Environmental Cleanup

A Prospective Purchaser Agreement is a legally binding agreement between DEQ and a prospective purchaser or lessee of real property. A PPA limits the purchaser’s or lessee’s liability to DEQ for environmental cleanup of the property. In return for this liability release, the PPA must provide the state with a substantial public benefit (see below). The PPA does not provide protection from liability a purchaser or lessee may have under federal law or from liability for any new contamination that may occur after the purchaser or lessee acquires the property. A PPA must be negotiated with DEQ before the purchaser or lessee acquires an interest in the property. The following links will take you to information about PPAs and liability management, and to Oregon statutes that authorize DEQ to enter into PPAs.

Forms

 

The Oregon Department of Environmental Quality uses Prospective Purchaser Agreements to facilitate cleanup and productive reuse of properties contaminated with hazardous substances.

Investment in properties with existing contamination can be uncertain due to the strict liability scheme under state and federal laws. PPAs benefit buyers by limiting their liability, and benefit the state and local jurisdiction by promoting environmental cleanup, returning properties to productive use, and allowing purchasers to provide substantial public benefits.

Who is a prospective purchaser?

A prospective purchaser can be an individual, business, government body or any other entity with the interest and ability to purchase or lease contaminated property, where the prospective purchaser has neither caused nor aggravated contamination.

How would a PPA benefit me?

If you’re thinking about buying property that you know or suspect to be contaminated with hazardous substances, you may be interested in a Prospective Purchaser Agreement. The agreement’s liability protections clarify and limit your responsibility to the state of Oregon for the existing contamination. PPAs often make it easier to obtain financing for property purchase. Because it “runs with the land,” a PPA can also protect subsequent owners and lessees, as long as they adhere to the PPA’s terms.

I just bought a contaminated property and didn’t cause the contamination – can I still enter into a PPA?

No. PPAs must be negotiated and finalized before the property is purchased.

If I’m buying contaminated property, do I automatically get a PPA from DEQ?

No. Every property presents a unique set of circumstances and not all properties are appropriate for PPAs. As a starting point, the minimum requirements in the law are:

  • The prospective purchaser isn’t responsible for cleaning up existing contamination at the property;
  • There is contamination at the property and the law requires it to be cleaned up;
  • The prospective purchaser’s proposed use for the property will not worsen contamination or interfere with necessary cleanup; and
  • A substantial public benefit will result from the agreement.
What is a substantial public benefit?

The law provides the framework for DEQ’s evaluations by listing examples of substantial public benefit, including:

  • Generation of substantial funding or other resources for environmental cleanup at the property.
  • Commitment to perform substantial environmental cleanup at the property.
  • Productive reuse of an abandoned or vacant industrial or commercial facility.
  • Development of the property by a governmental entity or non-profit to address an important public purpose.

These are typical substantial public benefits for PPAs that DEQ has negotiated. However, DEQ evaluates each agreement individually, and there’s a wide range of potential substantial public benefits. DEQ encourages prospective purchasers to be creative.

How do I apply for a PPA? Is there an application fee?
  • Begin the process by contacting DEQ’s Prospective Purchaser Program coordinator to obtain the program packet and schedule an initial meeting.
  • During the initial meeting, DEQ staff will ask questions to determine whether a PPA is appropriate for this property.
  • If you and DEQ decide to move forward, you must submit an application and a $2,500 deposit. The deposit is required for DEQ to start working on the PPA; it does not ensure that a final agreement will be reached.
  • You then begin negotiations, share technical information about property contamination, and strive to reach an agreement that meets the needs of both you and the state. If, as part of the PPA, you agree to conduct cleanup actions at the property, you will do so through DEQ’s cleanup program.
  • When the PPA is completed, or negotiations cease, any balance remaining from the deposit is refunded.
How long does it take to get a PPA?

Average time to complete a PPA is eight to twelve weeks. The length of time depends on: 1) how much DEQ knows about contamination at the property; 2) whether DEQ needs to modify the standard PPA language to accommodate unique circumstances; and 3) the number of PPAs that DEQ staff is currently working on.

