First Non-Liable Party Agreement to Clean Up a Superfund Site First ...

First Non-Liable PartyAgreement to Clean Up a

Superfund Site

First NonFirst Non--Liable PartyLiable PartyAgreement to Clean Up aAgreement to Clean Up a

Superfund SiteSuperfund Site

Christopher B. AmandesVinson & Elkins L.L.P.

1001 Fannin, Suite 2300Houston, Texas 77002-6760

© 2006

Christopher B. AmandesChristopher B. AmandesVinson & Elkins L.L.P.Vinson & Elkins L.L.P.

1001 Fannin, Suite 23001001 Fannin, Suite 2300Houston, Texas 77002Houston, Texas 77002--67606760

© 2006© 2006

Unique Elements of this TransactionUnique Elements of this TransactionUnique Elements of this Transaction

• Non-liable party will clean up NPL site as part of purchase consideration

• Customized covenants not to sue for future home purchasers before groundwater remedy is fully implemented

• Touted as “model” for future NPL cleanups

Today’s PresentationToday’s PresentationToday’s Presentation

• Site overview and history• Elements of remedy• History of transaction• Agreed order• Covenants not to sue• Additional complications• Future model?

MDI Site LocationMDI Site Location

MDI Site MapMDI Site MapMDI Site Map

History of MDI Site – Site UseHistory of MDI Site History of MDI Site –– Site UseSite Use

• Originally developed as Houston Brick Works; clay excavated from on-site gully

• 1926: TESCO began foundry operations• Expanded during WWII, second foundry built in

1970s• Mid-1980s: Can-Am leased part of site for

refinery catalyst recycling operation• 1988: Can-Am ceased operations, abandoned

~4000 drums of spent catalyst on site

History of MDI Site – Site UseHistory of MDI Site History of MDI Site –– Site UseSite Use

• 1990: MDI purchased TESCO note from TESCO’s bank

• 1991: TESCO ceased operations, MDI foreclosed

• 1991 – 92: MDI operated foundry as San Jacinto Foundry

• June 1992: SJF filed for bankruptcy• May 1994: MDI filed for bankruptcy• 2001: SJF, MDI bankruptcies consolidated

History of MDI Site – Post-BankruptcyHistory of MDI Site History of MDI Site –– PostPost--BankruptcyBankruptcy

• 1995 – 96: Foundry demolished as salvage effort pursuant to bankruptcy court order

• 1998 – 99: PRP-led removal action of abandoned catalyst drums, visibly contaminated soil

• 1998: TCEQ removal action for lead-contaminated soil from 89 residential yards

• 2003: EPA removal action for lead-contaminated soil from 57 residential yards, school, community center

History of MDI Site - SuperfundHistory of MDI Site History of MDI Site -- SuperfundSuperfund

• Jan. 1999: Site added to NPL

• Jan. 2003: RI/FS begun

• Nov. 2003: RI/FS completed

• July 2004: ROD issued for OU-1

ROD ElementsROD ElementsROD Elements

• Excavation, treatment if necessary, and off-site disposal of ~13,600 cy lead-contaminated soil– >500 mg/kg – Top 18 inches

• Treatment, if necessary, and off-site disposal of ~3000 cy of soil stockpiled on-site from OU-2 removal action

• Transportation and off-site disposal of ~31,600 cy of debris, ACM, and UST

• Excavation and off-site disposal of ~2100 cy of soil contaminated with PAHs, LNAPL, and TPH

ROD ElementsROD ElementsROD Elements

• MNA for two organic plumes

• Long-term monitoring for one metals plume

• Institutional controls for soils remedy, groundwater remedy

Remedy ElementsRemedy Elements

DebrisDebrisDebris

ACM/DebrisACM/DebrisACM/Debris



Waste Oil TankWaste Oil TankWaste Oil Tank

Groundwater Monitoring WellGroundwater Monitoring WellGroundwater Monitoring Well

Building to be DemolishedBuilding to be DemolishedBuilding to be Demolished

DebrisDebrisDebris

Extent of LNAPLExtent of LNAPL

Evolution of the TransactionEvolution of the TransactionEvolution of the Transaction

• Sept. 2003: Original trustee proposal– Auction to purchase property– Earnest money paid upon signing of sales contract– EPA conducts cleanup– High bidder closes on property at completion of cleanup, pays

balance of purchase price– Bankruptcy trustee gets proceeds (side deal with EPA on

reimbursement of some EPA costs)

• Proposal fine-tuned after comments

• Nov. 2003: EPA announces it has insufficient funds to perform cleanup

Back to the Drawing BoardBack to the Drawing BoardBack to the Drawing Board

Elements of Transaction As ExecutedElements of Transaction As ExecutedElements of Transaction As Executed

• Auction for site• Bid consists of:

