PRINTER'S NO. 691
No. 650 Session of 1993
INTRODUCED BY STEWART, BRIGHTBILL, MUSTO, BELAN, SHAFFER, STOUT, FISHER, WENGER, RHOADES, PECORA, SALVATORE AND HART, MARCH 9, 1993
REFERRED TO COMMUNITY AND ECONOMIC DEVELOPMENT, MARCH 9, 1993
AN ACT 1 Providing a limitation on liability of certain economic 2 development agencies for the cleanup of releases of regulated 3 substances not caused by the agencies. 4 The General Assembly of the Commonwealth of Pennsylvania 5 hereby enacts as follows: 6 Section 1. Short title. 7 This act shall be known and may be cited as the Economic 8 Development Agency Environmental Liability Protection Act. 9 Section 2. Declaration of policy. 10 The General Assembly finds and declares as follows: 11 (1) The Commonwealth has provided grant and loan funds 12 to a variety of economic development agencies, all for the 13 purpose of assisting these agencies in their efforts to 14 promote the general welfare of this Commonwealth by 15 encouraging economic development and industrial redevelopment 16 throughout this Commonwealth. 17 (2) Economic development agencies acquire title to 18 industrial property for financing purposes only and lease or
1 sell the same to industrial occupants who have sole 2 possession of the facilities for an amount of rent or 3 installment payments pursuant to an installment sale contract 4 which is determined solely on a basis of meeting the costs of 5 the financing and other costs associated with ownership 6 unrelated to profit. 7 (3) Economic development agencies acquire possession of 8 these industrial sites from time to time when the industrial 9 occupant defaults under its obligations to the agencies under 10 its lease or installment sales agreements. 11 (4) Economic development agencies also acquire 12 industrial property either for the purpose of financing or 13 redevelopment but without a motive for profit or to occupy 14 the property for their own industrial operations. 15 (5) Economic development agencies are reluctant to 16 acquire title to or other interests in property whether for 17 financing or redevelopment purposes or to secure repayment of 18 obligations unless the economic development agencies are 19 protected from liability for environmental contamination on 20 those sites they seek to assist to develop. 21 (6) The taking of legal title and any foreclosure or 22 retaking of possession of property by an industrial 23 development agency, area loan organization or industrial and 24 commercial development authority is pursuant to the following 25 acts: 26 (i) The act of May 17, 1956 (1955 P.L.1609, No.537), 27 known as the Pennsylvania Industrial Development 28 Authority Act, which expressly requires that the 29 Pennsylvania Industrial Development Authority loan money 30 to industrial development agencies secured by not less 19930S0650B0691 - 2 -
1 than a second mortgage lien. 2 (ii) The act of August 23, 1967 (P.L.251, No.102), 3 known as the Industrial and Commercial Development 4 Authority Law, which provides for issuance of debt by 5 industrial and commercial development authorities and 6 authorizes these authorities to take title to real 7 property as security for the indebtedness. 8 (iii) The act of July 2, 1984 (P.L.545, No.109), 9 known as the Capital Loan Fund Act, which requires that 10 its loans be made to area loan organizations with 11 adequate collateral. 12 Section 3. Definitions. 13 The following words and phrases when used in this act shall 14 have the meanings given to them in this section unless the 15 context clearly indicates otherwise: 16 "Department." The Department of Environmental Resources of 17 the Commonwealth. 18 "Economic development agencies." The term includes: 19 (1) Any redevelopment authority created under the act of 20 May 24, 1945 (P.L.991, No.385), known as the Urban 21 Redevelopment Law. 22 (2) Any industrial development agency as that term is 23 defined in the act of May 17, 1956 (1955 P.L.1609, No.537), 24 known as the Pennsylvania Industrial Development Authority 25 Act. 26 (3) Any industrial and commercial development authority 27 created under the act of August 23, 1967 (P.L.251, No.102), 28 known as the Industrial and Commercial Development Authority 29 Law. 30 (4) Any area loan organization as that term is defined 19930S0650B0691 - 3 -
