On June 5, 2018 the Superfund Task Force held another of its eight scheduled public listening sessions intended to solicit public and stakeholder input relating to recommendations contained in the Task Force’s July 2017 report. The listening session focused on Recommendation 22, which suggests exploring Environmental Liability Transfer (ELT) approaches and other risk management tools.
While Recommendation 22 addresses a variety of risk management approaches Potentially Responsible Parties (PRPs) might use to transfer responsibilities, the listening session honed in on ELTs specifically. Participants in the listening session were able to follow along with a presentation from Greg Wall of OSRE’s Regional Support Division, Erik Hanselman of OSRE’s Policy and Program Evaluation Division, and Charlie Howland from the Region 3 Office of Regional Counsel, who described the general function of ELTs and offered details from two case-studies where ELTs were used effectively to spur cleanup by private parties at sites with unique challenges.
As detailed by the presenters during the session, an ELT is a mechanism whereby PRPs contractually transfer their cleanup response obligations to a specialized third party for a negotiated price. The upside to the public of such arrangements is that they encourage cleanup by specialized private parties who are particularly motivated to cleanup and redevelop properties as expeditiously as possible, all of which helps to conserve Superfund resources. Meanwhile, PRPs benefit from the use of ELTs because they allow PRPs to shift cleanup response obligations for a fixed cost and reduce environmental reserves on their balance sheets, which affords them greater ability to focus on their core business activities. Because PRPs cannot, under section 107(e)(1) of CERCLA, contract away their underlying liability, the value of any ELT will be a function of the indemnity received by the PRP and the financial viability of the entity assuming the obligations under the ELT.
The presenters offered two case studies. The first was the Bethlehem Steel Sparrow’s Point Steel Mill, where the use of ELTs jump-started the cleanup and redevelopment of a site with extensive soil and ground water contamination that had been subject to a series of successive bankruptcies since 2003. The second was Mattiace, a 1.9 acre site in Nassau County, New York with 84 PRPs, most of whom had arranger liability, that was subject to a 1991 Record of Decision (ROD) from the EPA. In 2003, pursuant to a consent decree with the EPA and numerous PRPs, an ELT entity assumed responsibility for implementation of the remedial action at the site and the EPA agreed to “look first” to the ELT entity for any non-compliance.
Through the listening session and submitted comments, EPA is hoping to identify:
- Specific types of ELT transactions and tools private parties are using to allocate financial risks associated with site cleanups;
- The types of sites that are particularly amenable to ELT and related approaches;
- The factors that make an ELT approach more, or less, useful at a site; and
- Whether, based on the experience of stakeholders and the public, EPA should encourage the use and development of ELT transactions and similar tools to facilitate cleanups.
As part of the listening session, EPA took comments from registered participants. While a number of participants were registered to speak, only two commenters actually presented. Their remarks included:
- Parties should be permitted to employ a “Portfolio Approach” whereby entities with many liabilities can package and sell those liabilities to third-party remedial entities.
- EPA should provide model language for “Look First Agreements” and incorporate the look first approach into comfort letters.
- EPA should support creative ways to de-list portions of cleanup sites with less environmental risk to give parties greater flexibility to negotiate ELTs.
EPA is collecting input from stakeholders and practitioners regarding their experience with ELTs or related risk management approaches and intends to analyze the feedback to develop ELT approaches to facilitate cleanups. Written remarks can be emailed to OSRE-SFTF-listening-session@EPA.gov until June 26, 2018.
For more background on the Superfund Task Force, its report, and the listening sessions, see the May 29, 2018 blog by Susanne Peticolas. The blog by Jordan Asch on the Recommendation 27 Listening Session, which focused on new tools to encourage private investment in Superfund sites, is available here.
Stay tuned as the Gibbons Environmental Department continues to monitor the Superfund Task Force listening sessions.