While an Environmental Use Restriction (EUR) can be an incredibly useful (and, often times, a cost-effective) tool in connection with cleaning up contaminated properties, it is important to understand that EURs are rarely as easy to apply or as inexpensive (particularly in the long term) as one might expect.
For those that may not have had the "pleasure" of dealing with or applying for an EUR, EURs are institutional controls (i.e., site use and/or activity limitations that are placed on the land records) used to minimize the risk to the environment of, or human exposure to, pollutants by prohibiting certain activities, including, e.g., residential activities, use of groundwater as a drinking source, or demolition of a building, pavement or other permanent structure used to cap contaminated soil. In general, the purpose of an EUR is to help a property achieve compliance with the applicable cleanup standards (known in Connecticut as the Remediation Standard Regulations) in lieu of performing more active and, generally, costly remediation, e.g., excavation and offsite disposal of contaminated soil and/or treatment of contaminated groundwater.
Since revised EUR regulations become effective on February 16, 2021, there are now two types of EURs that can be utilized: (1) Environmental Land Use Restrictions (ELURs); and (2) Notices of Activity and Use Limitations (NAULs). While there are distinctions between ELURs and NAULs-for example, ELURs create an easement in favor of the Connecticut Department of Energy and Environmental Protection (DEEP) and NAULs do not-both impose various obligations on property owners, which obligations property owners (or others taking on the responsibility/liability for preparing and complying with EURs) should understand and appreciate when deciding whether an EUR is right for them. For example, April 1 marked the start of the second year of Connecticut's annual inspection period for EURs. As summarized below, annual inspections are just one of the new and ongoing obligations now required of current site owners under revised EUR regulations.
In addition, although not a new issue related to the revised EUR regulations, anyone considering an EUR (regardless of whether it will be an ELUR or NAUL) should critically evaluate (early in the process) what easements or other interests may exist on the property or may be imposed in the near term (e.g., utility easements, mortgages) that may need to be subordinated to the EUR, either through a formal subordination agreement in connection with an ELUR or an agreement by the easement/interest holder to actually sign a NAUL.
Since many industrial and commercial properties in Connecticut have gone through (or may currently be subject to) an environmental cleanup program, understanding the new (and old) "strings" attached to EURs is critical for property owners, particularly since the new monitoring and recordkeeping requirements apply to all EURs, even if they were recorded on the land records prior to the effective date of the revised EUR regulations.
EUR Obligations for Site Owners
Key new obligations for owners of sites subject to an EUR include:
EUR Factsheet: Ensuring that a factsheet summarizing the EUR's location, restrictions, obligations and appropriate health and safety-related information is prepared and conspicuously posted at the site or maintained by someone responsible for the site's maintenance or operations. Although the revised EUR regulations do not specifically require that the factsheet be provided to DEEP, DEEP is requesting that draft factsheets be submitted with applications for new EURs and that the final factsheet be provided to DEEP after the EUR has been recorded on the land records.
Annual Inspection: Between April 1 and July 31each year, the EUR must be inspected and within 30 days, an annual inspection form must be signed and maintained by the site owner (although it is not required that the annual inspection forms be provided to DEEP). The annual inspection must encompass a: (i) physical inspection of the EUR subject areas; (ii) review of relevant records kept onsite, including any associated analytical data; and (iii) review of the EUR factsheet.
Five-Year Inspection: Beginning in 2025, and every five years thereafter, the site owner must ensure a Connecticut Licensed Environmental Professional (LEP) inspects the property subject to the EUR between April 1 and September 30. Within 30 days thereafter, the LEP must prepare, sign and seal the Five-Year Comprehensive Inspection Form (note: this form is still under development by DEEP). The owner must also sign the Five-Year Comprehensive Inspection Form (note: an annual inspection is not required for each year that an LEP completes a Five-Year Comprehensive Inspection Form). Although the Five-Year Comprehensive Inspection Form is not required to be submitted to DEEP, it must be maintained by the site owner.
Corrective Action: If the site owner becomes aware of a condition that does not comply with an EUR (e.g., cracks in a parking lot that also serves as a cap for contaminated soil), the owner must: (i) correct the condition within 90 days; or (ii) if the condition cannot be corrected within 90 days, submit a correction plan to DEEP within 30 days. Notably, if an LEP knows of any non-compliance based on an inspection performed pursuant to the new regulations, the LEP must notify the owner in writing who must then address any identified non-compliance.
Health and Safety Notification: Except for EURs that only restrict residential activity, prior to any work that could be contrary to the EUR (e.g., excavation in an area subject to a "no-dig" restriction), a copy of the EUR and EUR factsheet must be provided to the person responsible for overseeing the health and safety of workers conducting such work. Note, however, that the revised EUR regulations now affirmatively allow temporary limited disturbances in areas that are subject to an EUR, assuming certain conditions are satisfied, which conditions are specifically delineated in the regulations.
Document Retention: The site owner must retain copies of all required records, documents and reports, including the EUR, EUR factsheet and annual and five-year inspection reports.
Site Transfers: At least 30 days before the sale of a site (or a portion thereof) subject to an EUR, the site owner must provide copies of all EUR records to the buyer. If the timing of the deal makes it impractical to provide the materials 30 days prior to the closing, the regulations provide that the required records be provided to the buyer prior to closing. In addition, within 30 days of any such sale, the buyer must notify DEEP of the transfer on a form prescribed by DEEP.
Temporary Allowable Disturbances: As noted above, while not an ongoing obligation (but rather a new "benefit"), for the first time, activities that are otherwise prohibited by an EUR (e.g., excavation) may be conducted on a temporary basis without the need for DEEP's prior approval, provided several requirements are met. For example: (i) the disturbance must be a discrete single project and not part of a multi-phase or continuous project; (ii) an LEP must prepare a plan for, and supervise, the activity; and (iii) no more than 250 cubic yards of material can be excavated.
Looking Ahead
Last year, DEEP enforcement of the EUR regulations, including with respect to the above obligations, was not high on its priority list, as the regulations were new and many of the relevant and required forms had not been developed and released. This year, subject to budget and personnel constraints, we expect the agency will increase its attention to ensuring property owner compliance with the new EUR requirements.
We also expect that landlords/owners, investors, buyers and lenders (including during refinancing) will be evaluating compliance with the EUR regulations as part of due diligence. Accordingly, if you own or operate a site that is currently subject to, or may become subject to, an EUR, and especially if you are selling (or leasing) such a property, it is important to review and appreciate the new obligations (and old requirements) of the EUR regulations.
As appropriate, property owners and tenants should coordinate with their property management, technical and legal teams to ensure they are complying with the EUR regulations that apply to them, particularly since these new requirements may not have been contemplated in the relevant deal documents when the property was acquired or the lease commenced.
A prior version of this article first appeared on CBIA's website and is published here with permission.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
