Valbruna Slater Steel Corp. (Valbruna) knew about the extensive contamination from a former owner’s industrial operations when it bought the Indiana steel mill out of bankruptcy in 2004.  As many do when buying contaminated property, Valbruna negotiated a Prospective Purchaser Agreement (PPA) with the Indiana Department of Environmental Management (IDEM) and escrowed $500,000 for the remaining cleanup work.

That $500,000 was soon depleted and Valbruna picked up the tab for the additional cleanup work later ordered by IDEM. Valbruna filed, among other things, a CERCLA contribution suit against the former owner to recover past and future cleanup costs.

In Valbruna Slater Steel Corp. v. Joslyn Mfg. Co., No. 18-2633, 2019 WL 3729272 (7th Cir. Aug. 8, 2019), the Seventh Circuit upheld the district court’s equitable allocation of past and future cleanup costs: 75% for the former owner, whose operations caused the contamination, and 25% to Valbruna, who bought the property decades after the contamination occurred and pursuant to a PPA with IDEM.

Recognizing the lower court’s discretion in allocating cleanup costs among responsible parties, the Seventh Circuit found that the 25% allocation to a no-fault owner, while striking, was rational.  One key factor in upholding this allocation is classic caveat emptor – Valbruna knew there were serious pollution problems at the site at the time of acquisition.  Another key factor is the potential for windfall given the steep discount on the purchase price – Valbruna paid less than half the asking price, $6.4 million as compared to $20 million, and ultimately insured the property for $80 million.

This case emphasizes the importance of smart, careful, and thorough pre-purchase due diligence.  If environmental issues are suspected, purchasers should employ contractual protections such as indemnities and escrows, as well as the use of the various insurance products available in today’s market to protect against unknown liabilities.  Purchasers should also undertake adequate due diligence to take advance of statutory defenses, such as CERCLA’s innocent purchaser defense.

 

Lake Hopatcong, New Jersey’s largest lake, has been in the headlines all summer for the large blue-green algae blooms forcing beach and lake closures. This blue-green algae, called cyanobacteria, produces cyanotoxins under heavy rain and high temperature conditions. Cyanotoxins can have severe human health effects, including fever and blisters to liver failure and respiratory arrest in severe cases.

The Lake Hopatcong closures, and the continued presence of the algae blooms, highlight the difficulties that New Jersey’s aging sewer and stormwater infrastructure face in managing the type of repeated and heavy rainfalls New Jersey has experienced over recent summers. When stormwater runoff overwhelms these old and outdated systems, flooding occurs and sewage and fertilizer flows into waterways. This, combined with high summer temperatures, create a nutrient-rich environment in which cyanobacteria algae thrives, grows densely, and produces cyanotoxins.

Earlier this year, Governor Murphy signed into law the “Clean Stormwater and Flood Reduction Act” (S-1073), also known as New Jersey’s “Rain Tax.” This law is intended to address New Jersey’s aging stormwater infrastructure. It authorizes local governments to establish stormwater utilities and collect fees based on the volume of stormwater runoff from an owner’s property. These fees must be used for stormwater management and to maintain and replace old and inadequate stormwater infrastructure. Large commercial properties with significant impervious surfaces, such as parking lots and large building footprints, are expected to see the highest fees under the new law.

The “Rain Tax” has been controversial.  Some say that it “taxes the weather,” while others view it as a means to restore healthy waterways and support flood-prone communities. At this point, it is still not clear whether, and how many, municipalities and other local governments will use the “Rain Tax” to address stormwater and runoff related problems like the Lake Hopatcong algae blooms.

As for anyone planning to visit Lake Hopatcong this Labor Day Weekend, six beaches meeting the State’s Health Advisory Guidance for cyanobacteria levels have been reopened. The rest of Lake Hopatcong is still on “advisory status,” meaning swimming and other water-based activities should be avoided – in other words, at your own risk!

Anastasia Bellisari, environmental paralegal at Cole Schotz, contributed to this article.

