Conservation Easements and CERCLA Liability: Making Sure Good Deeds Stay Unpunished



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North Carolina Lawyers Weekly
Feb. 21, 2011

North Carolina's dramatic population growth in the past 30 years -- driven by people attracted to the state's mild climate, strong economy and natural beauty -- has put stress on the very rolling hills and open space that attracted our newcomers. In the 24-county Carolina Piedmont region around Charlotte, for example, the land area under development jumped tenfold during the 30 years between 1976 and 2006, from 1.8 percent to 17.2 percent. More telling, the rate of development accelerated from an average of 30 acres a day between 1976 and 1985 to more than 140 acres a day by 2006.

A number of nonprofit land trusts now work with willing landowners to preserve open space and restrict future development of their land. A landowner might sell or donate its land to a land trust, or might voluntarily apply development restrictions to maintain farm uses, protect a watershed or preserve wildlife habitat. Depending upon the transaction, the landowner can receive state and federal income, property and estate tax advantages. The nonprofit land trust is responsible for monitoring future uses and assuring landowners honor the development restrictions.

Perversely, sometimes land worth preserving includes contaminated property. Former farmland that has gone fallow might have soil contaminated by pesticides, or acreage along a riverbank might have groundwater contaminated by discontinued manufacturing site operations. The bombing ranges around U.S. Marine Camp Lejeune, for example, are home to nine federally listed endangered species precisely because no development has occurred there due to the presence of unexploded ordnance on those ranges.

But owning contaminated property, even for laudable purposes like preserving open space could put the nonprofit land trusts out of business. The Comprehensive Environmental Response, Compensation and Liability Act of 1980 imposes on current and certain past landowners liability for the cleanup of hazardous substances present on the land. Such liability is not dependent upon whether the landowner caused the contamination. Absent one of the narrow statutory defenses to CERCLA liability, a land trust acquiring fee title to contaminated land would be responsible as a current owner for any costs incurred to remediate the property.

So how might a land trust go about protecting contaminated property from future development once it is cleaned up without putting the nonprofit's assets at risk? By accepting a conservation easement rather than fee title to contaminated land, a land trust likely avoids owner liability under CERCLA. From a land trust's perspective, a conservation easement can be an appealing alternative to acquiring fee title to real property for a variety of reasons, including minimizing the potential for CERCLA liability.

A conservation easement is a legally binding agreement between a landowner and a land trust that runs with the land and conveys future development rights to the land trust. Courts have held that easement holders are not "owners" for purposes of CERCLA. Holding an easement, however, does not completely shield a land trust from CERCLA liability. CERCLA also imposes liability on current and certain past "operators" of contaminated land.

Generally, whether a person is an operator turns on the person's authority to control the "facility," defined as "(A) any building, structure, installation, equipment, pipe or pipeline (including any pipe into a sewer or publicly owned treatment works), well, pit, pond, lagoon, impoundment, ditch, landfill, storage container, motor vehicle, rolling stock or aircraft, or (B) any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located." In the case of easement holders, operator status depends on the degree to which the easement holder participates in the management of the contaminated land.

Exactly how much participation in management of land subject to a conservation easement would be necessary to trigger operator liability under CERCLA is unclear. An easement that permits twice-a-year visits to police the development restrictions involves much less authority over the land than an easement that gives the land trust extensive decision-making authority over all aspects of the land management. To date, no court has held a conservation easement holder liable as an operator.

Since acquiring a conservation easement could subject a land trust to CERCLA liability, easement holders such as a land trust should conduct an environmental assessment of any property it considers acquiring. Even if the environmental assessment does not raise any red flags, a land trust may consider including in the conservation easement agreement environmental indemnification provisions.

While an indemnification provision will not absolve the land trust's liability under CERCLA, it will provide a mechanism by which the landowner and easement holder can allocate any cleanup costs as between the parties to the agreement.

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