Before You Buy a Brownfield: Know What CERCLA Exempts and What It Doesn’t

• CERCLA provides narrow liability exemptions for certain Tribal nations, Alaska Native Corporations and municipalities that acquire contaminated property under specific circumstances
• Act of God, act of war and third-party defenses exist, but their requirements limit when property owners can rely on them
• For most brownfield owners, liability protection still depends on early planning, compliant due diligence and clear documentation

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) can impose liability on current owners of contaminated property, but the law also provides targeted exemptions for certain owners and circumstances.

Tribal nations and Alaska Native Corporations are not considered “persons” under CERCLA Section 107, which can protect the tribal government itself from liability. That protection does not necessarily extend to tribally owned businesses.

Municipalities also may receive protection when they acquire contaminated property involuntarily through mechanisms such as tax delinquency, abandonment or escheat. These circumstances can exclude a municipality from CERCLA’s owner or operator definition, although the exemption does not eliminate every potential environmental obligation.

Local governments that acquired property before January 11, 2002, have another consideration. The 2018 BUILD Act may allow them to remain eligible for U.S. Environmental Protection Agency (EPA) funding even when they do not qualify as bona fide prospective purchasers (BFPPs), provided they did not cause or contribute to the contamination.

These protections can be significant, but they apply to specific circumstances. Most buyers still need to establish and maintain another CERCLA liability defense.

CERCLA also recognizes defenses involving an act of God, an act of war or contamination caused solely by a third party.

The act of God and act of war defenses apply in uncommon circumstances. A natural disaster affecting a contaminated property, for example, does not automatically eliminate owner liability. To qualify for the act of God defense, an owner must show that an exceptional and unavoidable natural event solely caused the release and that its effects could not have been prevented through due care or foresight.

The third-party defense can have broader relevance, but owners must meet several requirements. They must show that:

• A third party solely caused the contamination
• The owner had no direct or indirect contractual relationship with that party
• The owner exercised due care and took appropriate precautions

The property owner carries the burden of establishing the defense.

For most brownfield transactions, the practical path to liability protection remains the BFPP defense created by the 2002 CERCLA amendments. That starts with timely and compliant All Appropriate Inquiries (AAI), typically supported by a Phase I Environmental Site Assessment, and continues with appropriate action after acquisition.

Decision-makers should:

• Understand which CERCLA protection applies before acquiring the property
• Complete AAI within the required transaction timeline
• Document continuing obligations and actions after closing
• Maintain a clear record of site history, environmental conditions and risk-management decisions
• Bring environmental and legal advisers into the process early when ownership or liability questions are complex

A Phase I ESA is the threshold, not the finish line. Liability protection ultimately depends on how owners use the information, manage known conditions and document their decisions.

Purchasing and redeveloping brownfield properties can create value, but environmental liability protection depends on more than a strong site plan. This series explains how buyers, municipalities, Tribal nations, lenders and redevelopment partners can manage CERCLA risk through timely due diligence, disciplined documentation and strategic planning. The takeaway for decision-makers is clear: CERCLA risk management works best when liability protection is built into the project’s full life cycle, from acquisition planning through redevelopment.

• Before You Buy a Brownfield, Protect the Deal With All Appropriate Inquiries
  Why All Appropriate Inquiries (AAI) and a current Phase I environmental site assessment help buyers identify environmental risk before closing
  
• Before You Buy a Brownfield: Keep the Bona Fide Prospective Purchaser Defense Intact
  How buyers can preserve bona fide prospective purchaser protection by meeting continuing obligations after acquisition