Search results for: prospective purchaser

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.

Someone who buys contaminated real estate can sometimes avoid liability under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund), 42 U.S.C. Sections 9601-75, if that purchaser conducts “all appropriate inquiry” before the purchase. If the inquiry does not uncover a reason to believe that the site is contaminated, then the purchaser may be “innocent.” See 42 U.S.C. Section 9601(35). If the inquiry does uncover contamination and the purchaser takes certain other steps, the buyer may be a “bona fide prospective purchaser.” See Section 9601(40). A “Phase I environmental site assessment” is the colloquial term for the inquiry that constitutes “all appropriate inquiry.” A similar defense exists under the Pennsylvania Hazardous Sites Cleanup Act, 35 Pa. Stat. Ann. Section 6020.701(b).

Read “Does a Negligent Phase I Result in Loss of the CERCLA Innocent Purchaser Defense?” authored by David G. Mandelbaum on The Legal Intelligencer website. (subscription)

Click here to download the PDF.

*The opinions expressed in this column are those of the author and do not necessarily reflect the views of Greenberg Traurig or its clients.

As part of the 2025 Executive Budget, New York’s legislature has passed significant amendments to New York’s Environmental Conservation Law concerning the Inactive Hazardous Waste Disposal Site Remedial Program—commonly referred to as the State Superfund program. It is anticipated that the governor will sign the legislation. The proposed amendments (S.8308-C/A.8808-C) would align New York’s state-level liability framework more closely with core components of federal CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601–9675. 

The new law would strengthen enforcement authority and emphasizes environmental justice (EJ) priorities. Notably, it codifies a state analog to CERCLA’s “bona fide prospective purchaser” (BFPP) defense—previously absent from New York statutory law. This legislative package marks a departure from the governor’s initial proposal and signals a broader evolution of the State Superfund program. Property owners, prospective purchasers, and others should carefully assess how these changes affect liability exposure and the steps necessary to qualify for liability protections.

Revising Liability Standards and Introducing New Defenses

The bill broadens the definition of “responsible person,” to include any owner, operator, disposer, arranger, or transporter—excluding only Brownfield Cleanup Program volunteers—as liable for hazardous waste disposal at a site. Without carve-outs, this expansive language would capture “innocent owners” and prospective purchasers of contaminated sites who had no role in the contamination. While the definition aligns with federal CERCLA, the governor’s initial January 2025 proposal did not include CERCLA-style defenses, potentially complicating the sale of contaminated properties. The law, as-passed, now provides for a state BFPP safe harbor.  Since 2002, federal CERCLA law has recognized that a party can maintain BFPP status to avoid potential liability for the purchase of a contaminated site so long as certain statutory criteria are met. New York’s version would extend similar protections to good-faith buyers who conduct “all appropriate inquiries” and fulfill continuing care obligations. This marks a significant improvement over New York’s vague common law “innocent owner” defense, which was largely derived from Navigation Law oil spill cases, offering greater clarity for purchasers navigating contaminated site transactions.

Shifts in Enforcement and Procedural Architecture

The new legislation also rejects an earlier proposal authorizing the DEC commissioner to issue unilateral cleanup orders, akin to EPA’s power under CERCLA § 106. Instead, the bill introduces a summary abatement mechanism modeled on NY ECL § 71-301, under which the commissioner may issue an order finding an imminent danger to health or welfare of the people or environment. If a party fails to comply or refuses to enter a remedial program the DEC may refer the matter to the attorney general for injunctive relief or cost recovery. Orders may be challenged administratively and, if upheld, via an Article 78 proceeding. The legislation leaves unchanged the DEC’s ability to issue notices of potential liability, pursue consent orders, or undertake cleanups and seek cost recovery through litigation. The bill also raises civil penalties significantly—to $65,000 to $125,000 per day for continuing violations—bringing them closer to federal levels.

Environmental Justice Considerations

The bill enhances the role of local governments in identifying potential inactive hazardous waste sites, particularly within disadvantaged communities (DACs). DEC must now consider these referrals in prioritizing state-funded cleanups. The statute directs state Superfund dollars—not voluntary cleanup incentives—to Class 1 and 2 sites located in DACs, marking a policy shift that favors direct state remediation in EJ areas. Again, tying into developments at the federal level that have mostly abandoned prior administrations’ focus on DACs, New York law now expressly compels the prioritization of cleanups in DACs, giving the state primacy in the protection of these communities. 

GT Insights

This bill marks a significant step toward aligning New York’s Superfund program with federal CERCLA, particularly by its codifying BFPP protections. Previously, good-faith purchasers had limited options—either enter a Brownfield agreement, BFPP administrative consent order, or litigate under an ill-defined “innocent owner” defense. The new framework would provide clearer, more accessible liability relief. The adoption of established summary abatement authority seeks to balance the need for administrative enforcement tools without overreaching through unilateral orders. The structured abatement referral process, combined with heightened penalties, enhances enforcement while allowing for both administrative and judicial review.  This new framework should strengthen the state’s leverage over noncompliant actors without risking over-reliance on heavy-handed unilateral orders in ordinary agency disputes. Finally, the mandated prioritization of Class 1 and 2 cleanups in DACs signals a state-led commitment to EJ—positioning New York as the primary regulator of that space amid inconsistent federal policy.

From vapor intrusion systems to rooftop solar; green building to pollution legal liability insurance, environmental and real estate go hand-in-hand. Environmental issues are routine in all types of real estate transactions, no matter the size, location, or nature of the property and can potentially impact the land (including subsurface), the building, or both. Many of these impacts are captured within the due diligence period, but as a precaution it is important for real estate attorneys and practitioners to lend a keen eye to the intricacies of environmental issues, and take the time to evaluate the site and formulate a plan for any necessary remediation or alternative long-term solutions. In the Delaware River Valley, most parcels present some site contamination risk, but these properties have always presented unique opportunities for developers. Over the past two years, the potential of these properties has been further incentivized through Federal and state programs, increasing the ability of communities and investors to make “lemonade” out of real estate “lemons.”

