This is an update to a 2019 post.

Section 1113 of the Pennsylvania Hazardous Sites Cleanup Act (“HSCA”), 35 Pa. Stat. Ann. § 6020.1113, authorizes settlements of responsible parties’ obligations. The Department of Environmental Protection has used it to enter into prospective purchaser agreements under which a prospective new owner fixes its liability for pre-existing contamination at a site that the new owner wishes to develop.

Two years ago we noted the Environmental Hearing Board’s decision in Delaware RiverkeeperNetwork v. Dep’t of Envt’l Prot’n, EHB Dkt. No. 2018-20-L (Apr. 26, 2019), that held invalid amendments to a PPA between Constitution Drive Partners and DEP. At the time, the lesson of the EHB’s opinion was that prospective purchasers had to attend to the administrative record supporting their PPA, lest a challenge to the agreement succeed based on a sloppy or incomplete record.

Constitution Drive Partners appealed. On March 5, the Commonwealth Court affirmed the EHB’s invalidation of the PPA amendments, but for a subtly different reason with a potentially different (and more concerning) implication. Constitution Drive Partners, LP v. Dep’t of Envt’l Prot’n, No. 643 CD 2019 (Pa. Commw. Ct. Mar. 5, 2021).

The case involved two amendments to a 2005 PPA calling for a defined cleanup of the Bishop Tube site and the grant of liability protection to the prospective purchaser in exchange. The agreement was amended in 2007 and again in 2010. The owner (by then) substantially performed, although the remedy had difficulties. The DEP neglected to publish the proposed amendments until 2017. The Riverkeeper submitted adverse comments, but DEP nevertheless finalized the amendments in 2018 and the Riverkeeper appealed.

Challenges to section 1113 agreements are on the administrative record, rather than de novo as is typical in the EHB. The long delay, failure of one of the remedial systems, rezoning of the property, a lot of remedial work, and other changes were not properly reflected in the record because of the long delay. Accordingly, the EHB held that the finalization of the amendments was arbitrary and capricious in 2018.

The Commonwealth Court reasoned somewhat differently. It held that section 1113 requires notice to all responsible parties and the public before DEP enters into a settlement. The notice must come after the agreement is reduced to writing and before it takes effect. The public must then have 60 days to comment, and DEP must respond to the comments. The notice in this case came after the deal closed and the work was done, so the agreement could not convey liability protection.

In the context of a transaction, publication, a 60-day comment period, and time to respond to comments can be a material delay. But treating the settlement as concluded before that delay can put the prospective purchaser’s protection into question. Prudent parties will be careful with this mechanism.

On April 26, 2019, the Pennsylvania Environmental Hearing Board (EHB) voided two amendments to a prospective purchaser agreement (PPA) for the Bishop Tube Site entered into in 2007 and 2010. Del. Riverkeeper Network v. Dep’t of Envt’l Prot’n, EHB Dkt. No. 2018-020-L (Constitution Drive Partners). The underlying PPA was dated 2005. The Department of Environmental Protection (DEP) failed to issue public notices of the amendments until 2017, and did not respond to comments received until 2018, by which point conditions had changed. DEP failed to make an administrative record that took adequate account of the delay and the changed circumstances.

Prospective purchaser agreements are tools used under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund), 42 U.S.C. §§ 9601-75, and the Pennsylvania Hazardous Sites Cleanup Act (HSCA), 35 Pa. Code §§ 6020.101 to .1305, to enable parties looking to acquire a contaminated site to do so with known cleanup obligations. The EPA website addresses PPAs and other tools generally here.

In Constitution Drive Partners, the EHB reaffirmed the rule that a PPA under HSCA is a settlement agreement subject to the public notice requirements of section 1113. That section calls for the creation of an administrative record to support the PPA consisting of the agreement, the public notice, any comments received, and DEP’s responses to those comments. The PPA (or any other settlement) is not final until DEP has filed those responses to comments.

Section 1113 goes on to make the final PPA – that is, the agreement as supported by the administrative record – appealable to the EHB. That is conventional. All final actions of DEP are appealable to the EHB under the Environmental Hearing Board Act. However, unlike virtually all other actions by DEP, actions under HSCA are not reviewed after a de novo hearing. Instead, the EHB determines whether DEP acted arbitrarily or capriciously based on the administrative record only.

Constitution Drive Partners emphasizes that record review. The record presented on appeal in that case was deficient in that it did not address the delay either procedurally or substantively. For example, the PPA called for installation of a soil vapor extraction system that, apparently, had been installed but had not worked. The record did not deal with those changed conditions to the satisfaction of the EHB.

Constitution Drive Partners presented an extreme and an odd case. The lesson for more ordinary situations, however, is that parties entering into PPAs or subject to any other decision under HSCA must attend to the administrative record. Supplementation is hard. If one anticipates a favorable decision from DEP and opposition from a third party, one should attend to the quality of support in the record. If one anticipates an adverse decision from DEP, then one should get what one can in the record for a later EHB appeal. This is a deviation from conventional Pennsylvania practice, and a potential trap for the unwary.

For more on prospective purchaser agreements, click here.