Publications

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On October 23, 2009, the Maryland Department of the Environment (MDE) published proposed regulations, which, if implemented as drafted, will usher in sweeping changes to the environmental reporting obligations of businesses, local governments and individuals in the state. The potential impacts on the regulated community are far reaching. The rules may require disclosure of information in prior transactional due diligence reports as well as those prepared in the future, affecting both the marketability of property and the potential liability of owners and operators with respect to the information disclosed and, if disclosures are not made, with respect to potential civil and criminal penalties.

Overview

In 2008, the Maryland General Assembly passed legislation requiring MDE to draft and implement regulations mandating regulated businesses and property owners, among others, to report sampling results or other environmental assessments to MDE that indicate a release of hazardous substances into the environment at or above certain thresholds established by MDE. Under the enrolled law, MDE was required to adopt regulations by June 30, 2009, and the reporting obligations were to take effect on October 1, 2009. However, MDE did not publish draft regulations (including the threshold screening levels) until October 23, 2009, and MDE does not expect final regulations to take effect until January 31, 2010.

Who Must Report

The draft regulations mandate that a “responsible person,” as previously defined in Maryland law, must make the disclosure to MDE. Who qualifies as a “responsible person” is not always an easy question to answer. The term includes current owners and operators¹ of contaminated property as well as those who owned or operated the property when hazardous substances were disposed.² The actions that constitute “operation” of a property and the circumstances that constitute “disposal” are widely debated. The proposed regulations would not require a prospective purchaser to disclose otherwise reportable data obtained as part of its due diligence, until that person becomes an owner or operator of the property.

The proposed regulations do not require consultants to report sampling results to MDE. However, if their clients are “responsible persons,” the clients would be required to report data that exceeds MDE’s threshold screening levels or other reportable assessment information.

What Must Be Reported

A release must be reported by the responsible person if screening levels set out in the regulations or federal “reportable quantities” are exceeded, free product is identified in groundwater, abandoned containers of hazardous substances are discovered or unpermitted waste disposal occurred on the property under certain circumstances.

MDE’s proposed soil screening levels differ for residential and industrial properties. The residential screening levels apply if the property is zoned for residential use, regardless of the actual current property use.

The proposed regulations exempt narrow categories of releases, including releases that were already reported to MDE or the federal government, releases to public water systems and publicly owned treatment works, application of pesticides and fertilizers used for their intended purposes and in accordance with all label requirements and for lawful and non-negligent use of hazardous substances for personal or domestic purposes. Under the proposed regulations, MDE may exempt reporting on metals contamination if MDE determines that the observed levels are due to naturally occurring background levels, but there is no requirement for MDE to do so.

The proposed regulations do not exempt historical sampling results or evidence of historical releases. The proposed regulations require reporting evidence or data meeting the relevant criteria in the possession of a responsible person, no matter how old the sampling data or report may be. MDE guidance issued with the proposed regulations also indicates that the reporting obligations do not fall on just current owners or operators: a former owner or operator who still possesses historical data that is otherwise reportable must submit that data to the state. According to the guidance, it also does not matter for whom the reports were prepared. If the responsible person is in possession of the reportable data, that is enough to trigger the responsible person’s obligation to disclose the information to MDE.

Deadlines for Reporting

The proposed regulations require a responsible person to make the report within 48 hours after discovery if the information is discovered on or after October 1, 2009. If a responsible person possesses a sample result or other reportable information prior to October 1, 2009, the report is due on October 1, 2009. Given the delay in publishing the regulations, the October 1, 2009, deadline is expected to be adjusted when the regulations are finalized.

Procedure for Reporting

Responsible persons must use a reporting form developed by MDE, a copy of which is available on the Department’s website. In addition to property information, the report must include the hazardous substances and media involved, information on potential human receptors and on the properties affected and a summary of actions taken to investigate and remediate contamination.

Penalties for failing to report to MDE as required could be severe. By statute, civil penalties for infractions could be as high as US$25,000 per violation for each day of violation. Criminal penalties for first time offenders could be as high as US$25,000 per violation and/or up to one year imprisonment. The upper range of possible criminal fines and prison terms increase with subsequent convictions.

Implications for the Regulated Community

The disclosure-triggering screening levels proposed by MDE for hundreds of chemical analytes are typically very low. For example, the proposed residential soil reporting level for arsenic, a very common background constituent in Maryland, is 3.9 parts per million (ppm) and 0.45 parts per billion (ppb) for arsenic in water (ie groundwater, surface water or seep water). For benzene, a typical constituent in fuels, MDE proposes residential and industrial soil reporting levels of 1.1 ppm and 5.6 ppm, respectively, and a water reporting level is 0.41 ppb. For PCB aroclors, the proposed soil reporting levels range from 0.17 ppm to 21 ppm, and the proposed water reporting concentrations range from 0.068 ppb to 0.3 ppb. The proposed tetrachloroethylene (aka PCE or dry cleaning solvent) reporting levels are 5.7 ppm, 27 ppm and 1.1 ppb for residential soil, industrial soil and water, respectively. Free product is not defined in the proposed regulations, but other existing Maryland regulations define that term to be any regulated substance present as a nonaqueous phase liquid. In practice, MDE has considered the presence of a regulated substance in water to be free product if it is little more than a sheen.

The proposed regulations do not say what process MDE will use to evaluate and respond to reports and sampling results disclosed under these regulations. In an introductory note to the proposed regulations in the Maryland Register, MDE opined that regulated industries responsible for a release could incur costs to investigate and remediate the contamination. MDE has indicated in guidance that it will eventually issue No Further Action letters (NFA letters) for sites of little environmental concern and will request that sites not qualifying for NFA letters enter the Voluntary Cleanup Program or Controlled Hazardous Substance program.

Reporting parties could be in limbo for many months while MDE wades through hundreds of initial disclosures. The uncertainty about the potential need for investigation and remediation could adversely affect the marketability of certain properties in the interim. On the other hand, failure to make required disclosures could subject current and former owners and operators of Maryland property (as well as persons who arranged for the disposal of hazardous substances, selected the disposal site or transported hazardous substances to a property in Maryland and who are in possession of sampling data or other environmental information indicating that screening levels have been exceeded) to civil and criminal penalties.

Deadline for Public Comment on the Draft Regulations

All public comments must be received by MDE by November 23, 2009. To date, a public hearing has not been scheduled for the proposed regulations. MDE will hold a public workshop on the proposed regulations on November 10 at 10:00 am at MDE’s headquarters in Baltimore. Interested parties must RSVP to MDE to attend the workshop. To register call the Land Restoration Program at +1 410 537 3000.

DLA Piper expects to develop comments on the proposed regulations with interested clients. Should you have questions on the proposed regulations or wish to file comments with MDE, please contact one of the DLA Piper lawyers listed below:

Wm. Roger Truitt Phone: +1 410 580 4277

Gina M. Zawitoski Phone: +1 410 580 4291

Melissa Hearne Phone: +1 202 799 4389