 

Sorry to disappoint you Superman fans but that’s not your favorite superhero in the sky – it’s an OSHA drone. OSHA has begun using drones to collect evidence. Over the past year, it has been confirmed that the agency has used drones in several inspections. We can only expect that OSHA’s use of drones will continue and so employers should begin preparing themselves accordingly. This article explains OSHA’s policy on the use of drones as well as issues that employers need to consider.

OSHA’s Guidance Document 

Currently, the use of drones is limited to areas that are inaccessible or pose a safety risk to inspection personnel. Drones may also be used to provide assistance in emergencies or with compliance activities. OSHA is required to obtain the express consent of the employer prior to using a drone on any inspection. In addition, personnel on a site on which an aerial inspection is to occur must be notified prior to the launching of the drone.

Each OSHA Regional Office is required to designate a manager to oversee the drone program. The manager will be responsible for compliance with regulations governing the use of such aircraft’s, as well as the following operational requirements:

  • The manager must keep visual line-of-sight with the drone
  • The drone must be operated during daylight
  • The drone speed must be kept at 100 mph or less and at a height not greater than 400 feet
  • The manager must ensure that the drone does not fly over persons not participating in the operation

Employer Considerations

There is no clear-cut formula to follow in deciding whether to grant OSHA permission to use drones during an inspection. That decision is best made as a matter of company policy prior to the actual inspection. Other actions that employers need to consider:

  • As a condition to agreeing to allow a drone inspection, you should require OSHA to share all data and photographs collected by the drone
  • Depending on OSHA’s reasons for conducting the inspection, you may be able to limit the drone’s area of inspection
  • You should have an employer representative monitor/observe the drone noting the areas covered

Concerns about the human health and environmental impacts of per- and polyfluoroalkyl substances – known as “PFAS” – are increasingly in the headlines and trending on a practically daily basis.  Click here for the basics about PFAS chemicals and the potential adverse human health effects.

Last week, an environmental group released a study reporting that 610 sites in 43 states are contaminated with PFAS, with locations ranging from public water systems, military bases, airports, industrial facilities, and firefighting training sites.  Here is one of the many news reports on the nationwide reach of the contamination.

All of this is being driven by the increasing amount of research into the adverse human health effects of PFAS chemicals and how they behave in the environment and in our bodies.

Why does it matter to today’s businesses and their lawyers?  Regulators across the country are paying attention and taking action.

The recent flurry of regulatory actions to address PFAS contamination is creating a pipeline of liability risks that require attention and caution.

Regulatory Actions

In the absence of an enforceable federal cleanup standard, dozens of states are taking action on their own.  This means we are seeing a myriad of proposed standards and regulations, interim guidance, massive data gathering endeavors, and various interpretations of the growing body of research about these chemicals. It is a lot to keep up with.

Here is a quick snap shot of recent regulatory activity from just a handful of those states.  This is in no way a comprehensive list – if you are buying or selling, or taking a security interest in, real property or if your operations use PFAS chemicals (or used to), we recommend looking into what your state is doing or plans to do about PFAS.

Maine

Maine has been active on addressing PFAS for a few years now.  Most recently, in March 2019, the Governor signed an executive order creating a task force to study the effects of PFAS and the Maine DEP established a new requirement to sample for PFAS in biosolids.  The most timely and interesting development is the upcoming public stakeholder meeting on May 31, 2019 on the proposal to designate all PFAS as hazardous matter.

New York

Earlier this year, the New York Department of Environmental Conservation (DEC) issued new guidance – Sampling for 1,4-Dioxane and Per- and Polyfluoroakyl Substances (PFAS) Under DEC’s Part 375 Remedial Programs. The DEC is now requiring all sites in the state cleanup program to sample for PFAS in soil, groundwater, surface water, sediment, and, where applicable, biota.  Sampling is also required for any soil imported to a site.

