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Pennsylvania Prospective Purchaser Agreements: Emphasis on ‘Prospective’

This is an update to a 2019 post.

Section 1113 of the Pennsylvania Hazardous Sites Cleanup Act (“HSCA”), 35 Pa. Stat. Ann. § 6020.1113, authorizes settlements of responsible parties’ obligations. The Department of Environmental Protection has used it to enter into prospective purchaser agreements under which a prospective new owner fixes its liability for pre-existing contamination at a site that the new owner wishes to develop.

Two years ago we noted the Environmental Hearing Board’s decision in Delaware RiverkeeperNetwork v. Dep’t of Envt’l Prot’n, EHB Dkt. No. 2018-20-L (Apr. 26, 2019), that held invalid amendments to a PPA between Constitution Drive Partners and DEP. At the time, the lesson of the EHB’s opinion was that prospective purchasers had to attend to the administrative record supporting their PPA, lest a challenge to the agreement succeed based on a sloppy or incomplete record.

Constitution Drive Partners appealed. On March 5, the Commonwealth Court affirmed the EHB’s invalidation of the PPA amendments, but for a subtly different reason with a potentially different (and more concerning) implication. Constitution Drive Partners, LP v. Dep’t of Envt’l Prot’nNo. 643 CD 2019 (Pa. Commw. Ct. Mar. 5, 2021).

The case involved two amendments to a 2005 PPA calling for a defined cleanup of the Bishop Tube site and the grant of liability protection to the prospective purchaser in exchange. The agreement was amended in 2007 and again in 2010. The owner (by then) substantially performed, although the remedy had difficulties. The DEP neglected to publish the proposed amendments until 2017. The Riverkeeper submitted adverse comments, but DEP nevertheless finalized the amendments in 2018 and the Riverkeeper appealed.

Challenges to section 1113 agreements are on the administrative record, rather than de novo as is typical in the EHB. The long delay, failure of one of the remedial systems, rezoning of the property, a lot of remedial work, and other changes were not properly reflected in the record because of the long delay. Accordingly, the EHB held that the finalization of the amendments was arbitrary and capricious in 2018.

The Commonwealth Court reasoned somewhat differently. It held that section 1113 requires notice to all responsible parties and the public before DEP enters into a settlement. The notice must come after the agreement is reduced to writing and before it takes effect. The public must then have 60 days to comment, and DEP must respond to the comments. The notice in this case came after the deal closed and the work was done, so the agreement could not convey liability protection.

In the context of a transaction, publication, a 60-day comment period, and time to respond to comments can be a material delay. But treating the settlement as concluded before that delay can put the prospective purchaser’s protection into question. Prudent parties will be careful with this mechanism.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XI, Number 74
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About this Author

David G. Mandelbaum, Greenberg Traurig Law Firm, Philadelphia, Environmental Law Litigation Attorney
Shareholder

David G. Mandelbaum represents clients facing problems under the environmental laws and serves as Co-Chair of the firm's Environmental Practice. He regularly represents clients in lawsuits and has also helped clients achieve satisfactory outcomes through regulatory negotiation or private transactions. David teaches Superfund, and Oil and Gas Law in rotation at the Temple Law School. He has taught Environmental Law, Climate Change and Land Use Law and Administration in the past, and he is a regular writer and speaker on the subjects.

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215-988-7813
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