[Federal Register Volume 60, Number 127 (Monday, July 3, 1995)]
[Notices]
[Pages 34790-34792]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16283]




[[Page 34789]]

_______________________________________________________________________

Part VI





Environmental Protection Agency





_______________________________________________________________________



Announcement and Publication of Final Policy Toward Owners of Property 
Containing Contaminated Aquifers and Guidance on Agreements with 
Prospective Purchasers of Contaminated Property and Model Prospective 
Purchaser Agreement; Notices

  Federal Register / Vol. 60, No. 127 / Monday, July 3, 1995 / Notices 
  

[[Page 34790]]


ENVIRONMENTAL PROTECTION AGENCY

[FRL-5251-7]


Announcement and Publication of Final Policy Toward Owners of 
Property Containing Contaminated Aquifers

SUMMARY: This policy states the agency's position that, subject to 
certain conditions, where hazardous substances have come to be located 
on or in a property solely as the result of subsurface migration in an 
aquifer from a source or sources outside the property, EPA will not 
take enforcement actions under CERCLA, 42 U.S.C. 106 and 107, against 
the owner of such property to require the performance of response 
actions or the payment of response costs.

FURTHER INFORMATION CONTACT: Ellen Kandell, Policy and Program 
Evaluation Division, Office of Site Remediation Enforcement, 401 M St. 
S.W., 2273-G, Washington, D.C. 20460. Phone: 703-603-8996, Fax: 703-
603-9117

    Dated: June 21, 1995.
Bruce M. Diamond,
Director, Office of Site Remediation Enforcement.
POLICY TOWARD OWNERS OF PROPERTY CONTAINING CONTAMINATED AQUIFERS

I. Statement of Policy

    Based on the Agency's interpretation of CERCLA, existing EPA 
guidance, and EPA's Superfund program expertise, it is the Agency's 
position that where hazardous substances have come to be located on or 
in a property solely as the result of subsurface migration in an 
aquifer from a source or sources outside the property, EPA will not 
take enforcement action against the owner of such property to require 
the performance of response actions or the payment of response 
costs.\1\ Further, EPA may consider de minimis settlements under 
Section 122(g)(1)(B) of CERCLA where necessary to protect such 
landowners from contribution suits.

    \1\ By this Policy, EPA does not intend to compromise or affect 
any right it possesses to seek access pursuant to Section 104(e) of 
CERCLA.
---------------------------------------------------------------------------

    This Policy is subject to the following conditions:
    (A) The landowner did not cause, contribute to, or exacerbate the 
release or threat of release of any hazardous substances, through an 
act or omission. The failure to take affirmative steps to mitigate or 
address groundwater contamination, such as conducting groundwater 
investigations or installing groundwater remediation systems, will not, 
in the absence of exceptional circumstances, constitute an ``omission'' 
by the landowner within the meaning of this condition. This policy may 
not apply where the property contains a groundwater well, the existence 
or operation of which may affect the migration of contamination in the 
affected aquifer. These cases will require fact-specific analysis.
    (B) The person that caused the release is not an agent or employee 
of the landowner, and was not in a direct or indirect contractual 
relationship with the landowner. In cases where the landowner acquired 
the property, directly or indirectly, from a person that caused the 
original release, application of this Policy will require an analysis 
of whether, at the time the property was acquired, the landowner knew 
or had reason to know of the disposal of hazardous substances that gave 
rise to the contamination in the aquifer.
    (C) There is no alternative basis for the landowner's liability for 
the contaminated aquifer, such as liability as a generator or 
transporter under Section 107(a) (3) or (4) of CERCLA, or liability as 
an owner by reason of the existence of a source of contamination on the 
landowner's property other than the contamination that migrated in an 
aquifer from a source outside the property.
    In appropriate circumstances, EPA may exercise its discretion under 
Section 122(g)(1)(B) to consider de minimis settlements with a 
landowner that satisfies the foregoing conditions. Such settlements may 
be particularly appropriate where such a landowner has been sued or 
threatened with contribution suits. EPA's Guidance on Landowner 
Liability and Section 122(g)(1)(B) De Minimis Settlements \2\ should be 
consulted in connection with this circumstance.

