Purchasers of contaminated property are often familiar with obtaining a Phase 1 Environmental Site Assessment (ESA) in the hopes of maintaining the CERCLA bona fide prospective purchaser defense, but sometimes they overlook the fact that Oregon offers no such defense. Given that the state is more likely to require cleanup than the Environmental Protection Agency (EPA), this can be a major oversight.
This does not mean that Phase 1 ESAs should be avoided in Oregon. They provide important information about the property, and the CERCLA bona fide prospective purchaser defense has at least some value even if the purchaser becomes liable under Oregon law. The real lesson is that purchasers in Oregon that want protection against Oregon cleanup liability need to plan ahead and negotiate a Prospective Purchaser Agreement (PPA) with the Oregon Department of Environmental Quality (DEQ) before acquiring contaminated property.
Planning ahead is critical because there are three types of PPAs that offer different levels of protection, with those that offer the most protection taking months to negotiate. The simplest PPAs (such as the Administrative Agreement PPA) can sometimes be negotiated within one month, but they only provide protection from claims by the state and not from third party claims.
PPAs don’t come free and not all sites qualify. Some removal or remedial action must still be necessary at the property and the PPA must provide a “substantial public benefit.” Thus, the purchaser almost always has to agree to conduct, or at least pay for, some remedial work at the property. If the DEQ already has another party on the hook for cleanup at the property, it may not be interested in negotiating a PPA with a prospective purchaser. The key takeaways are to plan as far ahead as possible, and not falsely assume that a Phase 1 ESA is sufficient.
For more on PPA's, read my April 9, 2024 post "Prospective Purchaser Agreements: Lessees and Subsequent Owners and Operators."
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
