and institutional controls; (6) complies with information requests and administrative subpoenas; and (7) does not impede any response action or natural resource restoration.

Memorandum is available online at: The Guidance
http://www.epa.gov/compliance/resources/policies/cleanup/superfund/bfpp-tenant-mem.pdf.

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