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Property owners must pay for environmental cleanup costs that occurred before they acquired it, a federal appeals court said.
In Pennsylvania Department of Equal Protection v. Trainer Custom Chemical, the U.S. Third Circuit Court of Appeals dropped an $818,000 cleanup bombshell on a chemical company after it purchased a property for $20,000. Pennsylvania's environmental protection department sued to recover the cleanup costs.
A trial judge said Trainer Custom Chemical was responsible for costs incurred after the purchase, but not before. The appeals court read the law differently.
It basically started in 2007, when Stoney Creek Technologies bought the site. The company used it for making corrosion inhibitors, fuel additives, and oil products, and kept about 20 million gallons of flammable or combustible chemicals there.
The Pennsylvania Department of Equal Protection investigated and concluded there was "a release or threat of release of hazardous substances" at the site. The department and the federal Environmental Protection Agency started a removal action.
Stoney Creek could not afford a cleanup and fell behind in real estate taxes. Trainer Custom Chemical acquired it through an auction for $20,000.
Soon after, the principals sold metals and salvaged materials at the site for $875,000. The PDEP sued Trainer and its principals for the cleanup costs -- including $818,000 incurred before the purchase.
The PADEP said the defendants were liable under the Comprehensive Environmental Response, Compensation and Liability Act. On appeal, the Third Circuit said the owners were liable for "all costs" under CERCLA.
"The plain text thus leads us to conclude that the words 'all costs' include costs incurred before ownership and costs incurred after ownership," the panel said.
The judges said in a footnote that the "innocent owner" defense did not apply. Reading between the lines, it seems the defendants were not so innocent.