Activity and Use Limitations (AULs) and Demand Letters and Private Cost Recovery
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1 Activity and Use Limitations (AULs) and Demand Letters and Private Cost Recovery MCP for Everyone December 2, 2010 By: Peter J. Feuerbach, Esquire Rubin and Rudman, LLP masslegalalerts.blogspot.com
2 Activity and Use Limitations (AULs) Deed restrictions to reduce exposures to contaminants and reduce response actions. Demand Letters and Private Cost Recovery How private parties recover response costs from responsible parties (RPs).
3 AUL: DEP s Regulations Purpose of an Activity and Use Limitation: - to narrow the scope of exposure assumptions used to characterize risks to human health from a release - by specifying activities and uses that are prohibited and allowed at the disposal site in the future. 310 CMR (1)
4 AUL: DEP s Guidance An AUL is a legal document that identifies site conditions that are the basis for maintaining a condition of No Significant Risk at a property where contamination remains after a cleanup. To help prevent unacceptable exposures to contamination left at a site. Guidance on Implementing Activity and Use Limitations (DEP Interim Final Policy #WSC ; May 1999)
5 Definitions of AULs: Activity and use limitation, a restriction, covenant or notice concerning the use of real property which is imposed upon real property by a property owner or the department.... (G.L. c.21e, 2) Activity and Use Limitation means a Grant of Environmental Restriction or Notice of Activity and Use Limitation recorded, registered or filed in accordance with 310 CMR through 310 CMR Notice of Activity and Use Limitation means a written notice of the activities, uses and/or exposures that provide the basis for a Response Action Outcome Statement.... (310 CMR )
6 Elements of an AUL: written notice of property restrictions (vs. a grant of an interest) imposed by the land owner DEP approval not required, but DEP conducts audits recorded at the Registry of Deeds or Land Court restricts prohibited future uses while allowing permitted uses prevents exposure to remaining oil or hazardous materials (OHM) largely used for soil contamination (groundwater application: e.g., to eliminate an existing private well, O+M of venting system or vapor barrier) Goal: reduce response actions (and costs) while maintaining protection (e.g., Brownfields redevelopment projects)
7 Examples of AUL Restrictions Prohibit residential, school, agricultural and other sensitive uses Allow commercial and industrial activities Install and maintain an impervious surface (e.g., pavement) Limit excavation activities (implement a Health and Safety Plan and a Soil Management Plan) Inspect and maintain a venting system or vapor barrier (to prevent indoor air contamination)
8 Contents of an AUL Filing: Notice of Activity and Use Limitation (Form 1075) Exhibit A Parcel Description Exhibit B Sketch Plan Exhibit C AUL Opinion Exhibit D AUL Opinion Form BWSC Form 113A Exhibit E Signatory Authority (by Owner) 45-day prior written notice to record interest holders (e.g., banks, mortgagees, easement holders, tenants) All documents recorded at the Registry of Deeds (Land Court if registered land)
9 Contents of Form 1075 Notice of AUL Activities and uses consistent with AUL Opinion (permitted uses) Activities and uses inconsistent with AUL Opinion (prohibited uses) Obligations and conditions in the AUL Opinion Proposed changes in activities and uses (new LSP Opinion required) Incorporation in deeds, mortgages and leases Mirror the contents of the AUL Opinion
10 Contents of AUL Opinion Prepared by LSP Describe site history and nature of contamination remaining Described why an AUL is necessary to maintain a condition of No Significant Risk Identify permitted uses, prohibited uses and the future obligations Mirror the contents of the AUL Form 750
11 Sources and References: Chapter 21E: Section 2 (Definitions) Section 6 (Restrictions on Property) MCP, 310 CMR : (Definitions) (Application of AULs) (Notice of AULs) DEP Policy: Guidance on Implementing Activity and Use Limitations (DEP Interim Final Policy #WSC ; May 1999)
12 Demand Letters and Private Cost Recovery Common scenarios: Current owner incurred response costs due to: - former owner s contamination - off-site, neighboring source
13 Section 4A Process Under Chapter 21E Demand letter to: - obtain reimbursement, contribution, or equitable share from Responsible Party - to request performance of response actions. To recover necessary and appropriate response actions costs, including: Assessment, containment, remediation Identification of responsible party LSP and consultant fees Attorneys fees if tied to response action (e.g., response action and regulatory strategy, management of the clean-up, etc.)
14 Section 4A Process Under Chapter 21E Mandatory, pre-suit (pre-litigation) process: Demand letter to RP: provide notice of factual and legal basis of claims RP s written response within 45 days of demand Response can request documents or information Parties confer in good faith within 60 days of response. Either party can request alternative dispute resolution within 75 days of response (e.g., mediation, arbitration).
15 Possible Sanctions Under Section 4A Litigation costs and attorneys fees may be awarded to notifier/sender if: RP s failure to respond to demand letter within 45 days Failure to negotiate in good faith Unreasonable refusal to enter into an agreement to pay share or perform response action, where liability was reasonably clear But, the notifying party (sender) can be liable for costs and attorneys fees if: No reasonable basis for claim Failure to negotiate in good faith Plaintiff s position regarding defendant s liability was unreasonable
16 Bank case - Supreme Judicial Court Bank v. Thermo Elemental, Inc., 451 Mass. 638 (2008) - owner spent $800,000 on tenant s contamination* - 12 years of litigation - SJC ruled in favor of owner and awarded response costs - LSP does not have to be perfect; substantial compliance with MCP is okay - Attorneys fees reimbursable if they are tied to the clean-up *ultimately determined that not contaminated enough to warrant a actual clean-up (* me for a summary of the Bank case: pfeuerbach@rubinrudman.com)
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