PRINTER'S NO. 691

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

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
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     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
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     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
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     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,
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     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
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     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
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     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.
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     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.
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     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
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     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
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     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.


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