On June 16, 2020, Governor DeWine signed House Bill 168 into law, following the bill’s unanimous passage out of the State Legislature in May 2020. The bill, introduced in March 2019 by former State Representative Steven Arndt (R – Port Clinton), provides liability protection to purchasers of brownfields sites through an affirmative defense.
The new law went into effect on September 14, 2020.
Brownfields are a top policy priority for GOPC, which has focused on encouraging brownfield redevelopment through regulatory reform and increased investment from the state. HB168 provides one such regulatory reform to Ohio.
Background: Brownfields
A brownfield is any previously developed land that is not currently in use that may be environmentally contaminated. The term is also used to describe land previously used for industrial or commercial purposes with known or suspected pollution including soil contamination.
Brownfields are found in every county throughout the state, in both rural and urban communities. These blighted sites discourage investment and create barriers to job creation and economic development. Brownfield redevelopment often involves more time and increased costs, and the environmental contamination increases liability to purchasers and developers. Because of this, their redevelopment is often passed over.
Bona Fide Purchase Defense
Establishing the Bona Fide Purchase Defense (BFPD) in Ohio law will encourage the redevelopment of lightly contaminated brownfields sites. The state’s Voluntary Action Program (VAP) remains the gold standard in the state for liability protection, and will continue to be utilized for heavily-contaminated brownfield sites.
BFPD provides an alternative pathway for purchasers, allowing liability protection through an affirmative defense for purchasers who complete certain due diligence steps. Those steps are referred to in federal law as the “All Appropriate Inquires” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, commonly known as CERCLA.
A purchaser following this pathway will complete their due diligence, and if any of these due diligence steps indicate there is contamination present on the property, the prospective buyer must take reasonable steps to stop ongoing releases and prevent exposure. The goal is to make the property safe for reuse and to prevent any ongoing threats to the environment.
The prospective purchaser following the BFPD pathway will often not have to perform a full-blown expensive cleanup of the property (because of the level and type of contamination). Furthermore, the BFPD is self-implementing. There is no requirement to obtain governmental approvals prior to qualifying for the defense.
In passing the BFPD into Ohio law, Ohio will now be in line with many other states, such as Indiana and Michigan, which have incorporated the federal BFPD or BFPD-like legal protection in state law. HB168 addresses an important gap in Ohio law that placed Ohio at a competitive disadvantage to neighboring states with regard to brownfield redevelopment.
Frequently Asked Questions
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Environmental liability for contamination can deter prospective purchasers from redeveloping brownfields. Congress recognized that liability impeded brownfield redevelopment and, in 2002, passed the Brownfield Amendments to federal law to enhance protections for innocent purchasers (i.e. buyers who did not contaminate the property). One of the protections adopted under federal law for innocent purchasers is called the Bona Fide Prospective Purchaser Defense (also known as: BFPD).
While some states followed with their own state law BFPDs that mirrored the federal BFPD, Ohio never adopted the BFPD. This gap in Ohio law acted as a deterrent to brownfield redevelopment in the state because there was no clear protections for properties that did not want to go through the Voluntary Action Program (VAP).
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The Ohio EPA’s Voluntary Action Program (VAP) provided a pathway for purchasers to work directly with the Ohio EPA to assess, cleanup, and receive liability protection. VAP provided governmental approval for a qualified defense, known as the Covenant-not-to-Sue (CNS).
While this pathway remains the gold standard for brownfield liability protection in the state, the VAP process is often time consuming and expensive. HB168 provides an alternative pathway to receive liability protection that does not require governmental approval. Instead, BFPD offers an affirmative defense, meaning if All Appropriate Inquiries steps have been followed, the property owners’ liability protection can be recognized in civil court cases.
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With HB168 enacted into Ohio law, this offers a new pathway for prospective purchasers of brownfields to receive an affirmative defense to liability protection. Purchasers can follow federal standards established under CERCLA to assert this affirmative defense if a case related to the property is brought to a civil court.
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The steps, referred to in federal law as the “All Appropriate Inquires”, include: 1) reviewing federal and state databases for information about potential contamination on the property; 2) interviewing those with knowledge about the property; and 3) inspecting the property by an environmental professional for signs of contamination. If any of these due diligence steps indicate there is contamination present on the property, the prospective buyer must take reasonable steps to stop ongoing releases and prevent exposure. The goal is to make the property safe for reuse and to prevent any ongoing threats to the environment. However, the innocent prospective purchaser may not have to perform a full-blown, expensive cleanup of the property.
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HB168 does not. The Voluntary Action Program still exists in Ohio law, and is not affected by the passage of HB168.
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HB168 will likely encourage the redevelopment of lightly contaminated brownfield sites. The Voluntary Action Program will remain the pathway for purchasers of heavily contaminated sites.
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Ohio’s previous brownfields program, the Clean Ohio Revitalization Fund (CORF), provided $400M to Ohio’s communities from 2002 to 2013. The funding for this has been dispersed, and has not been funded since.
GOPC has long advocated with stakeholders for regulatory reforms and incentives to encourage brownfields redevelopment. Ohio’s current budget (FY22-23) provided a one-time allocation of $350 million to the new Brownfield Remediation Fund, but more funding will likely be needed in the future.
An Overview of HB168 and the BFPD
Greater Ohio Policy Center (GOPC) hosted this webinar, featuring panelists Joseph Koncelik (Tucker Ellis LLP) and Kristin Watt (Vorys, Sater, Seymour, and Pease LLP), providing participants with an overview of HB168 and the BFPD in practice.