What happens after the PPA is finalized?

You have an obligation to properly record the PPA and related documents in the appropriate county office, and must meet all PPA conditions. Failure to do either of these may void the agreement and the liability protections it provides.

Who do I contact?

Please call DEQ's PPA program coordinator at 503-229-6461 (800-452-4011 x6461, toll-free in Oregon) if you have questions about the program or want to discuss whether a PPA may be appropriate and useful for your transaction.

Known or potential contamination may add cost and uncertainty to real estate transactions. Therefore, it is natural for buyers of contaminated properties in Oregon to be concerned about their potential liability for costs associated with investigating and cleaning up that contamination. For those acquiring such properties, this fact sheet briefly describes potential liability under Oregon’s environmental cleanup law and under the federal cleanup law, Comprehensive Environmental Response, Compensation and Liability Act, and some methods to manage that liability.

NOTE: This information is not intended and should not be construed as legal advice. Prospective purchasers should consult with an attorney before buying potentially contaminated property.

Buyer liability under Oregon law

Under Oregon Revised Statute 465.255, a buyer of contaminated property may become liable for the cost of cleaning up existing contamination, if the buyer knew or should have known about the contamination at the time of purchase. When a pre-acquisition environmental assessment reveals contamination, the purchaser may become liable for that contamination - even though it occurred before the purchaser became the owner. Similarly, a person buying property without first conducting an environmental assessment may become liable for existing contamination that is discovered later.

Addressing state liability concerns

ORS 465.255 includes some statutory defenses that are particularly relevant to buyers. For example, under the “innocent purchaser” defense, a person who buys property that is already contaminated would not be liable if the person did not know and reasonably should not have known of the contamination at the time of purchase. To maintain this defense, the person must have conducted “all appropriate inquiry” before purchasing the property. Although Oregon has not adopted an AAI rule, an assessment consistent with the federal AAI rule (discussed below) would generally constitute satisfactory inquiry. Other forms of inquiry may also be sufficient. In any case, if the pre-acquisition assessment identifies contamination or conditions requiring further inquiry, this defense would not be available.

Persons who inherit contaminated property and entities that take contaminated property by condemnation or tax foreclosure may also have defenses to liability under Oregon law. Oregon law also provides a “security interest holder” defense to liability, which may protect lenders and others who hold mortgages or trust deeds on contaminated property simply to secure payment.

Other liability management tools

Other state tools available to prospective buyers to manage potential liability include Prospective Purchaser Agreements and No Further Action decisions.

The Oregon Legislature created the Prospective Purchaser program to encourage redevelopment of contaminated properties. DEQ may enter into a PPA with a prospective buyer that limits the purchaser’s liability for environmental cleanup at the property if the agreement will result in a “substantial public benefit” (e.g., substantial funding toward cleanup, cleanup actions, or productive reuse of vacant property). PPAs can often help buyers and sellers decide who will pay for and complete cleanup of the property. To provide liability protection, a PPA must be completed before the purchaser closes on the property.

In many cases, concerns about liability can be addressed by the seller cleaning up the property before closing on the sale. Sellers often work though DEQ’s Voluntary Cleanup Program to investigate and clean up contamination before a transaction closes. When cleanup is complete, DEQ will issue a NFA letter. This action does not release a current owner or subsequent purchaser from liability but does indicate that, based on information then available to DEQ, the property has been cleaned up to DEQ’s satisfaction. NFAs may include conditions such as long-term monitoring requirements or land-use restrictions. In either case, for many purchasers, a NFA is a practical approach to address contamination.

In addition, DEQ’s Off-Site Contaminant Migration Policy (which replaces the Contaminated Aquifer Policy) applies to certain properties that have been contaminated solely by releases at other properties.

Note that even if a person qualifies for a defense to liability, a PPA, or relief under DEQ’s Contaminated Aquifer Policy, it does not mean that DEQ or someone else will clean up the property.

