In 2008, the Maryland General Assembly passed a law instructing the Maryland Department of the Environment (MDE) to develop regulations requiring property owners to disclose environmental sampling results to the State. On October 31st MDE published draft regulations in the Maryland Register and will be taking comments until December 1, 2014. If enacted, these regulations will significantly alter the obligations of Maryland companies and individuals to report sample results to MDE. Here are answers to what we anticipate will be the most common questions:
Who is required to submit a report?
The law applies to “responsible persons.” Responsible Person is a complicated legal term that has been the subject of much litigation, but for most sites this will usually mean an owner or operator of the property where the sample was taken. However, the obligation is not limited to current owners. A prior owner or operator who has retained a copy of a sampling result meeting the criteria may be required to report the result to MDE. The regulations also provide that people working at the site or other property users may make a report.
It does not matter whether the owner or operator performed the test; the only issue is whether the owner or operator is in possession of the results. So, for example, a prospective purchaser who conducts sampling would not necessarily be required to report it to MDE unless or until the prospective purchaser acquired title. However, if that purchaser provides the current owner a copy of the results, the current owner likely will be required to submit it.
What are the threshold levels?
MDE has published guidance including a long list of constituents with residential and non-residental standards for reporting. These thresholds are generally very low. For many constituents the threshold is the same as the conservative Voluntary Cleanup Program standards; for others, like arsenic, the threshold is the “anticipated typical concentration,” meaning you will be required to report arsenic detections that are what would be expected to occur on any property in Maryland. We anticipate that many Phase IIs and other sampling reports will show at least some sample results that exceed these numbers and therefore may need to be turned over to the State.
How do I know whether a sample result must be reported?
You are required to report sample results under three circumstances: (1) a sample result exceeds the thresholds established in MDE guidance titled “Hazardous Substance Notification Standards Guidance”; or (2) the sample results show a “hazardous substance” (as defined in the regulations) which is floating as “free product” in groundwater, is in excess of reportable quantities under federal law, was disposed without a permit or is in an abandoned container; or (3) unpermitted disposal of industrial waste has occurred on the site.
Does the property’s current use affect the applicable threshold?
The current use of the property does not determine the appropriate standard. For example, the residential soil screening levels will apply to any site which is zoned for residential use, or is not otherwise restricted from being used for residential purposes. So even if the site is currently being used for commercial or industrial purposes, the fact that there is no legal restriction on residential use means that the residential standard applies.
Am I required to disclose old reports?
Yes. The regulations do not include any “grandfathering” for prior sample results regardless of how long ago they were taken as long as you still possess the results. So, for example, a soil sample result from 1980 that a responsible person currently has in his or her possession must be disclosed. In fact, reporting is required even if the responsible person no longer owns the property.
Although the “Assumptions” (from the introductory language in the Maryland Register) section states that Responsible Persons are not required to search their records, if challenged it will be extremely difficult to convince MDE that the property owner did not know it possessed a report. And once a report is discovered, it must be submitted within 30 days of discovery.
When is reporting required?
Responsible persons ("RP") are required to file a report upon the later of: (1) 30 days after the regulations are effective; (2) 30 days after discovery of a report older than October 1, 2009; or (3) 15 days “after discovery” by the RP of sample result above the reporting thresholds.
This will be most problematic mid-transaction when sample results are obtained during due diligence periods. Potential purchasers or their lenders/investors are likely to insist on disclosure and resolution with MDE prior to closing on the property. Depending on transaction deadlines and MDE processing time this may be difficult if not impossible.
Are there any exemptions?
Yes, but they are limited and not likely to help most businesses. The regulations do not require reporting of properly-applied pesticides and fertilizers, de minimus residential use of hazardous substances, releases previously reported to MDE or the EPA, or oil releases already subject to other provisions of MDE regulations.
Is any provision made for naturally-occurring substances?
Yes, but again it is limited and discretionary with MDE. The regulations say that MDE “may” exempt “metallic constituents” if MDE determines that the concentration “is a naturally occurring background concentration.” This may be a frequent problem. Arsenic, for example, naturally occurs in the Baltimore region at levels that exceed MDE’s screening levels.
If I am required to file a report, how is it submitted to MDE?
The regulations provide that MDE will create a form, but it is not included within the regulations. The form will require information regarding property location, the materials triggering the reporting obligation, a summary of historic and current operational activities, proximity to humans, and details regarding the impact of the release including on soil sediment, groundwater, surface water, and indoor air.
After reporting occurs, how will MDE respond?
The regulations do not specify how MDE will respond and there is no deadline for response. This is the most significant unknown and is likely to be a significant issue for real estate transactions. If an immediate No Further Action letter is not appropriate, the assumption is that MDE will compel participation in either the Voluntary Cleanup Program or the Controlled Hazardous Substance Program.
The heart of the problem is less the reporting itself than the uncertainty that will follow. Once property is caught up in the regulatory process it is completely unclear what process will be required to “clear” it, and how long this may take. For property involved in real estate transactions (e.g., buying/selling, mortgaging or refinancing, leasing), once a report is pending it is highly unlikely the transaction will proceed until MDE has issued closure. This closure may simply be a letter stating that no further action is necessary, and if the Department issues the letter very quickly (using its existing staff) the regulations will not be a problem. But there are no deadlines for response, no closure process is set forth in the regulations, and no funding exists for additional staff to process and respond to submissions. If the Department is overwhelmed by submissions, decides further testing is needed, or decides remediation is required, the property could be effectively entering indefinite purgatory.
Is it too late to challenge these regulations?
No. The regulations have been published in draft form and public comments are being accepted until December 1, 2014. During this period interested parties will have the opportunity to submit comments to MDE prior to the finalization of the regulations.
If you have questions regarding Maryland’s new Environmental Reporting Regulations, the Gordon Feinblatt Environmental and Energy Practice Group is ready to help you. For additional information, please contact: Todd Chason, Michael Powell, or Maggie Witherup.