One such federal program, the Opportunity Zone Program, was created and enacted by Congress through the Tax Cuts and Jobs Act in 2017. The program aims to address nationally imbalanced economic recovery in low income areas by offering tax incentives for investment to simulate long-term private sector investment. By offering these incentives to private investors to develop within a designated “Opportunity Zone,” the program is designed to facilitate improved infrastructure while spurring job and economic growth in hopes that it will lead to long-term investment and development in economically-depressed areas. These incentives are given with the expectation that growth stimulation in economically distressed communities will be targeted using private investment rather than taxpayer money. Since the first Opportunity Zone was designated in April 2018, the program has grown to over 8,700 sites within the United States and its territories. Pennsylvania, Delaware, and New Jersey account for 486 of those sites with 82 sites designated in Philadelphia

According to the PIDC, Philadelphia’s public-private economic development corporation, when an investor or developer chooses a project located in one of Philadelphia’s Opportunity Zones, they can also access existing local incentives to support business growth and development including a 10-year real estate tax abatement for new construction and renovations of residential and commercial property zones known as the Keystone Opportunity Zone. This incentive provides substantial relief from state and local taxes for qualified businesses located on Commonwealth-designated parcels of land, and flexible financing from the PIDC.

While Opportunity Zones are not designated based on contamination, environmental risk is certainly worth evaluating when considering investment and development within an Opportunity Zone. These sites often present elevated risk due to historic use, limited enforcement of environmental regulations, and/or the prohibitive financial investment required to maintain infrastructure. As investors and developers begin to explore the value of investing in Opportunity Zones thorough environmental diligence is essential.

Environmental due diligence is the process of assessing environmental conditions at a property to identify potential environmental liabilities prior to acquisition. The process can include Phase I and Phase II Environmental Site Assessments as well as a review of any number of relevant documents including, but certainly not limited to, permits, sampling data, and tank testing results. Completing sufficient due diligence serves several purposes including establishing statutory defenses under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), enabling the mitigation of risks through contract or insurance, developing a more fulsome understanding of the condition of the property before redevelopment, and satisfying lenders in order to obtain commercial loans. If the diligence process reveals a contamination issue, the property may also be eligible for certain benefits and incentives under the state or Federal brownfields programs.

For those who are unfamiliar, a “brownfield” is a property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. It is estimated that there are more than 450,000 sites in the United States. Last year, in March 2018, the Brownfields Utilization, Investment, and Local Development (BUILD) Act was enacted as part of the Consolidated Appropriations Act of 2018. The BUILD Act provides additional protections and incentives for brownfield redevelopment while prioritizing the development of renewable energy and energy-efficient projects. The BUILD Act did not significantly alter the landscape for brownfields purchasing or leasing but it did provide a handful of helpful updates. Those include a petroleum brownfield enhancement, the expansion of the definition of a bona fide prospective purchaser to include lessees of property, the expansion of eligibility for nonprofit organizations, increased funding for remediation grants and multipurpose grants, brownfields funding and technical assistance grants, and several new ranking criteria focusing on renewable energy, energy efficient projects, and revitalization of waterfront property, all of which will now be considered in grant applications.

Many investors and developers are reluctant to emphasize environmental due diligence due to concerns that any identified contamination could be a deal killer. Join us for a happy hour discussion of real estate, environmental law, and how to make a lemon of a property into lemonade, on March 14 at Greenberg Traurig’s Philadelphia office, 1717 Arch Street. We will host The Pipeline, a professional development group that connects women in retail real estate.

Register here by using the password “Pipelinemarch.”

On the morning of Dec. 25, the News Analysis on page A1 of the New York Times led off with this cheery holiday thought: “Sometime in the last couple of months, predictions of a major economic downturn or recession in 2019 went from being a crank view to the conventional wisdom.” At the front end of the Great Recession, we offered some ways in which businesses and others could protect themselves against environmental liabilities flowing from bad economic times. See “Anticipating Environmental Issues in an Economic Downturn,” Natural Resources & Environment, Vol. 24, No. 1 at 33 (Summer 2009). Many of those observations still hold.

Primarily, entities have often managed their environmental liabilities to clean up historic contamination or to maintain current compliance through agreements. Some may be direct: one party agrees to indemnify another party. Others may be indirect: the regulator agrees to seek compliance from one party first and the other party only as a backup. See “Managing Environmental Obligations: Tracking ‘Environmental Debtors,’” 35 Pa. L. Weekly 196 (Feb. 28, 2012), posted on this blog here.

Those arrangements collapse if the party with the environmental obligation cannot or will not perform due to other financial stress. The problem can be as simple as the new owner failing to pay the electric bill to power the pumps on a groundwater pumping system or allowing its housekeeping to lapse.

Now may be a time to inventory the environmental “debts” one is owed. If the debtor seems fragile, one may want to consider one’s options.

One option that is more common now is excess of indemnity insurance coverage. Rather than insist that that new owner somehow secure its obligations, you can insure against its default. It is a tool in the box if not new, then more commonly used, since 2009. Excess of indemnity approaches can insure over first-party performance obligations or more conventional third-party claims such as bodily injury and property damage causes of action. In cases where responsible parties have assumed cleanup obligations under a consent decree or administrative order on consent, the insurance can safeguard a prospective purchaser or lender from the risks associated with the responsible party’s default.

URL

Continue Reading SiteLinksTest