    \2\ See Guidance on Landowner Liability Under Section 107(a)(1) 
of CERCLA, De Minimis Settlements under Section 122(g)(1)(B) of 
CERCLA, and Settlements with Prospective Purchasers of Contaminated 
Property, OSWER Directive No. 9835.9, June 6, 1989, 54 FR 34235 
(August 18, 1989) (hereinafter ``Guidance on Landowner Liability and 
Section 122(g)(1)(B) De Minimis Settlements'').
---------------------------------------------------------------------------

    In exchange for a covenant not to sue from the Agency and statutory 
contribution protection under Sections 113(f)(2) and 122(g)(5) of 
CERCLA, EPA may seek consideration from the landowner,3 such as 
the landowner's full cooperation (including but not limited to 
providing access) in evaluating the need for and implementing 
institutional controls or any other response actions at the site.4

    \3\ A more complete discussion of the appropriate consideration 
that may be sought under Section 122(g)(1)(B) settlements is 
contained in Section IV.B.3.a. of Guidance on Landowner Liability 
and Section 122(g)(1)(B) De Minimis Settlements, supra note 2.
    \4\ The Agency has developed guidance which explains the 
authorities and procedures by which EPA obtains access or 
information. See Entry and Continued Access under CERCLA, OSWER 
Directive #9829.2, June 5, 1987; Guidance on Use and Enforcement of 
CERCLA Information Requests and Administrative Subpoenas, OSWER 
Directive 9834.4-A, August 25, 1988.
---------------------------------------------------------------------------

    The Agency intends to use its Section 104(e) information gathering 
authority under CERCLA, 42 U.S.C. 9604(e), as appropriate, to verify 
the presence of the conditions under which the Policy would be applied, 
unless the source of contamination and lack of culpability of the 
property owner are otherwise clear.5 Accordingly, failure by an 
property owner to provide certified responses to EPA's information 
requests may, by itself, be grounds for EPA to decline to offer a 
Section 122(g)(1)(B) de minimis settlement.

    \5\ See Guidance on Landowner Liability and Section 122(g)(1)(B) 
De Minimis Settlements, supra note 2, for an outline of the types of 
information which should be provided by the landowner to support a 
request for a de minimis settlement.
---------------------------------------------------------------------------

II. Discussion

A. Background

    Nationwide there are numerous sites that are the subject of 
response actions under CERCLA due to contaminated groundwater. 
Approximately 85% of the sites on the National Priorities List have 
some degree of groundwater contamination. Natural subsurface processes, 
such as infiltration and groundwater flow, often carry contaminants 
relatively large distances from their sources. Thus, the plume of 
contaminated groundwater may be relatively long and/or extend over a 
large area. For this reason, it is sometimes difficult to determine the 
source or sources of such contamination.
    Any person owning property to which contamination has migrated in 
an aquifer faces potential uncertainty with respect to liability as an 
``owner'' under Section 107(a)(1) of CERCLA, 42 U.S.C. 9601(a)(1), even 
where such owner has had no participation in the handling of hazardous 
substances, and has taken no action to exacerbate the release.
    Some owners of property containing contaminated aquifers have 
experienced difficulty selling these properties or obtaining financing 
for development because prospective purchasers and lenders sometimes 
view the potential for CERCLA liability as a significant risk. The 
Agency is concerned that such unintended effects are having an adverse 
impact on property owners and 

[[Page 34791]]
on the ability of communities to develop or redevelop property.
    EPA is issuing this policy to address the concerns raised by owners 
of property to which contamination has migrated in an aquifer, as well 
as lenders and prospective purchasers of such property. The intent of 
this policy is to lower the barriers to transfer of such property by 
reducing uncertainty regarding the possibility that EPA or third 
parties may take actions against these landowners.

B. Existing Agency Policy

    This policy is related to other guidance that EPA has issued. The 
Agency has previously published guidance on issues of landowner 
liability and de minimis landowner settlements.6 Moreover, in 
other EPA policies, EPA has asserted its enforcement discretion in 
determining which parties not to pursue.7

