Today was the final opportunity for public comment on a regulation published by the Maryland Department of the Environment making mandatory the reporting to the State of locations of potential hazardous substances, including those routinely identified in the due diligence associated with real estate transactions.

Phase I Environmental Site Assessment reports on real estate could, and certainly many Phase II reports will, trigger the obligation to file a report with MDE.

This reporting requirement is a major regulatory change in Maryland and risks having an economic impact on any business that owns land.

In 2008, the Maryland General Assembly passed a law requiring MDE to develop a regulation requiring “Responsible Persons” to disclose the locations of potential hazardous substance; this included when historical contamination is discovered. A draft regulation to implement Section 7-222(d) of the Environment Article was published October 23, 2009, but was so controversial it never became effective.

Five years later, on October 31, 2014 MDE proposed this new regulation at 41 Maryland Register 1337, that would amend COMAR 26.14.02. You can read it here.

As proposed Responsible Persons will have the reporting obligation. Responsible Persons under state law include current owners and operators, owners and operators at the time of disposal, arrangers, and transporters. A seller of real estate who learned of a bad Phase I result might have to report it. The purchaser probably would not if the purchaser did not close on the transaction; however, after closing the purchaser would be a Responsible Person who will have to report to the government.

The proposed reporting thresholds (i.e., what concentrations of a hazardous substance trigger a reporting requirement) are not published as part of the regulation, but appear in a June 2014 guidance document posted on the MDE websitehere.

Among the features of this regulation that are troubling the owners of land is that the reporting thresholds are very low “concentrations” of hazardous substances, not “quantities” of those substances; which means a few parts per billion in a very small sample could trigger a reporting requirement even though the quantity of the substance is quite small; and such is not consistent with the Federal regulatory scheme for reporting.

Also that there is no grandfathering is problematic. The regulation requires “immediate reporting.” Immediate means as soon as practicable, “but in any event before the later of the following deadlines: (a) 30 days after the effective date of these regulations; (b) 30 days after the discovery of a sample result or environmental assessment collected or performed before October 1, 2009 that indicates the release of a hazardous substance into the environment at or above the notification standards; or (c) 15 days after discovery by the responsible person that the criteria requiring reporting have been met.”

The reported information will then be publicly available.

The retroactive feature of this regulation requires, at a minimum that property owners consider and evaluate the risk of hazardous substance information in existing and old files; .. that is, if a property owner has information in its files, it will have 30 days after the effective date of the regulation to report to MDE. (Note, there was guidance from MDE on the 2009 draft regulation that appeared to indicate that all Responsible Persons did not need to search their files for historical information?)

After a report is made, MDE may require further evaluation or remediation of the property. And while after reporting MDE apparently plans to assess the potential risks from the substance and issue a No Further Action letter, there are no time frames for any of this in the regulation.

As described, this is a major regulatory change in Maryland. Because it risks having an economic impact on many businesses that own land, it is possible the newly elected Maryland Governor will seek to halt action on this regulation after being sworn in on January 21, 2015.

However, with the uncertainty associated with this new regulatory requirement to report to the government proprietary information on hazardous substances, which information was intended to remain confidential, the real estate industry and business that have real estate in their portfolio, are altering their business practices.

This law firm has for many decades advised risk adverse clients that environmental assessments and the like, are best accomplished through an attorney where the results of the environmental assessment and any samples can in most instances be subject to attorney client privilege and confidential.