1 in the act of July 2, 1984 (P.L.545, No.109), known as the 2 Capital Loan Fund Act. 3 (5) Any other Commonwealth or municipal authority which 4 acquires title or an interest in property. 5 "Foreclosure." The term includes: 6 (1) Any purchase at foreclosure sale. 7 (2) Acquisition by or assignment of title in lieu of 8 foreclosure. 9 (3) Termination of a lease or installment sale agreement 10 or other action permitting possession by an economic 11 development agency. 12 (4) Any other formal or informal means by which the 13 economic development agency obtains title to or possession of 14 the secured property. 15 "Industrial activity." Commercial, manufacturing or any 16 other activity done to further either the development, 17 manufacturing or distribution of goods and services, including, 18 but not limited to, research and development, warehousing, 19 shipping, transport, remanufacturing, repair and maintenance of 20 commercial machinery and equipment. 21 "Industrial site." A site which now has or once had an 22 industrial activity on it. 23 "Occupant." A party which occupies or has the right to 24 occupy property owned by an economic development agency by any 25 instrument, including, but not limited to, a lease, mortgage, 26 installment sale contract, disposition agreement or trust 27 agreement. 28 "Property." Real property and improvements, including: 29 (1) A "facility" as defined in the Comprehensive 30 Environmental Response, Compensation, and Liability Act of 19930S0650B0691 - 4 -
1 1980 (Public Law 96-510, 94 Stat. 2767). 2 (2) A "site" as defined in the act of October 18, 1988 3 (P.L.756, No.108), known as the Hazardous Sites Cleanup Act. 4 (3) A "tank" as defined in the act of July 6, 1989 5 (P.L.169, No.32), known as the Storage Tank and Spill 6 Prevention Act. 7 "Redevelopment." Undertakings and activities made under the 8 act of May 24, 1945 (P.L.991, No.385), known as the Urban 9 Redevelopment Law, including, but not limited to, planning, 10 acquisition, site preparation, demolition, rehabilitation, 11 renovation, conservation, reuse, renewal, improvement, 12 clearance, sale and lease of real property and improvements 13 thereon. 14 "Regulated substance." A substance, the discharge or release 15 or potential release of which is governed or regulated by the 16 act of June 22, 1937 (P.L.1987, No.394), known as The Clean 17 Streams Law, the act of July 7, 1980 (P.L.380, No.97), known as 18 the Solid Waste Management Act, the act of October 18, 1988 19 (P.L.756, No.108), known as the Hazardous Sites Cleanup Act, and 20 the act of July 6, 1989 (P.L.169, No.32), known as the Storage 21 Tank and Spill Prevention Act. 22 "Release." A release as defined in the act of October 18, 23 1988 (P.L.756, No.108), known as the Hazardous Sites Cleanup 24 Act. 25 "Remedial response." An action taken to remediate, clean up, 26 mitigate, correct, abate, eliminate, prevent, study or assess a 27 release or potential release of a regulated substance into the 28 environment in order to protect the present or future public 29 health, safety, welfare or the environment. 30 "Remediate." To clean up, mitigate, correct, abate, 19930S0650B0691 - 5 -
1 minimize, eliminate, prevent, study or assess a release of a 2 regulated substance into the environment in order to protect the 3 present or future public health, safety, welfare or the 4 environment. 5 Section 4. Conditions for economic development agency 6 eligibility. 7 An economic development agency, in order to be eligible for 8 the limitation of liability for releases provided in this act, 9 shall satisfy each of the following conditions: 10 (1) The economic development agency must have legal, 11 equitable or beneficial ownership of property or an interest 12 therein, including, but not limited to, a mortgage or other 13 lien, and have acquired the ownership of property or interest 14 therein for the purpose of developing or redeveloping the 15 property or to finance an economic development or 16 redevelopment activity thereon. 17 (2) The property must be or have been used for 18 industrial activities. 19 (3) The economic development agency has acquired an 20 interest in or possession of the property under its or their 21 lawful authority. 22 Section 5. Limitation to liability for remediation of releases 23 of regulated substances. 24 (a) Action by department.--An economic development agency 25 eligible under section 4 shall not be liable in an action by the 26 department as a responsible person, owner, operator or occupier 27 for remediating a release or a potential release of regulated 28 substances on the property, if the economic development agency 29 demonstrates that each of the following are true: 30 (1) The economic development agency at no time 19930S0650B0691 - 6 -