    \6\ See Guidance on Landowner Liability and Section 122(g)(1)(B) 
De Minimis Settlements, supra note 2. This guidance analyzes the 
language in Sections 107(b)(3) and 122(g)(1)(B) of CERCLA.
    \7\ See, e.g., Policy Towards Owners of Residential Property at 
Superfund Sites, OSWER Directive #9834.6, (July 3, 1991) 
(hereinafter ``Residential Property Owners Policy'') (stating Agency 
policy not to take enforcement actions against an owner of 
residential property unless homeowner's activities led to a 
release); National Priorities List for Uncontrolled Hazardous Waste 
Sites, 60 FR 20330, 20333 (April 25, 1995). In this notice the 
Residential Property Owners Policy was applied to ``* * * 
residential property owners whose property is located above a 
groundwater plume that is proposed to or on the NPL, where the 
residential property owner did not contribute to the contamination 
of the site.'' See also, Interim Policy on CERCLA Settlements 
Involving Municipalities or Municipal Waste, OSWER Directive No. 
9834.13, (December 6, 1989).
C. Basis for the Policy

1. The Section 107(b)(3) Defense
    Section 107(a)(1) of CERCLA imposes liability on an owner or 
operator of a ``facility'' from which there is a release or threatened 
release of a hazardous substance.8 A ``facility'' is defined under 
Section 101(9) as including any ``area where a hazardous substance has 
* * * come to be located.'' The standard of liability imposed under 
Section 107 is strict, and the government need not prove that an owner 
contributed to the release in any manner to establish a prima facie 
case.9 However, Section 107(b)(3) provides an affirmative defense 
to liability where the release or threat of release was caused solely 
by ``an act or omission of a third party other than an employee or 
agent of the defendant, or than one whose act or omission occurs in 
connection with a contractual relationship existing directly or 
indirectly with the defendant * * *'' In order to invoke this defense, 
the defendant must additionally establish, by a preponderance of the 
evidence, that ``(a) he exercised due care with respect to the 
hazardous substance concerned taking into consideration the 
characteristics of such hazardous substance, in light of all relevant 
facts and circumstances, and (b) he took precautions against 
foreseeable acts or omissions of any such third party and the 
consequences that could foreseeably result from such acts or 
omissions.'' 42 U.S.C. Sec. 9607(b)(3).

    \8\ EPA has taken the position that lessees may be ``owners'' 
for purposes of liability. See Guidance on Landowner Liability and 
Section 122(g)(1)(B) De Minimis Settlements, supra note 2, footnote 
10.
    \9\ See, e.g., U.S. v. R.W. Meyer, Inc., 889 F.2d 1497, 1507 
(6th Cir. 1989)(``CERCLA contemplates strict liability for 
landowners'').
---------------------------------------------------------------------------

    a. Due Care and Precautions. An owner of property may typically be 
unable to detect by reasonable means when or whether hazardous 
substances have come to be located beneath the property due to 
subsurface migration in an aquifer from a source or sources outside the 
property. Based on EPA's interpretation of CERCLA, it is the Agency's 
position that where the release or threat of release was caused solely 
by an unrelated third party at a location off the landowner's property, 
the landowner is not required to take any affirmative steps to 
investigate or prevent the activities that gave rise to the original 
release in order to satisfy the ``due care'' or ``precautions'' 
elements of the Section 107(b)(3) defense.
    Not only is groundwater contamination difficult to detect, but once 
identified, it is often difficult to mitigate or address without 
extensive studies and pump and treat remediation. Based on EPA's 
technical experience and the Agency's interpretation of CERCLA, EPA has 
concluded that the failure by such an owner to take affirmative 
actions, such as conducting groundwater investigations or installing 
groundwater remediation systems, is not, in the absence of exceptional 
circumstances, a failure to exercise ``due care'' or ``take 
precautions'' within the meaning of Section 107(b)(3).
    The latter conclusion does not necessarily apply in the case where 
the property contains a groundwater well and the existence or operation 
of this well may affect the migration of contamination in the affected 
aquifer. In such a case, application of the ``due care'' and 
``precautions'' tests of Section 107(b)(3) and evaluation of the 
appropriateness of a de minimis settlement under Section 122(g)(1)(B) 
require a fact-specific analysis of the circumstances, including, but 
not limited to, the impact of the well and/or the owner's use of it on 
the spread or containment of the contamination in the aquifer. 
Accordingly, this Policy does not apply in the case where the property 
contains a groundwater well, the existence or operation of which may 
affect the migration of contamination in the affected aquifer. In such 
a case, however, the landowner may choose to assert a Section 107(b)(3) 
defense, depending on the case specific facts and circumstances, and 
EPA may still exercise its discretion to enter into a Section 
122(g)(1)(B) de minimis settlement.
    b. Contractual Relationship. The Section 107(b)(3) defense is not 
available if the act or omission causing the release occurred in 
connection with a direct or indirect contractual relationship between 
the defendant and the third party that caused the release. Under 
Section 101(35)(A) of CERCLA, a ``contractual relationship'' for this 
purpose includes any land contract, deed, or instrument transferring 
title to or possession of real property, except in limited specified 
circumstances. Thus, application of the defense in the circumstances 
addressed by this Policy requires an examination of whether the 
landowner acquired the property, directly or indirectly, from a person 
that caused the original release. An example of this scenario would be 
where the property at issue was originally part of a larger parcel 
owned by the person that caused the release. If the larger parcel was 
subsequently subdivided, and the subdivided property was eventually 
sold to the current landowner, there may be a direct or indirect 
``contractual relationship'' between the person that caused the release 
and the current landowner.
    Even if the landowner acquired the property, directly or 
indirectly, from a person that caused the original release, this may or 
may not constitute a ``contractual relationship'' within the meaning of 
Section 101(35)(A), precluding the availability of the Section 
107(b)(3) defense. Land contracts or instruments transferring title are 
not considered ``contractual relationships'' if the land was acquired 
after the disposal or placement of the hazardous substances on, in or 
at the facility under Section 101(35)(A) and the landowner establishes, 
pursuant to Section 101(35)(A)(i), that, at the time of the 
acquisition, the landowner ``did not know and had no reason to know 
that any hazardous substance which is the subject of the release * * * 
was 

