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GIS Registry Review is a Crucial Element of a PHASE I ESA

Prospective Land Buyers Should Specifically Request a Review of the GIS
February 07, 2007

When purchasing contaminated real estate, discovering and complying with land use restrictions is a crucial requirement for establishing the Bona Fide Prospective Purchaser Defense to Superfund liability. As of June 2006, the Wisconsin Department of Natural Resources (WDNR) uses its Global Information System (GIS) Registry to track contaminated sites that have been partially remediated and closed with land use restrictions. However, parties do not always review WDNR’s GIS Registry as a matter of course when performing Phase I Environmental Site Assessments (Phase I). Accordingly, it is important to specifically request a review the GIS Registry when retaining a third party to perform a Phase I assessment.

Background
Under the Federal Superfund Law, an individual or corporation who purchases real estate that is contaminated is responsible for cleaning up that contamination regardless of whether that individual or corporation caused the contamination. However, the Superfund Law provides an exception to this rule called the “Bona Fide Prospective Purchaser Defense.” In order to qualify for this defense, an individual or corporation must perform “all appropriate inquiry” prior to purchasing the property.

At some sites, a previous owner may have already discovered and cleaned up the contamination to WDNR’s satisfaction. At other sites, the previous owner may have partially cleaned-up the contamination, and obtained WDNR’s satisfaction by implementing land use restrictions or institutional controls. In order for a subsequent purchaser to maintain the Bona Fide Prospective Purchaser Defense at these sites, a party must comply with and avoid impeding the effectiveness or integrity of any land use restrictions or institutional controls employed at the site. Thus, a party may take title to a contaminated site without incurring clean-up liability if that party performs all appropriate inquiry prior to purchasing the site and observes any land use restrictions in place at the site.

Per Environmental Protection Agency (EPA) regulations, an environmental analysis of the property, commonly referred to as a Phase I, that is performed by a qualified environmental professional will satisfy the all appropriate inquiry requirement. EPA regulations set forth the elements of a Phase I required to satisfy the all appropriate inquiry standard. (See Generally 40 C.F.R. Chap. 312 et seq.) One of the major requirements is “Review of Federal, State, Tribal and Local Government Records.” (See 40 C.F.R. §312.26.) This provision requires the environmental consultant performing the Phase I to review government databases for records of releases of contaminants at the site, activities at the site that were likely to cause releases, government responses to such releases or regulation of such activities including land use restrictions, and similar information relating to adjacent or nearby sites. With respect to land use limitations or institutional controls, standard practice among environmental consultants has been to perform a title search of the property in order to uncover any deed restrictions.

Phase I ESA’s in Wisconsin and WDNR’s GIS Registry
As of June 3, 2006, land use limitations and institutional controls associated with partially remediated sites are to be recorded in WDNR’s GIS Registry in place of deed restrictions under Wisconsin Act 418.

The danger in performing a Phase I without reviewing the GIS Registry, of course, is that such a Phase I might fail to discover land use restrictions or institutional controls that are recorded on the GIS Registry and not the deed to the property. This failure might frustrate the Bona Fide Prospective Purchaser Defense in two ways, subjecting the purchaser to Superfund liability. First, such a Phase I might fail to satisfy the all appropriate inquiry standard because the GIS Registry is a state database that should be reviewed under 40 C.F.R. 312.26. More importantly, without complete knowledge of the land use restriction and institutional controls at the site, the subsequent purchaser risks unwittingly running afoul of those restrictions.

Either of these missteps could disqualify the subsequent purchaser from the Bona Fide Prospective Purchaser defense and subject him or her to Superfund liability. Accordingly, when retaining an third party to perform a Phase I, it is crucially important to specifically request that the third party review of WDNR’s GIS Registry.

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