Buyer liability under federal law

Under CERCLA, the owner of contaminated property is liable for cleanup costs, unless that owner qualifies for one or more statutory defenses.

CERCLA provides an “innocent purchaser” defense similar to that in Oregon law, for purchasers who “did not know and had no reason to know” of property contamination at time of purchase. This defense requires the buyer to perform all appropriate inquiry in compliance with U.S. Environmental Protection Agency rules (Code of Federal Regulations, Title 40, Part 312). A detailed property assessment is required to meet the AAI standard.

CERCLA also provides a Bona Fide Prospective Purchaser defense to liability for certain buyers of contaminated property - even when buyers know of the contamination. Purchasers must perform all appropriate inquiry in compliance with the EPA rule and satisfy various “continuing obligations” to maintain the defense.

Unlike a PPA with DEQ, the federal Bona Fide Prospective Purchaser defense does not require a written agreement with EPA. This lack of an agreement, and uncertainty about several provisions in the new BFPP law, has caused concern among some buyers about their potential federal liability. EPA’s BFPP Policy recognizes that, in limited instances, the public interest is served by EPA entering into Prospective Purchaser Agreements or some other form of agreement with purchasers of contaminated property.

Similar to Oregon law, security interest holders, persons who inherit contaminated property and entities taking contaminated property through condemnation may have a defense to liability under CERCLA.

Managing liability with private agreements

Parties to a real estate transaction can also allocate liability for contamination as between the buyer and seller through indemnification, hold-harmless, or similar agreements. While these can help buyers address uncertainty and are a common feature of many transactions, they do not relieve buyers of any underlying liability.

Summary
  • A prospective purchaser of property that may be contaminated should make sure the property is investigated before the transaction closes.
  • For many purchasers of contaminated property, having an agreement with the seller for cleanup, or ensuring that a DEQ No Further Action decision is in place are practical approaches to managing concerns about contamination and potential liability.
  • To manage liability under state law, DEQ offers Prospective Purchaser Agreements.

Special rules not addressed in this fact sheet may apply to properties subject to RCRA (federal Resource Conservation and Recovery Act) or to properties with underground storage tanks.

Who do I contact?

Please call DEQ's PPA program coordinator at 503-229-6461 (800-452-4011 x6461, toll-free in Oregon) if you have questions about the program or want to discuss whether a PPA may be appropriate and useful for your transaction.

 

Laws and regulations

Examples of Prospective Purchaser Agreements

Starting in 1964, this 15.5-acre site in Portland was the terminal for the transportation of bulk liquids and heavy equipment. On-site operations included truck fueling and tanker rinsing; the site contained ponds and later, a six-cell aeration treatment system designed to handle liquid wastes generated from truck rinsing. Over the years, companies operating at the site reported spills, and DEQ received complaints about unauthorized disposal of hazardous substances that affected the adjacent Columbia Slough. After operations ceased in the 1990s, the property trustee began looking for a buyer. By this time, contaminated subsurface soil and groundwater had been documented, involving a broad range of substances, including free-product petroleum, pesticides, and PCBs. North Portland Road, LLC wished to buy the property, and in December 2005 entered into a PPA with DEQ, executed as a judicial Consent Judgment. Under the Consent Judgment, North Portland Road agreed to conduct further investigation and removal/remedial actions, including possible deed restrictions governing future use of the property, as determined appropriate by DEQ under its Voluntary Cleanup Program. North Portland Road also agreed to provide funding for future investigative and remedial actions in the Slough. In return, the Judgment provided North Portland Road with a release from liability under Oregon law for releases of contamination at the property, including into the Slough. By executing the PPA as a Consent Judgment, North Portland Road also received protection from possible contribution action by third parties for the contamination.