[[Page 34792]]
disposed of on, in, or at the facility.'' 10 Thus, in the 
subdivision scenario described above, the current landowner might still 
qualify for the Section 107(b)(3) defense if he or she did not know or 
have reason to know that the original landowner had disposed of 
hazardous substances elsewhere on the larger parcel.

    \10\ Section 101(35)(A) also excludes from the definition of 
``contractual relationship'' certain acquisitions of property by 
government entities and certain acquisitions by inheritance or 
bequest, so long as the other requirements of Section 101(35)(A) are 
met. See 42 U.S.C. 101(35)(A) (ii) and (iii).
---------------------------------------------------------------------------

2. Settlements Under Section 122(g)(1)(B)
    To address concerns that strict liability under Section 107(a)(1) 
could cause inequitable results with respect to landowners who had not 
been involved in hazardous substance disposal activities, Congress 
authorized the Agency to enter into de minimis settlements with certain 
property owners under Section 122(g)(1)(B) of CERCLA, 42 U.S.C. 9622 
(g)(1)(B). Under this Section, when the Agency determines that a 
settlement is ``practicable and in the public interest,'' it ``shall as 
promptly as possible reach a final settlement'' if the settlement 
``involves only a minor portion of the response costs at the facility 
concerned'' and the Agency determines that the potentially responsible 
party: ``(i) is an owner of the real property on or in which the 
facility is located; (ii) did not conduct or permit the generation, 
transportation, storage, treatment or disposal of any hazardous 
substance at the facility; and (iii) did not contribute to the release 
or threat of release * * * through any act or omission.'' 11

    \11\ A detailed discussion of each of these components of 
Section 122(g)(1)(B) and guidance on structuring settlements under 
this Section are provided in the Guidance on Landowner Liability and 
Section 122(g)(1)(B) De Minimis Settlements, supra note 2.
---------------------------------------------------------------------------

    The requirements which must be satisfied in order for the Agency to 
consider a settlement with landowners under the de minimis settlement 
provisions of Section 122(g)(1)(B) are substantially the same as the 
elements which must be proved at trial in order for a landowner to 
establish a third party defense under Section 107(b)(3), as described 
above.12

    \12\ Id.
---------------------------------------------------------------------------

D. Use of the Policy

    This Policy does not constitute rulemaking by the Agency and is not 
intended and cannot be relied on to create a right or a benefit, 
substantive or procedural, enforceable at law or in equity, by any 
person. Furthermore, the Agency may take action at variance with this 
Policy.
    For further information concerning this Policy, please contact 
Ellen Kandell in the Office of Site Remediation Enforcement at (703) 
603-8996.

[FR Doc. 95-16283 Filed 6-30-95; 8:45 am]
BILLING CODE 6560-50-P