Real Property & Environmental Law Alert : New Jersey, New York, Pennsylvania & Delaware Lawyers & Attorneys for Real Estate Development & Environmental Law

Arranger Liability Broadened

The Court, mindful of Burlington Northern’s holding that an entity may qualify as an arranger when it takes intentional steps to dispose of a hazardous substance, broadly interpreted arranger liability under §107(a)(3) of CERCLA to conclude that WSDOT arranged for the disposal of hazardous substances because:

1. WSDOT designed the drainage system at issue with the specific purpose of discharging highway runoff into the environment;
2. WSDOT had knowledge that the runoff contained hazardous substances;
3. there was an actual release of hazardous substances into the environment;
4. WSDOT had control over how the runoff was disposed of because not only did it design the drainage system but it also had the ability to redirect, contain or treat its contaminated runoff.

Whereas most courts examining the issue of arranger liability post-Burlington Northern have narrowed the scope of liability, Judge Bryan took the opposite approach. However, he also concluded that issues of fact precluded him from determining whether WSDOT could properly assert the “federally permitted release” exemption under §107(j) of CERCLA, or whether it could establish the third party defense to liability under §107(b).

Facility Definition Narrowed

In the other opinion, the Court focused on the meaning of “facility” under §107(a)(1) (imposing liability on an owner and operator of a facility) and §107(a)(2), (imposing liability on a person, who at the time of disposal of hazardous substances, owned or operated a facility at which such hazardous substances were disposed). The United States argued that the entire Commencement Bay Site was a facility and that WSDOT was an owner of property within the borders of the Site. WSDOT claimed that the waterways were the facility, which it did not own.

Relying upon U.S. v. Township of Brighton, 153 F.3d 307, 313 (6th Cir. 1998), the Court determined that the bounds of a facility should be defined by the bounds of the contamination. It concluded that the United States’ definition was too broad because it would impose liability on persons not related to the contamination. The Court’s analysis focused upon the following:

1. facility is defined in §101(a) of CERCLA as an “area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located;”
2. the Commencement Bay Site included properties owned by different parties, with no common purpose among the different owners;
3. in order to be a liable party under CERCLA Section 107(a)(1), WSDOT must be “the owner or operator of the facility in which the United States incurred a response cost.” (Slip Opin. At 5).

WSDOT was not the owner or operator of the waterways and although it owned the Tacoma Spur Property, no response costs were incurred on that property, so WSDOT was not found to be a liable party under Section 107(a)(1).

Significantly, Judge Bryan also noted that if the party was only connected factually to a portion of the property, that distinction should be drawn in its divisibility analysis. Slip Opin. at 4.

As to liability under Section 107(a)(2), the Court found that there was a genuine issue of material fact as to whether the hazardous substance, coal tar, was disposed of through the drainage systems on the Tacoma Spur Property.

These rulings are likely to have widespread ramifications in the many river and harbor sites which are pending throughout the United States. And whereas Judge Bryan extended arranger liability under CERCLA to public entities that designed and managed stormwater systems, he narrowly defined a “facility” under CERCLA, and thus, limited the scope of owner/operator liability in such cases. These issues will most definitely be the subject of future litigation.

Irvin M. Freilich is a Director in the Gibbons Real Property & Environmental Department.

The Act Does Not Apply to All Permits

The Act does not apply to other statutes, including the:

• "Keystone Opportunity Zone, Keystone Opportunity Expansion Zone and Keystone Opportunity Improvement Zone Act,"
• "The Underground Utility Line Protection Law," and
• certain other permits issued by the Pennsylvania Department of Transportation.

The Act also does not apply to permits with expiration dates determined by federal law, or to administrative consent orders and enforcement actions for a permit subject to the extension period.

How Long is a Permit Extended?

Under the Act, a permit granted under an applicable statute and having an expiration date after December 31, 2008 may have its expiration date extended until July 1, 2013, regardless of whether the permit was issued before or after the extension period. The Act does not shorten the life of a permit with an expiration date after July 1, 2013.

How Can You Find Out If the Act Applies to Your Permit?

The permit holder can request verification, subject to a fee, from the issuing agency of the existence of a valid permit and its expiration date, but must identify the permit in question and its anticipated expiration date. The issuing agency must tell you in writing within 30 days of receiving your request:

1. whether you have a permit;
2. its expiration date; and
3. stating any issues related to the validity of the permit.

Except in Philadelphia and Pittsburgh, the failure of the issuing agency to respond within 30 days will result in the "deemed affirmation of the existence of the [permit] and the expiration date set forth in the request."

In the City of Philadelphia, in order to exercise its right to extend the permit under the Act, the permit holder must provide the issuing agency with notice of its intent to extend the permit and pay the agency a fee equal to fifty percent of the original application fee, not to exceed $5000. Elsewhere, the issuing agency may charge a fee up to twenty five percent of the original application fee, but no more than $5000, to extend the Permit.

Permits granted pursuant to the MPC are protected from changes in a "zoning, subdivision or other governing ordinance or plan," such that those changes will not affect the permit holder’s right to begin or complete the activities authorized by the permit during the extension period. The extension period is further extended for the length of litigation, including appeals, concerning permits issued under the MPC that prevent the completion of the work authorized by the permit.

The Act brings Pennsylvania into line with New Jersey which enacted its own permit extension legislation in 2008. The Act gives needed flexibility and time to developers who may be facing financial challenges in the current economy. At a minimum, permit holders should consider verifying the viability of permits, and extending them as required, now so they will be in a position to proceed when market conditions warrant.

Alfred R. Fuscaldo is a Director in the Gibbons Real Property and Environmental Department.