Less than 1 acre in size and located along a commercial corridor adjacent to I-5 in Eugene, the former Franko facility sold gasoline from 1976 until its closure in 1991. At that time, the owners filed Chapter 7 bankruptcy, and the property was turned over to a bankruptcy trustee. Also in 1991, petroleum contamination from the site was observed during trenching along the highway just east of the site. Contamination had also migrated to a residential well west of the facility. In 1996, a private party purchased the property out of bankruptcy, removed the five USTs and removed contaminated soil. Subsequent assessment identified the former fuel pump islands as the primary source of contamination. Lane County eventually acquired the property through tax foreclosure, and in January 2005 removed over 400 tires and 15 drums of wastes from past investigations, as well as other miscellaneous debris from the property originating from transients and squatters. Based on the site’s size, location, and configuration, SeQuential Retail Station #1, LLC wished to purchase the site and construct its first retail biofuels facility, but was concerned about its potential liability for site contamination. In July 2005, SeQuential and DEQ entered into a PPA that released SeQuential from liability for existing contamination. In return, SeQuential agreed to provide $50,000 toward the cleanup and to complete development of its retail fueling facility. In conjunction with the PPA process, DEQ worked with Lane County to enhance the prospects for a property transaction, by using U.S. EPA grant funds to conduct further investigation of the site, and by helping the County secure a separate $200,000 grant from EPA to conduct needed removal/remedial actions. SeQuential completed its retail biofueling station in August 2006.

Located on the Willamette River in the Portland Harbor area, the MFC facility has been used for office trailer storage, warehousing, and houseboat construction. In April 2000, DEQ and MFC signed a voluntary agreement to investigate the site. But because MFC was financially unable to conduct investigation and cleanup, DEQ declared the site an Orphan, and then conducted two rounds of environmental assessments. DEQ also removed abandoned waste containers and lead-acid batteries from the facility. The investigations revealed petroleum, metal, and PCB contamination somewhat above safe levels on the property and in adjacent sediment; however, no significant or widespread contamination was found. In November 2004, Advanced American Construction Properties, LLC signed a PPA with DEQ, in which DEQ released Advanced American from liability under Oregon law for releases of contamination at the property, including releases into the Willamette River. For its part, Advanced American agreed to complete a source-control evaluation and develop a plan to address potential impacts to the Willamette River from the site. The PPA also required a small removal of contaminated shallow soil, and implementation of a DEQ-approved stormwater and soil-management protocol during site development. Working with DEQ’s Voluntary Cleanup Program under the PPA, Advanced American conducted additional soil sampling in January 2005 and found no new areas of potential concern. Advanced American subsequently completed construction of a new building, and has consolidated its business operations at the site.

 
 

Eligible sites

Generally, eligible sites are properties contaminated with hazardous substances, including petroleum, where removal or remedial activities are needed to protect human health or the environment. DEQ may enter into PPAs for such sites at its discretion. In many instances, a PPA may be useful to facilitate the acquisition, cleanup and redevelopment of contaminated property; however, a PPA may not be appropriate or useful in all cases.

Eligible applicants

A PPA may be available for an individual, business, nonprofit, governmental body or any other entity that intends to acquire contaminated property. The prospective purchaser or lessee must not have caused or aggravated the contamination at the property, and must not have been affiliated with individuals or entities responsible for the contamination.

Substantial public benefit

Among other qualifying criteria, Oregon law requires DEQ to determine that the state will receive a substantial public benefit from entering into a PPA. What this means will differ from site to site, because each property presents a unique set of cleanup and redevelopment issues and opportunities. In general, a PPA will include some combination of: substantial funding for cleanup or a commitment to perform substantial cleanup; productive reuse of a vacant or abandoned industrial or commercial facility; or a development by a government entity or nonprofit organization to address an important public purpose.

Beginning the PPA process

Please call DEQ's PPA program coordinator at 503-229-6461 (800-452-4011 x6461, toll-free in Oregon) if you have questions about the program or want to discuss whether a PPA may be appropriate and useful for your transaction.
 
Below is a link to DEQ’s guidance document for the PPA program, describing the program in greater detail. It includes qualifying criteria, costs for applying for a PPA, and the process for developing a PPA. There are also links to documents that DEQ will ask you to prepare and submit once you and DEQ decide that a PPA is appropriate for your transaction.