EPA Issues Revised Enforcement Guidance Regarding Tenant Liability Under CERCLA’s Bona Fide Prospective Purchaser Provision

Late last year, the United States Environmental Protection Agency (“EPA”) issued Revised Enforcement Guidance Regarding the Treatment of Tenants under the Federal Comprehensive Environmental Response, Compensation, and Liability Act’s (“CERCLA”) Bona Fide Prospective Purchaser Provision.  CERCLA generally provides that the owner and operator of a facility from which there is a release or a threatened release of a hazardous substance which causes the incurrence of response costs, is liable for cleanup costs without regard to fault.  Therefore, an owner or operator of contaminated properties is a potentially liable party under CERCLA.  However, CERCLA provides statutory liability protection for certain owners or operators of property, called Bona Fide Prospective Purchasers (“BFPPs”). 

A BFPP is a person (or the tenant of a person) that acquires ownership of property after January 11, 2002 and can establish the following:

1. that all disposal of hazardous substances at the facility occurred prior to acquisition;
2. the person conducted all appropriate inquiry (“AAI”) into the previous ownership and uses of the facility;
3. the person provides certain legally required notices;
4. the person takes reasonable steps with respect to hazardous substance releases;
5. the person provides cooperation, assistance and access to EPA and/or the remediating party;
6. the person complies with land use restrictions and institutional controls;
7. the person complies with information requests and administrative subpoenas; and
8. the person is not potentially liable for response costs at the facility or “affiliated” with any such person.

Tenants may derive BFPP status from an owner who satisfies the BFPP criteria.  The tenant remains a BFPP and is protected from CERCLA liability as long as the owner maintains BFPP status, provided the Tenant does not impede the performance of a response action or natural resource restoration.  Further, as long as the owner maintains compliance with the BFPP criteria, the tenant who has derived BFPP status does not have any independent duty to carry out those responsibilities (such as conducting AAI).  However, if the owner loses its BFPP status, whether by its own action or inaction, or that of the tenant, EPA’s guidance would hold that the tenant would no longer have derivative BFPP status. 

The EPA acknowledges in its guidance that due to its self-implementing process, as a practical matter, it may be difficult for a tenant to know with certainty whether the owner has qualified for and continues to maintain BFPP status.  Thus, it’s good practice for tenants with or seeking to obtain derivative BFPP status to independently verify and/or evaluate whether the BFPP criteria are being met in order to assess their own status as a BFPP.  Additionally, where appropriate, the tenant may seek to protect its BFPP status through the lease agreement.

Tenants may also independently assert BFPP status where the owner is not a BFPP.  The EPA states that it will exercise its enforcement discretion on a site specific basis to treat the tenant as a BFPP when a tenant itself meets all of the BFPP provisions in CERCLA.  As such, whether the tenant intends to obtain its BFPP status derivatively or independently, a tenant should review existing environmental assessments, investigations and/or remedial action reports in order to assess what, if anything, a tenant must do to obtain its BFPP status. 

A link to USEPA’s “Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision,” dated December 5, 2012 is available here.