Utah Bar Journal

UECA represents one of the most recent efforts of the National Conference of Commissions on Uniform State Laws ("NCCUSL"). NCCUSL finalized and adopted UECA in August 2003. Since its adoption, UECA has been enacted by a number of state legislatures, including Delaware, Iowa, Kentucky, Maine, Maryland, Nebraska, Nevada, North Dakota, Ohio, South Dakota, Utah, West Virginia, and Wyoming.1

The need for a uniform law like UECA arises out of the burgeoning Brownfields movement focused on bringing contaminated and underused properties back into full productive use in the community. UECA is complementary of federal statutes like the Small Business Liability Relief and Brownfields Revitalization Act ("Brownfields Amendments")2 and state statutes like the Utah Voluntary Cleanup Program ("VCP").3 Among other things, these statutes seek to encourage the purchase of and investment in contaminated sites by offering defenses and alternatives to the notorious strict, joint and several liability scheme of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").4 The VCP also seeks to encourage cleanup of contaminated sites by providing procedures for voluntary cleanup of Brownfields sites using flexible risk-based cleanup levels that are selected depending on the anticipated future use of the property.5

The effective, long-term use of risk-based cleanup levels is dependent on the ability of site owners, the Utah Department of Environmental Quality ("DEQ"), and other parties interested in the site to create, implement, and enforce "institutional controls" at Brownfields sites. Generally speaking, institutional controls fall into five different categories: (1) proprietary controls (e.g., deed restrictions, easements, and restrictive covenants); (2) local government controls (e.g., zoning, variances, and building permits); (3) statutory enforcement controls (e.g., administrative orders and consent decrees); (4) information devices (e.g., deed notices, record notice, and notice to government agencies); and (5) engineering and access controls (e.g., pavement or caps over contamination, slurry walls, and fencing).6

As of May 1, 2006, institutional controls at Brownfield sites must be implemented under UECA in lieu of the Utah Environmental Institutional Controls Act which was enacted in 2003 by the Utah Legislature.7

Hypothetical Example of UECA in Action: For example, ABC Corporation owns an 8-acre parcel in an urban location historically used for commercial and industrial purposes. Over the years, there have been some releases of hazardous constituents at certain locations at the site where raw materials and waste materials were handled. These activities and releases resulted in some contamination of the soil and groundwater. ABC Corporation closed and cleaned up these facilities with the approval of DEQ utilizing risk-based standards that contemplate only commercial or industrial uses on certain contaminated portions of the site. DEQ is satisfied with the closure and issues ABC a "no further action" letter. ABC does not contemplate or desire residential uses on the contaminated portions of its site. A large cap is placed over a significant portion of the waste materials which have been consolidated into a corner of the site. ABC now wishes to sell the property, but is concerned that the cap and other cleanup remedies never be disturbed. ABC sells the property to XYZ Corporation with deed restrictions (i.e. an "environmental covenant") requiring no disturbance of the cap and no future use of designated portions of the property for residential purposes. An environmental covenant is prepared and signed by ABC, XYZ and DEQ. Furthermore, the environmental covenant is recorded in the county where the site is located.

In the foregoing hypothetical, ABC Corporation was motivated to clean up the site only to commercial standards because it is less expensive than cleaning the property to residential standards. Moreover, ABC reasons that so long as its deed restrictions on the site are complied with and enforced the chosen cleanup standards are fully protective of public health and the environment. ABC Corporation is also concerned the designated portions of the property continue to be used only for commercial purposes to avoid possible liability down the road from a subsequent buyer who uses the site for residential purposes and claims injury.

UECA allows a seller to impose restrictions on parcels of real estate in the form of "institutional controls" or "environmental covenants" that are enforceable by the initial seller and his buyer, the state environmental agency (DEQ), the municipality where the parcel is situated, and any other person expressly granted the right of enforcement in the covenant.8 Moreover, the environmental covenant runs with the land9 and has a duration that is "perpetual."10

To be valid and enforceable, the environmental covenant must be signed by the state environmental agency (DEQ) and each "holder" or grantee of the environmental covenant.11 The environmental covenant must also be recorded in the appropriate county - in every county in which any portion of the real estate subject to the environmental covenant is located.12

Since enactment of UECA by the Utah Legislature earlier this year, DEQ officials have been developing a form environmental covenant that could be used at any particular site to ensure the long-term enforceability of agreed upon environmental restrictions.

UECA is complementary of the growing strategy for dealing with environmental issues in commercial and industrial real estate situations: (1) perform environmental due diligence ("all appropriate inquiry") prior to taking title in any potentially contaminated real property to establish the foundation for qualifying for the "bona fide prospective purchaser," "adjoining property owner" or "innocent purchaser" defenses to CERCLA liability provided by CERCLA and the 2002 Brownfields Amendments; (2) as the new owner of a potentially contaminated site, obtain "written assurances" from federal and state environmental officials acknowledging qualification for the defenses to CERCLA liability on conditions of appropriate care of known contaminants and cooperation, assistance and access to environmental officials; (3) as circumstances dictate, perform a risk-based, voluntary or state directed cleanup of the site to comply with commercial cleanup standards where only non-residential future uses of the site are contemplated; and (4) utilizing UECA, impose appropriate environmental covenants or servitudes on the parcel in order to protect the seller and all subsequent buyers from future liability.

Conclusion:
The field of environmental law continues to evolve and mature through the enactment of more practical federal and state legislation. UECA is the latest example of this trend towards the creation of incentives for investing in and remediating contaminated Brownfields sites. Used properly in the hands of knowledgeable environmental practitioners, UECA can provide protections in the form of environmental covenants for owners, sellers and other parties with an interest in contaminated properties. UECA allows for intelligent, risk-based remedies at contaminated sites with the assurance of minimization of environmental liability through the imposition and enforcement of institutional controls.

1. See 19 Probate & Property 31 (May/June 2005), 19 Probate & Property 16 (July/August 2005), 19 Probate & Property 25 (September/October 2005); and 19 Probate & Property 32 (November/December 2005).

2. Pub. L. No. 107-118, 115 Stat. 2356 (2002) (amending 42 U.S.C. ¤¤ 9601 et seq.).

3. U.C.A. ¤¤ 19-8-101 to 120.

4. 42 U.S.C. ¤¤ 9601 et seq.

5. U.C.A. ¤ 19-8-110(5). See also U.A.C. R315-101 (Cleanup Action and Risk-Based Closure Standards).

6. A. Edwards, "Institutional Controls: The Converging Worlds of Real Estate and Environmental Law and the Role of the Uniform Environmental Covenant Act," 35 Conn. L. Rev. 1255, 1260-1262 (2003).

7. U.C.A. ¤ 19-10-101 to 108.

8. U.C.A. ¤ 57-25-111.

9. U.C.A. ¤ 57-25-105(1).

10. U.C.A. ¤ 57-25-109(1).

11. U.C.A. ¤ 57-25-104(1)(e).

12. U.C.A. ¤ 57-25-108(1).