On December 1, 2021, the Virginia Department of Environmental Quality (“VDEQ”) announced via a notice on its Brownfields website that it had stopped accepting bona fide potential purchase requests (“BFPP”) and ‘other “comfort letters” for an indefinite period. of time. These letters of intent had been an important tool available to potential buyers of industrial and other contaminated properties to help limit their liability for existing environmental contamination. Ironically, it was the popularity of the program that led to its suspension. VDEQ’s notice details how the number of applications has grown dramatically over the past few years, but it no longer has the resources to process applications due to current staff shortages.
For your information, environmental liability in the event of historical contamination is established by the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), better known as the “Superfund” law. CERCLA places strict liability on four categories of potentially responsible parties (“PRPs”), including past and current owners of property where hazardous substances have been released, whether hazardous substances have been disposed of or released on the property during their time. property. The draconian nature of CERCLA’s liability has discouraged the sale and redevelopment of contaminated properties, also known as “Brownfields properties”. CERCLA’s responsibility has prompted new development rather than redevelopment, encouraged urban sprawl and resulted in the abandonment of contaminated properties, often in economically disadvantaged communities that would have benefited most from the return of those properties to a productive use.
To address this problem, Congress amended the CERLCA in 2002 to add liability protections for potential or current landowners who meet certain criteria. Specifically, landowners who meet the criteria of a potential bona fide buyer (“BFPP”), innocent landowner, or contiguous landowner are protected from Superfund liability. These liability protections are self-enforcing, meaning that a landowner will benefit from these protections as long as he meets statutory and regulatory threshold criteria and complies with any continuing obligation to prevent further releases of hazardous substances. in the environment. However, Congress has provided no statutory mechanism to confirm whether a landowner or potential buyer meets the criteria for liability protection before defending against claims in litigation or legal action. regulatory enforcement. Since meeting the criteria is very fact-specific and regulators may disagree with a landowner’s conclusions in the future, landowners and potential buyers are often unsure whether they can cope with the situation. the responsibility of CERCLA in the future.
To address this residual uncertainty and encourage real estate redevelopment, many states and the EPA have developed so-called “comfort letters”. A comfort letter is issued by a regulatory body to a party that qualifies for an applicable CERCLA liability exemption (eg, a “potential buyer” of real estate). While these letters do not constitute a legal disclaimer, they provide clarity by confirming and documenting that a party meets the threshold criteria for a liability defense. In addition, comfort letters can detail the steps a party must take in the future to maintain liability protection. The comfort letters issued by the VDEQ were particularly helpful in that they were more emphatic and clearer than the comfort letters from the EPA, and met the legal requirements for brownfields specific to Virginia. Additionally, VDEQ has historically been able to process comfort letters relatively quickly, facilitating property purchase and loan transactions.
DEQ’s suspension of the processing of comfort letters, in particular BFPP letters, could complicate and delay real estate sale transactions involving industrial and contaminated properties. However, as noted above, the law did not require that a formal comfort letter be received in order for a buyer or landowner to benefit from legal liability defenses – the comfort letter simply facilitated and documented an agency’s agreement that the defense applied. Therefore, a landowner or buyer may still benefit from a liability defense, as a potential bona fide buyer for example, but will need to find other ways to document this status. The assistance of attorneys and consultants experienced with comfort letters and legal liability defenses can be invaluable in facilitating real estate transactions, even in the absence of a comfort letter.
VDEQ’s Comfort Letter program has provided welcome clarity in an area of law defined by uncertainty, and we hope the program can resume once VDEQ’s staff shortages are resolved. In the meantime, it becomes even more important for potential buyers and other property owners with CERCLA liability issues to consult an environmental advisor early in any transaction.