– Cash consideration to trustee– Commitment to enter into AO with EPA to clean up

site• Closing occurs upon finalization of AO, EPA

approval of financial assurance• Winning bidder cleans up property under full

EPA oversight

History of TransactionHistory of TransactionHistory of Transaction

• Mar. 2005: Auction for property, CGI is only bidder

• Apr. 2005 – May 2006: Negotiation of agreed order

• May 2006: CGI signs agreed order• Summer 2006: Public notice, public meeting• Sept. 2006: EPA signs agreed order• Closing

Major Agreed Order Negotiation IssuesMajor Agreed Order Negotiation IssuesMajor Agreed Order Negotiation Issues

• Need to remove all LNAPL contaminated soils

• Length of time required for MNA

• Post-remediation access to property to conduct 5-year reviews– Locations of monitoring wells– Access to houses constructed on-site

• Liability protection for future house buyers, lenders

Agreed Order FeaturesAgreed Order FeaturesAgreed Order Features

• Issued under CERCLA §§ 106, 122

• CGI agrees to implement ROD remedy pursuant to Agreed Order, General Work Provisions, Statement of Work

• EPA agrees to remove federal lien, eliminate the §107(r) windfall lien, provide CNTS

• CGI certifies relevant BFPP elements (did not cause contamination, disclosed what it knows, AAI)


• CGI to provide financial assurance for estimated cleanup cost

• CGI to reimburse EPA for oversight costs– Capped at $210,000 in exchange for waiver of right to dispute

• Stipulated penalties for failure to meet schedule for:– Final RD Work Plan– Final RD Report– Final RA Work Plan– Final Soils RA Report– Final Interim GW RA Report– Final Closeout GW RA Report– Assessment discretionary with EPA


• Covenant Not to Sue– Applies to claims under CERCLA §§ 106, 107, RCRA § 7003– Conditioned on satisfactory completion of Agreed Order– Applies to Existing Contamination

• Hazardous substances on site as of Effective Date• Hazardous substances removed from site or that migrated

from site before Effective Date• Hazardous substances that migrate onto, under, or from the

site after Effective Date


• Reservation of rights– Failure to comply with Agreed Order– Future releases at or from site caused by CGI– Releases after Effective Date beyond definition of Existing

Contamination– Criminal liability– Natural Resource Damages– CGI exacerbation of Existing Contamination other than as

provided by the Work– Violations of federal or local law

• Contribution protection: “matters addressed” are those actions and costs to address Existing Contamination

“Tract Buyer” Covenant Not to Sue““Tract Buyer” Covenant Not to SueTract Buyer” Covenant Not to Sue

• Must be applied for before sale of tract closes or tenancy begins

• Effective upon receipt by EPA– No “approval” requirement– Remains effective as long as conditions satisfied– Void if application determined not to be materially

accurate• Applies to purchasers, lessees, and lenders


• Representations Made by Beneficiaries– It is a purchaser, lessee, or lender– It has not caused or contributed to contamination

on property before Effective Date of Agreed Order– It will comply with institutional controls in real

property records– It has read and understands Attached EPA Letter– If necessary, it will permit access to persons

authorized to conduct response actions


• Attached EPA Letter describes activities that may require access– Applies after Soil RA and Interim Groundwater RA– Five year reviews of soil remedy: Is there evidence of removal

of 18-inch fill layer above 500 ppm lead soils?– Sample monitoring well if one is located on the tract– Possible need to install new wells if plumes or contaminant

concentrations increase

• Letter does not limit EPA’s statutory access rights• Tract Buyer gets same contribution protection as CGI

Additional ComplicationsAdditional ComplicationsAdditional Complications

• Off-site arsenic plume

• State of Texas past response costs

Arsenic PlumeArsenic Plume

Arsenic PlumeArsenic PlumeArsenic Plume

• Covered by covenant not to sue as Existing Contamination

• Excepted from Statement of Work• Contemplate Texas “Innocent Owner/Operator”

certificate– TCEQ determination that source of contamination is off-site– Owner not otherwise responsible or legally liable– Released from any cleanup obligation– Only condition is to provide reasonable access to those

seeking to clean up– Consistent with access rights in EPA “Tract Buyer” release

State of Texas Past Response CostsState of Texas Past Response CostsState of Texas Past Response Costs

• ~$1.5 million in past response costs

• State of Texas not a party to Agreed Order

• Bankruptcy court order arguably ambiguous about CGI’s liability for past TCEQ costs upon becoming a current owner

• TCEQ wrote “comfort letter” indicating intention not to seek past costs if Agreed Order successfully implemented

“Model” for Future NPL Cleanups?““Model” for Future NPL Cleanups?Model” for Future NPL Cleanups?

• Property is “right side up”

• No solvent owner

• Enough information to quantify cleanup costs with confidence

• Remedy is consistent with future development

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