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Robert D. Anderson, Norm James, Dawn Meidinger & Greg Adams. Standard practice for conducting due diligence as part of real estate trans-actions has long included an assessment of the potential for a site to have “recognized environmental conditions,” i.e., hazardous substances or petro-leum products released to the environment. In addition to this evaluation, sound due diligence practices should include an evaluation of the potential for federal regulatory requirements to significantly affect value. This paper will look at four general areas: the Clean Water Act1 (“CWA”), the Endan-gered Species Act2 (“ESA”), the National Environmental Policy Act3 (“NEPA”) and the National Historic Preservation Act4 (“NHPA”). Full Article

Sherri Zendri. The alphabet soup of federal and state statutes and rules regulating the purchase and sale of property can quickly become overwhelming. Nevertheless, parties to commercial and residential real estate transactions ignore such laws at their own peril: failure to comply with these regulations, whether intentional or not, can impose serious costs on all parties involved. This Article focuses on some practical approaches to due diligence inquiries and allocations of potential liabilities, and includes only brief comments on some of the legal liabilities regarding environmental disclosure requirements in real property transactions. The main take-away from this article is that the Arizona Department of Environmental Quality (“ADEQ”) is the key environmental regulatory agency in Arizona with a mission to protect the environment. As such, the Agency is a great resource…

Christopher D. Thomas. Few statutes bedevil experienced litigators as often as the federal Superfund act, the Comprehensive Environment Response, Compensation, and Liability Act (“CERCLA”). Although CERCLA practice is now into its third decade, the statute’s chronic drafting flaws and the absence of definitive judicial resolution of numerous fundamental issues continue to create uncertainty. This uncertainty offers the opportunity for both creative lawyering and spectacular failure. Many Superfund cases end badly because the lawyers spend their time preparing to fight the last war. In an attempt to mitigate the unease, this article will—after a rapid review of history—address the crucial legal issues we can expect to be front and center of hazardous substance litigation in the next several years. It is no secret that CERCLA was hastily and sloppily drafted in…

Patrick J. Paul & Christopher P. Colyer. As activity on the real estate transactional front continues to gain momentum, real estate practitioners need to increasingly be aware of due diligence requirements necessary to minimize or avoid liability under federal law—namely, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or “Superfund”). Performing the required due diligence prior to property acquisition is an essential prerequisite for three significant defenses to CERCLA liability—the Innocent Landowner, Bona Fide Prospective Purchaser (“BFPP”), and Contiguous Property Owner defenses—as well as to qualify for CERCLA Brownfield grants. The common thread to each of these CERCLA defenses and grants is the requirement that a purchaser or operator perform “All Appropriate Inquiry” (“AAI”) prior to acquisition. Performing AAI is not an idle exercise, as the United States Environmental…

Mark A. McGinnis, Esq. & R. Jeffrey Heilman, Esq. Water is and always has been an issue of critical importance in Arizona. Living in Arizona’s desert climate means that all economic activity, from agricultural and industrial enterprises to residential development, is entirely dependent on the state’s limited water supplies. Even today, Arizonans engaged in buying or selling real estate confront significant water issues, both legal and technical. This paper examines several of the issues that commonly arise in the context of real estate transactions. Although these issues most often arise with respect to transactions involving commercial or industrial property, some of the most perplexing problems can arise in the normal course of residential sales. The potential ramifications of unrecognized water issues are easy to appreciate. For example, a “prime commercial…

Gary E. Marchant. Uncertain risks present unique challenges to the law. Unlike science, which can always defer judgment until more data are generated and uncertainties are reduced, law must often come to final decisions on uncertain risks that are indeterminate and contested. A relatively new area of uncertain health and environmental risks, which often arise in the context of property transactions, is vapor intrusion. Although the potential for vapor intrusion has always been present on contaminated lands, it is only due to recent legal and policy changes that vapor intrusion evaluation has now become a part of almost every investigation of a potentially contaminated site, and many real estate transactions. This article describes this emerging problem, and the challenges and liability risks it presents for environmental transactions and remediation. Part…

Laura Malone. The following Article is based on comments given by Laura Malone at “Saving the Deal: Avoiding and Minimizing Environmental Liability in Corporate and Real Estate Transactions,” a continuing legal education seminar. The information contained below is a summary of information available through the Arizona Department of Environmental Quality (“ADEQ”) at http://www.azdeq.gov/ and from various ADEQ documents. Those of you in the environmental field back in 1970 may remember the passage of the National Environmental Policy Act (“NEPA”). Subsequent to NEPA, and later that same year, then President Richard Nixon signed an Executive Order creating the United States Environmental Protection Agency (“EPA”). Both NEPA and EPA were predicated on public concerns that, as a nation, we were not focusing on the environment or even had an understanding of how…

Kenneth A. Hodson & Charles H. Oldham. This article discusses potential liability under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”) and certain defenses thereto including the Bona Fide Prospective Purchaser (“BFPP”) defense. Under certain circumstances, the assertion of the BFPP defense may enable the purchaser (and the lessee) of real estate to avoid liability under CERCLA. As discussed more fully below, in general, a potential purchaser of real estate should be aware that, under CERCLA, the new purchaser of the property may be liable for, among other things, the cost of cleaning up any “hazardous substances” that may have been released at the property. Full Article

Jim Derouin. “Environmental Law” is, on the one hand, a phenomenon—an active, sometimes frenetic, area of the law for the last forty years. On the other hand, it is an ages-long reaction of civilization to, variously, preserve, protect, use and/or harness natural resources while, at the same time, protecting society from health risks (e.g., typhus) and providing safe public services (e.g., waste disposal and water supply). It is easy for society today to get carried away with arguments over hot topics such as “global warming,” “environmentalism” and/or the never-ending debate between private property rights and the “public right” to be protected from heath threats (whether from air or water sources). It is useful, however, from time to time to put those debates aside and concentrate on context. That is the…

Michelle De Blasi. The high cost of remediating contaminated sites and the joint and several liability scheme under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) (42 U.S.C. § 9607), as amended, have led the United States Environmental Protection Agency (“EPA”) and CERCLA Potentially Responsible Parties (“PRPs”) to pursue every available resource to cover cleanup costs. Litigation seeking reimbursement for remediation expenses from corporate parents, corporate successors, officers, directors, and shareholders has shown that plaintiffs will attempt to cast CERCLA’s liability over every possible party with resources, and any such party can be caught under the right circumstances. United States v. Bestfoods established the standard by which the liability of corporate entities and their subsidiaries is determined. In Bestfoods, the Court held that parent corporations can be directly liable…