1 participated in management with respect to the property. 2 (2) The economic development agency exercised reasonable 3 maintenance of the property whenever it had possession of the 4 property. 5 (b) Agency liability.--An economic development agency 6 operating under its lawful authority whose participation in 7 management with respect to a property is limited to those 8 activities normally associated with the development, 9 redevelopment and management of property, including, but not 10 limited to, site clearance and preparation, demolition of 11 existing structures, construction and installation improvements 12 or infrastructure and maintenance, shall be liable only to the 13 extent its actions or inactions have caused, worsened, or 14 increased a release or threat of a potential release and only 15 for the release or threat of release caused, worsened or 16 increased by the economic development agency. 17 (c) Other obligations.--Nothing in this act shall be 18 construed to relieve an economic development agency from all 19 other obligations it may have as an operator, owner, occupier or 20 responsible person under applicable environmental law, 21 including, but not limited to, requirements regarding 22 registration, maintenance, reporting and monitoring. 23 (d) Contribution action.--An economic development agency 24 which is eligible under section 4 with respect to a property and 25 which did not or does not participate in management shall not be 26 liable in a contribution action brought by responsible parties 27 for a release or potential release. 28 (e) Workout activities.--An economic development agency 29 which engages in workout activities prior to foreclosure or 30 retaking of possession will remain within the exemption from 19930S0650B0691 - 7 -
1 liability under this section so long as the agency is not 2 participating in management. Workout activities include those 3 actions which are designed to prevent, cure or mitigate a 4 default by an occupant or obligor or those actions which are 5 designed to preserve, protect or prevent the diminution in value 6 of the property or other security. These actions include, but 7 are not limited to: 8 (1) Restructuring or renegotiating the terms of the 9 security interest. 10 (2) Requiring payment of additional or, as the case may 11 be, less rent or interest. 12 (3) Exercising forebearance either with respect to a 13 monetary or nonmonetary obligation. 14 (4) Requiring or exercising rights with respect to or 15 pursuant to an assignment of accounts or other collateral 16 assignment. 17 (5) Requiring or exercising rights pursuant to an escrow 18 agreement. 19 (6) Providing general or specific financial advice, 20 suggestions or counseling. 21 (7) Exercising any rights or remedies the economic 22 development agency is entitled to by law, or under any of its 23 agreements, leases, notes or other instruments entered into 24 between it and the occupant. 25 (f) Foreclosure.--An economic development agency which 26 forecloses on or assumes possession of a property will remain 27 within the exemption from liability under this section so long 28 as the agency is not participating in management and is 29 exercising reasonable maintenance. 30 Section 6. Participation in management of property. 19930S0650B0691 - 8 -
1 (a) General rule.--An economic development agency shall be 2 deemed to have participated in management within the meaning of 3 this act if the economic development agency: 4 (1) exercises decisionmaking control over the 5 environmental compliance of a property or over the 6 environmental compliance of an occupant on the property; or 7 (2) exercises decisionmaking control over operational 8 aspects of the property or an occupant, other than financial 9 or administrative decisions that must be made as part of the 10 economic development agency's lawful authority. 11 (b) Exception.--An agency will not be considered to be 12 participating in the management of the property or the occupant 13 solely on the basis that it provided or is providing financing 14 or policing the financing of a property or an occupant. 15 Section 7. Actions that are not participation in management. 16 (a) List of actions.--No act or omission prior to the time 17 that an economic development agency acquires legal or equitable 18 title or some other indications of ownership primarily to secure 19 an interest in property as collateral for an obligation shall 20 constitute participation in management within the meaning of 21 this act. The actions or omissions to act referred to in this 22 section include, but are not limited to, the following measures 23 which do not constitute participation in management: 24 (1) Requiring a prospective occupant or other party to 25 undertake an environmental inspection of a site. 26 (2) Requiring a prospective occupant or other party to 27 remediate releases or potential releases on the property or 28 to otherwise come into compliance, whether before or after 29 the time that ownership is acquired by the economic 30 development agency, with any applicable law or regulation. 19930S0650B0691 - 9 -
