Ohio Expands Liability Protections for Brownfield Purchasers

A new Ohio law became effective September 15, 2020 that creates additional environmental protections for purchasers of commercial/industrial properties.  The Ohio House Bill 168 allows prospective purchasers to now obtain environmental protections at the state level through the Ohio Environmental Protection Agency (Ohio EPA), which were previously available only at the federal level through the U.S. Environmental Protection Agency (EPA).  The purpose of the new law is to encourage the development of contaminated and potentially contaminated properties in Ohio by providing purchasers additional protections from environmental liability.

With the passage of this new law, purchasers can now qualify under the bona fide prospective purchasers (BFPPs) defense at the federal and state level.  Under a 2002 amendment to the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, also known as Superfund), the BFPP defense provides purchasers liability protections against hazardous substance releases at a property, so long as they perform environmental due diligence in accordance with U.S. EPA standards.  To qualify for the BFPP defense, the following criteria must be met:

The BFPP has existed under the federal CERCLA law, but with the passing of Ohio House Bill 168, protection is now essentially extended under Ohio law.  Should a prospective purchaser wish to buy land with preexisting contamination of hazardous substances, if they go through the necessary steps to qualify for BFPP defense, they will be protected from environmental liability at both the federal and state level.

Prior to the bill’s passage, the only process purchasers could go through to obtain state liability protection was the Ohio Voluntary Program (VAP).  This process involves hiring an environmental consultant who is a certified professional (CP) under the VAP, performing investigation and cleanup of hazardous materials, if necessary, then applying for a No Further Action (NFA) letter which certifies that the property meets VAP standards.  This letter must then be formally submitted to the Ohio EPA to receive a Covenant Not to Sue (CNS), which limits present and future environmental liability exposure at the site.  While the goal of this program is to make obtaining state liability easier by utilizing private CPs rather than going through federal programs, it is still a time consuming, potentially costly, and complex process that has led to many purchasers agreeing to comply with VAP standards, but not submitting for a formal CNS.  The new bill should encourage prospective purchasers to now consider some properties that previously may not have been worth the cost and complexity of entering the VAP but will now receive a level of liability protections from the state by conducting the appropriate due diligence. 

In addition to the new affirmative defense, various modifications have been made to the Ohio VAP such as how violations of a property’s CNS are handled.  Prior to the bill’s passage, any violations of engineering controls or activity and use limitations at the property would result in the CNS to be automatically voided.  With the new modification, the Ohio EPA director must issue the order to void the CNS as such violations occur.  This gives the CNS a chance to be reviewed prior to being voided, thereby allowing the property the right to appeal the decision of their CNS being voided.

Another modification to the Ohio VAP is the steps the owner of a property must take if they receive a letter from the Ohio EPA stating the intention to issue an enforcement order related to a release or threatened release at the property.  When such case arises, the person must provide evidence that they have entered the Ohio VAP and are taking the appropriate steps in addressing the threat, and that they qualify as a BFPP.

The Ohio House Bill 168 presents more options to prospective purchasers for avoiding liabilities associated with purchasing contaminated property, either through the new state BFPP defense or a modified VAP program.  Purchasers are now given more freedom to work with private consulting firms rather than government agencies, resulting in quicker and less costly projects, thereby encouraging the reuse and redevelopment of previously tainted properties.