Part 11: Limiting Liability for Polluted Property

One of the most significant parts of HB 2776 was limiting liability for both lenders and fiduciaries (the responsible governing officers of a corporation, partnership or sole proprietorship who finance the redevelopment of toxic sites). The Independent Bankers Association of Texas and the Texas Association of Bankers both lobbied in the House and Senate to pass the bill. Proponents said this provision would allow lenders to loan money on polluted property, or to foreclose on property without fear of incurring liability.

The arguments against extending this freedom from liability seem obvious, but bear repeating. Limiting polluter liability overturns of decades of legal precedent. The Superfund program and American tort law establish the principle that landowners are responsible for cleaning up the remains of polluting activities, and pass that liability on to future owners who may purchase the property. The longstanding argument is that the polluter has harmed not just him or herself through their activities, but that they have had a negative impact on nearby citizens or property. Historically U.S. and Texas laws required that polluters pay to clean up the harm they've caused, and mandated that anyone who purchases polluted property assume the same responsibility.

When a polluter is unavailable or unable to pay to clean up a contaminated site, the costs of the cleanup are paid by the state or federal government. Prior to HB 2776, the main way polluters escaped paying for cleanup was filing bankruptcy -- polluters could vacate debts or settle them for pennies on the dollar. The economic bust of the late 1980s in Texas left many vacant polluted industrial sites with no solvent owner to petition for cleanup. The federal and state Superfund programs pay for cleanup where there is no individual owner able to pay.

Texas' state Superfund program will cost $60 million this biennium. (1) HB 2776 created a brand new classes of non-liable fiduciaries and owners in Texas, thus limiting the pool of "potentially responsible parties" who could be pursued to pay for hazardous waste cleanup on these properties. This creates a long-term trend toward greater and greater public financing for pollution cleanup. The math is easy: the smaller the pool of potentially liable parties, the greater the likelihood that the state will ultimately be required to pick up the tab for cleaning any given site.

Privatizing Profit Socializing Cost

HB 2776 also limited liability in other ways. For starters, it allowed companies that entered the state's "voluntary" cleanup program to sell their property without conferring liability for cleanup onto the purchaser. In another twist, the same provision allowed banks to foreclose on polluted properties without incurring responsibility for cleaning up the pollution.

Prior to HB 2776, the state required owners of polluted property to pay for the full cost of the cleanup. This bill created new loopholes to absolve polluters from liability, loopholes that were much more favorable to industry and property owners. These included: "covenants not to sue," mixed (i.e., partially public) funding for cleanup projects, and "partial settlements" where the polluter pays less than the full cost of the cleanup. The prevailing trend here is for the public to pick up an increasing portion of the tab for privately generated pollution, in the guise of "settlements" and "covenants."

Innocence Found

Another limitation on liability in HB 2776 was labeled the "Innocent Property Owners" program. TThe idea behind the initiative was reasonable on the surface: that property owners whose land was polluted by somebody else shouldn't be liable for cleaning it up. The bill authorized the TNRCC to issue "certificates of innocence" to applicants if their property is contaminated as a result of a release or migration of contaminants from a source or sources not located on the property, if the applicant did not cause or contribute themselves to the contamination. As of October 1999, 69 certificates had been issued under this program.

This provision poses numerous real problems. First, it overturns longstanding Texas law that historically holds all property owners responsible for cleanup of their own property. Existing statutes already allow the owner of property that has been contaminated by someone else to force the polluter to pay damages. But for participants in the Innocent Property Owners program, HB 2776 took the onus of cleaning up contaminated property entirely off the owners. In the long term, this increases the likelihood that taxpayers must finance cleanup of these sites.

Second, while some industrial sites have been rejected, some "innocent owners" have operations that may themselves pollute. Companies that have received certificates of innocence include a dry-cleaners, a concrete plant, an ink manufacturer and a chemical products firm.

Finally, the vast majority of innocence certificates approved by TNRCC have been for residential developments, apartment complexes, or shopping centers and retail outlets -- in other words, places where people are likely to come into close proximity to the contaminated land. HB 2776 limited the likelihood that polluted land would be cleaned up by the responsible parties & instead shifted the cleanup costs to the taxpayer.

Limiting Public Input on Hazardous Waste Cleanup

HB 2776 also went a long way toward limiting significant public input into the state's Superfund hazardous waste cleanup process. It allowed the TNRCC Executive Director to remove facilities from the state Superfund list even if the request came from someone other than the landowner. Moreover, it changed the requirements for de-listing facilities. Previously, sites could only be taken off the Superfund list after a public contested case hearing in which neighbors of the site had the right to inquire as to the sufficiency and quality of the cleanup.

Arguments were made during the legislative session on why limiting contested case hearings might harm the public interest: The owner of a contaminated site "might seek to have the land use of a property changed from residential to light industrial because the standards for cleaning up such a site would not be as stringent and therefore would be less expensive. Neighbors of the site, however, might not want their children growing up next to a partially re-mediated site. They should be able to present their views in a serious forum such as a contested case hearing, rather than a public meeting which has no legally binding consequences." (2) These arguments were ignored and New language in HB 2776 required only a "public meeting" of the Bush appointed three member TNRCC Commission.

Limiting The Public's Right to Know

In a move designed to lower polluters' profiles with the public, HB 2776 ended the state's longstanding practice of filing state liens at the local county courthouse on properties where state funds were used to clean up hazardous waste. The liens had ensured that future property owners were aware of their liability for cleanup costs, and made public information about which properties and property owners owed the state money for hazardous waste cleanup. After Governor Bush signed this bill, TNRCC merely sent the owners a written bill in the mail, which continued the Bush administration goal of limiting public information about pollution in their communities.

The final chapter of the Superfund a Super Deal for Texas Polluters PEER will examine the relationship between political contributions to George Bush and the polluting industries which supported and benefited from this legislation.

Sources:

1. Interview with TNRCC Superfund division employee, 12/14/99.
2. House Research Organization Bill Analysis, HB 2776, 5/5/97.

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