1 (3) Requiring a prospective occupant or other party to 2 undertake or refrain from undertaking any action which is 3 intended to protect the economic development agency's 4 interest in the property. 5 (b) Protection of security interest.--Actions or omissions 6 to act which are consistent with holding property primarily to 7 protect a security interest shall not constitute participation 8 in management for purposes of this act. The authority for an 9 economic development agency to take the actions may, but need 10 not be, contained in: 11 (1) The contractual or other loan, lease or sale 12 documents. 13 (2) The laws, regulations, statements of policy, 14 guidelines or other directives that govern the conduct of the 15 economic development agency or any other lawful authority 16 which would specify the requirements for financial, 17 environmental, economic development, redevelopment or any 18 other covenants, warranties, representations, promises or 19 conditions from the borrower, lessee, installment sale 20 purchaser or other occupant or beneficial owner of the 21 property. 22 (c) Actions to police property.--Actions or ommissions by an 23 economic development agency which are intended to police the 24 occupant's activities prior to foreclosure or similar action 25 providing repossession of the property to the economic 26 development agency shall not constitute participation in 27 management. These actions include, but are not limited to, the 28 following: 29 (1) Requiring the industrial occupant or related party 30 to remediate releases or potential releases on the property 19930S0650B0691 - 10 -
1 during the term of his occupancy. 2 (2) Requiring the occupant to comply or come into 3 compliance with applicable Federal, State and local laws, 4 regulations and rules. 5 (3) Securing or exercising authority to monitor or 6 inspect the property, including onsite inspections, 7 inspection of the occupant's financial and inspection of the 8 business conditions. 9 (4) Taking any other action to police adequately the 10 loan or security interest such as requiring the occupant to 11 comply with any warranties, covenants, conditions, 12 representations or promises of the occupant or related party. 13 Section 8. Remediation by economic development agency. 14 An economic development agency that meets the requirements of 15 section 4 and which conducts a remedial response in accordance 16 with a written agreement with the department shall not be liable 17 as a responsible party, owner, operator or occupier in an action 18 by the department for a release or potential release of 19 regulated substances. 20 Section 9. Cooperation with governmental agencies performing 21 remedial response activities. 22 (a) Cooperation with Federal Environmental Protection 23 Agency.--An economic development agency and any of its 24 successors and assigns shall take no action that would disturb 25 or be inconsistent with a remedial response that is proposed, 26 approved or implemented by the Federal Environmental Protection 27 Agency. 28 (b) Permit access to Federal and Commonwealth agencies.--An 29 economic development agency and any of its successors and 30 assigns shall permit access to Federal and Commonwealth agencies 19930S0650B0691 - 11 -
1 and other parties acting under the direction of these agencies 2 to evaluate, perform or maintain a remedial response. 3 (c) Performance, operation and maintenance of remedial 4 response.--An economic development agency or any of its 5 successors and assigns shall perform, operate and maintain 6 remedial responses pursuant to State laws as directed by the 7 department. 8 Section 10. Loss of exemption. 9 An economic development agency that fails to comply with 10 section 9 or that no longer satisfies the requirements to be 11 eligible for the limitation of liability as established by this 12 act shall be liable under all applicable environmental statutes, 13 including, but not limited to, the act of June 22, 1937 14 (P.L.1987, No.394), known as The Clean Streams Law, the act of 15 July 7, 1980 (P.L.380, No.97), known as the Solid Waste 16 Management Act, the act of October 18, 1988 (P.L.756, No.108), 17 known as the Hazardous Sites Cleanup Act, and the act of July 6, 18 1989 (P.L.169, No.32), known as the Storage Tank and Spill 19 Prevention Act. 20 Section 11. Applicability. 21 This act applies to all actions, suits or claims against 22 economic development agencies not yet finally resolved by any 23 court having either the action, suit or claim pending before it 24 or an appeal from a lower court regardless of when the release 25 or interest in the subject property occurred. 26 Section 12. Effective date. 27 This act shall take effect immediately. A29L64PJP/19930S0650B0691 - 12 -