December 28, 2010

Category: Arkansas Environmental, Energy, and Water Law

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Author: Walter G. Wright Potential purchasers, lessees or lenders sometimes attempt to prospectively resolve or clarify the liabilities associated with a given property or facility through the use of Brownfield authorities and/or policies in various states. The Arkansas Department of Environmental Quality ("ADEQ") has utilized certain Brownfield Arkansas statutory authorities for a number of years. The Arkansas General Assembly, in 1995, had provided ADEQ the authority to address Brownfield issues through an amendment to the Remedial Action Trust Fund Act. 1995 Ark. Acts 125. The ADEQ's Brownfield statutory authority includes the ability to provide prospective purchasers of certain properties with known or suspected contamination a covenant that they will not be held responsible for pre-existing contamination (Note "“ this covenant does not affect or apply to common law damage lawsuits). The prospective purchaser must commit to reuse or redevelop the facility for certain activities. Also, the prospective purchaser will usually be required to undertake site assessment work to establish baseline conditions. The ability of the Brownfield process to facilitate an acquisition often depends upon the cost of the assessment/remediation work as compared to the potential value of the property or facility. A recent example of a binding agreement that ADEQ and a prospective purchaser often execute is found in an "IMPLEMENTING AGREEMENT" executed between the agency and a company acquiring property in Mississippi County. The property to be acquired apparently consisted of five parcels. The company was required, in the IMPLEMENTING AGREEMENT, to warrant that it was not responsible for any pre-existing pollution or contamination and had to complete a comprehensive site assessment of the property (among other requirements). The soil and groundwater sampling apparently identified contaminants (above certain Safe Drinking Water Act MCL's). The company agreed to a certain land use that was apparently compatible with this pre-existing contamination. The company also agreed to submit a property development plan pursuant to a schedule to ADEQ that would restrict the use of the property to the activities that were deemed compatible uses, etc. The advantage to the company is presumably obtaining a property for which it will make use at a substantial discount. A key question that should be addressed in these types of transactions is whether the relevant deed restrictions, etc. potentially impair the market value of the property to an extent greater than anticipated? A copy of the IMPLEMENTING AGREEMENT can be found here.
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