New Jersey

New Jersey is hailing itself as the national leader on taking aggressive action, and backing it up with a number of legal actions in the last few months.  On March 25, 2019, the New Jersey Department of Environmental Protection (“NJDEP”) issued a directive against five of the big chemical companies –  Solvay, DuPont, Dow DuPont, Chemours and 3M – requiring them to provide information about potential modes of PFAS discharges from their operations and notifying them the state intends to hold them responsible for PFAS remediation costs.  The state is also pursuing natural resource damages for PFAS contamination.

The most important and timely action that will have the broadest reach is NJDEP’s proposed rule to establish both drinking water standards and groundwater cleanup standards for perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFAS), the two most studied and well known kinds of PFAS chemicals.  The proposed standards are among the lowest being considered these days – 13 parts per trillion (ppt) and 14 ppt.  For context, EPA’s unenforceable health advisory standard for these chemicals is 70 ppt.  And yes, parts per trillion is a very, very small concentration.

If this proposed rule takes effect, it will potentially have significant impacts on both ongoing and future remediation sites in New Jersey, and possibly even closed out sites.  There is a public hearing on this proposed rule today, Wednesday, May 15, 2019.  I am attending and will report.

Pennsylvania

On September 19, 2018, the multi-agency PFAS Action Team was formed by Executive Order.  It was charged with developing a comprehensive response for identifying and eliminating sources of PFAS contamination, ensuring drinking water is safe and managing PFAS environmental contamination.  The Pennsylvania Department of Environmental Protection (PADEP) announced it will begin the first phase of an extensive statewide sampling plan this month.  The sampling includes testing more than 300 public water supplies (PWS) across the state.

Michigan

Michigan has been actively investigating PFAS contamination in the state – and finding it. It appears they will find more.  The Michigan PFAS Action Response Team (MPART), an inter-agency coordination to investigate sources and locations of PFAS and protect drinking water and public health, was created in 2017.

In 2018, the state adopted EPA’s unenforceable health advisory standard of 70 ppt for PFOA and PFOS (individually or combined) as its cleanup criteria for groundwater used as drinking water.

On February 4, 2019, Executive Order 2019-3 established MPART as an advisory body comprised of representatives from seven state agencies to address the threat of PFAS contamination in Michigan and facilitate inter-agency coordination.

California

In July 2018, the California State Water Resources Control Board (SWRCB) established drinking water guidelines for water systems aimed at detecting and reporting PFOA and PFOS.  The interim notification level was set at 14 ppt for PFOA and 13 ppt for PFOS and the interim response level was set at 70 ppt.

Then, in a public hearing on March 8, 2019, the SWRCB announced a statewide PFAS investigation plan that will ultimately require over a thousand facilities to test for PFAS chemicals.  On March 20, 2019, Phase I was initiated with orders issued to landfills and airports.  Failure to comply subjects a facility to a penalty of $5,000 per day.   The next phases are expected later this year.

 

 

 

The New Jersey Economic Development Authority (NJEDA) just announced that it has created a new loan program to provide low-interest financing for the remediation of brownfields sites. The new program, called the Brownfields Loan Program, is designed to put vacant and underutilized sites back to productive use as part of Governor Murphy’s goal of bringing economic growth to underserved communities.

The Brownfields Loan Program will provide a bridge loan of up to $5,000,000 to potential brownfield site purchasers and current owners for the costs to investigate and remediate site contamination, as well as for site building and structure related issues such as asbestos abatement. To be eligible for a loan, a New Jersey Licensed Site Remediation Professional must submit a report verifying the existence of contamination. The project must also have a redevelopment plan, an appraised value of at least 100 percent of all debt financing, and must demonstrate local support through a letter of support from the mayor of the municipality in which the project site is located.

Funding will be made available through competitive application rounds, with projects scored on site location, length of time the site has been vacant or underutilized, and similar redevelopment and remediation criteria. Funding priorities will be given to the site with the highest overall scores.

Applications for the Brownfields Loan Program will be available through the NJEDA sometime in the next few months.