Prospective Purchaser Agreements
Arizona is one of a growing number of states to address, through statutes, the liability issues associated with buying, selling or developing real property contaminated by hazardous substances. Because of the potential for liability as an owner of property contaminated with hazardous substances, property owners and other participants in property transactions (buyers, developers and their financial institutions) frequently need to determine if the property they are interested in is contaminated. When contamination is discovered, participants in property transactions may also want to know the extent of the ADEQ authority to take enforcement actions or to recover cleanup costs.
Pursuant to A.R.S. § 49-285.01, ADEQ may enter into a Prospective Purchaser Agreement (PPA) that provides a written release and covenant not to sue for potential Water Quality Assurance Revolving Fund (WQARF) liability and for potential owner liability to the State under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for the existing contamination at the property, if certain statutory conditions are met. In order to be eligible for a PPA, the following conditions must be met: (1) the property is within a WQARF registry site or ADEQ has sufficient information to determine the extent of the contamination, (2) the purchaser did not cause or contribute to the contamination and is not affiliated with any person who may be responsible for the contamination, (3) the purchaser's use or development of the property will not exacerbate the contamination or interfere with ongoing remedial actions, and (4) the purchaser provides a substantial public benefit, which must be more than the mere continuation of a business on the property. Examples of substantial public benefit include: (1) substantial funding or other resources to perform or facilitate remedial measures at the property; (2) an agreement by the applicant to perform substantial remedial measures at the property; (3) productive reuse of a vacant or abandoned industrial or commercial property; (4) development of property by a governmental entity or nonprofit organization to address an important public purpose; and (5) creation of conservation or recreation areas.
The release and covenant not to sue are not effective until the public benefit and all other obligations under the PPA have been performed. ADEQ may also agree to seek a court-approved consent decree that will provide contribution protection from claims under § 107 of CERCLA. A complete application must be received by ADEQ before the sale of the property closes in order for the purchaser to be eligible for a PPA. The decision to enter into a PPA is solely within the ADEQ's discretion and is not an appealable agency action.
Prospective Purchaser Agreement Fees
ADEQ charges certain initial fees to cover its direct and indirect costs of drafting a PPA. For property listed on the Water Quality Assurance Revolving Fund (WQARF) registry, an applicant shall pay (1) an initial nonrefundable charge of $2,500 (this charge covers up to 34 hours of ADEQ staff time), (2) an hourly charge of $73.00 for all time in excess of 34 hours, (3) the cost of publishing the notice seeking public comments, and (4) an initial nonrefundable charge of $2,000 if the applicant requests a court-approved consent decree. If ADEQ's consent decree costs exceed $2,000, then the applicant shall pay all additional costs. For property that is not listed on the WQARF registry, an applicant shall pay an initial nonrefundable charge of $3,600 (this charge covers up to 49 hours of ADEQ staff time) and the other charges listed above.
Statements and information required to be in a PPA include:
- A statement that the property is or is not within a site listed on the WQARF registry.
- A statement that identifies the current seller/owner of the property.
- A statement that identifies, if known, all past owners and operators of the property.
- A statement that the applicant is not liable for an existing or threatened release of a hazardous substance at the property.
- If the applicant is a business entity, a statement concerning ownership of the applicant, including affiliations, interests and status of incorporation, if applicable.
- A statement that the applicant is not affiliated with any person who may be responsible for the contamination through any familial relationship or any corporate or contractual relationship other than a contract to protect a security interest.
- Information concerning the proposed redevelopment or reuse of the property.
- A statement that the proposed redevelopment or reuse of the property will not contribute to or exacerbate the contamination or unreasonably interfere with remedial measures necessary at the property or cause the contamination to present a substantial health risk to the public.
- A statement that fully identifies the extent of the contamination at the property.
- Identification of the proposed substantial public benefit, which may include:
- Substantial funding or other resources to perform or facilitate remedial measures at the property;
- An agreement by the applicant to perform substantial remedial measures at the property;
- Productive reuse of a vacant or abandoned industrial or commercial property;
- Development of property by a governmental entity or nonprofit organization to address an important public purpose;
- Creation of conservation or recreation areas; and
- Other substantial public benefits that ADEQ considers sufficient.
Exhibits to a PPA application include:
- A copy of the deed that sets forth the legal description of the property.
- A map depicting the location of the property.
Additional documents to be submitted:
- Documentation that supports the applicant's statements regarding the extent of the contamination at the property.
- If the applicant is a business entity, documents that show the legal formation or organization of the entity (e.g., articles of incorporation, L.L.C. articles of organization and operating agreement, or partnership agreements, etc.).
- Documentation that identifies the local planning and zoning authorities with jurisdiction over the property so that ADEQ may identify and consider the reasonably anticipated future land uses at the property and surrounding properties.
Prospective Purchaser Agreement application form (PDF) (WORD).
For further information on how to apply for a Prospective Purchaser Agreement, please contact:
Christina Silva, Legal Support
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Settlement Options for Potentially Responsible Parties
In 1997, the Arizona Legislature substantially amended the Water Quality Assurance Revolving Fund (WQARF) statutes. As a result of this legislation, three settlement options were made available for resolving WQARF and Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) liability to the State. These options are qualified business, financial hardship, and general settlements.
A 30-day public comment period is required for each of the three settlements. Notice of the settlement is published in a newspaper of general circulation in the county where the property is located. ADEQ may withdraw from any settlement after considering the public comments. If contribution protection is requested, the settlement must be approved by a federal court.
Qualified Business Settlements
The qualified business settlement (QBS) statute (A.R.S. § 49-292.01) allows an eligible person or business entity to settle all potential liability to the State under WQARF and § 107 of Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for known hazardous substance contamination at the property. To be eligible, the applicant must be a living person or valid business entity and have identifiable gross income, as defined by § 61 of the internal revenue code, greater than one dollar and less than two million dollars in each of the two years prior to the application and for the average of the two years preceding the year ADEQ or the U.S. EPA initiated an investigation into the applicant's share of liability. In determining the applicant's gross income, ADEQ may consider the gross income of all concerns in which the applicant has ownership, control, of management. Any transfer of money or assets by the applicant within two years preceding the application is void for the purpose of determining eligibility. An applicant whose liability arose out of criminal acts is not eligible for a QBS. The applicant shall pay 10 percent of its average annual gross income for the two years preceding the year the application was submitted, including the income from money or assets transferred within two years preceding the application. The settlement amount will be interest free if it is paid in full within five years. If the settlement amount is paid from five to ten years, then it shall bear interest at the rate of six percent per annum. The applicant shall also grant to ADEQ an easement on the property in a form provided by ADEQ.
If ADEQ determines that an applicant is not eligible for a QBS, ADEQ must notify the applicant in writing within 90 days of receipt of a complete application and other requested information. The denial of a QBS is appealable to the Office of Administrative Hearings pursuant to A.R.S. § 49-298.
- Qualified Business Settlement Application (PDF) (WORD)
Financial Hardship Settlements
ADEQ will consider any offer of settlement by a person or business entity who may be potentially liable to the State under Water Quality Assurance Revolving Fund (WQARF) or § 107(a) of Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The person must demonstrate a financial hardship with respect to payment of that person's liability. A person who is unable to pay the full amount of his or her share of liability may pay a reduced settlement amount based upon the person's ability to pay. A person whose liability arose out of criminal acts is not eligible for a financial hardship settlement.
To apply for a financial hardship settlement, a person must submit to ADEQ tax returns for the preceding five years and other financial information sufficient to establish that the applicant cannot pay the full amount of his or her liability. ADEQ has 90 days to determine whether the person qualifies for the financial hardship settlement. If ADEQ determines that the person does not qualify, ADEQ will notify the person in writing. The denial of a financial hardship settlement is appealable to the Office of Administrative Hearings pursuant to A.R.S. § 49-298.
Pursuant to ADEQ's general settlement authority under A.R.S. § 49-292, a person or business entity may make an offer to ADEQ to settle its potential Water Quality Assurance Revolving Fund (WQARF) and Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) liability to the State. ADEQ will consider the factors under § 49-282.06 and § 49-285 (E) and (F) in determining whether to settlement any person's liability. Under the general settlement provision, ADEQ has wide discretion to consider any offer of settlement.
For further information on how to apply for a qualified business, financial hardship, or general settlement, please contact:
Remedial Projects Section
(800) 234-5677 - Toll Free
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