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Baseline Environmental Assessments and Due Care in Michigan

what new owners or operators in Michigan need to know

Michigan’s Natural Resources and Environmental Protection Act (Act 451) of 1994 has two sections (Part 201 – Environmental Remediation and Part 213 – Leaking Underground Storage Tanks) that allow new owners or operators to buy property without being liable for cleanup of existing contamination on the property if they conduct a Baseline Environmental Assessment (BEA) and disclose it to the Michigan Department of Environment, Great Lakes and Energy (EGLE).

A BEA is a pre-purchase evaluation of environmental conditions on a parcel, focusing on contamination caused by hazardous substances on the property. The purpose of a BEA is to protect the purchaser and/or operator of the facility from liability from previous owners' actions and to hold the new owner accountable for future use and contamination.

When do you need a BEA?

A BEA may only be conducted on a parcel that is considered a “Facility” under Part 201 or a “Property” under Part 213 for new owners or operators (or lenders if the facility is in foreclosure). The new owner or operator cannot be responsible for the contamination, and the contamination must have originated on-site.

There are some circumstances where liability is not covered by a BEA. These include impact that goes beyond soil and groundwater (i.e. vapor intrusion), polychlorinated biphenyl (PCB) impact, and other parcel-specific and owner-entity-specific circumstances. A BEA may not provide protection from liability under other state and federal laws, including landfills regulated under Part 115 of Act 451; treatment, storage, and disposal facilities regulated by the federal Resource Conservation and Recovery Act and Part 111 (Hazardous Waste Management) of Act 451; underground storage tank operational requirements under Part 211 of Act 451; and Federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and Superfund laws (with some exceptions).

How does a BEA work?

In order to file a BEA with EGLE, the following materials are required:
●Current Phase I Environmental Site Assessment (ESA, performed within the last six months)
●Analytical data showing criteria exceedance(s) of contaminant(s) – must be representative of conditions, and must be confirmed through laboratory Quality Assurance/Quality Control documentation
●A scaled site plan showing sampling locations
●ALTA Survey and/or legal site description
●BEA submittal form signed by the preparer (your Partner consultant) and an authorized agent of the property owner or operator

Typically, the process begins with your environmental consultant conducting a Phase I ESA and a Phase II ESA, followed by preparation of the BEA in draft form. The BEA will be sent to the client for a review and signature. The form is then submitted to EGLE (most can be done digitally, however some districts will still require a hard copy). Following the completion and acknowledgement of the BEA, it is highly advised that the purchaser have EGLE independently evaluate the BEA and provide a written document stating the buyer is free from environmental liability (this is a separate fee and process).

Practically speaking, the time-frame for the process described above must be conducted before purchase, occupancy or foreclosure, and not later than 45 days thereafter. BEAs must be submitted to EGLE within six months of the date of ownership or operation (tenancy), and copies must also be provided to future owners or operators. Each transactional entity needs their own BEA submittal – the owner, operator, lessee and bank (if it is a foreclosure). Remember, as noted above, there are some important exceptions for liability and protection under certain circumstances.

Partner’s expertise in performing environmental assessments, and expert knowledge of Michigan EGLE compliance requirements, supports the preparation of BEAs that may be used to distinguish existing contamination from future releases.

Due Care Obligations in Michigan

Even if a new owner gets a Baseline Environmental Assessment (followed by acknowledgement from EGLE), that party is still responsible for "Due Care" provisions on a contaminated site. Due Care, defined under Michigan law, describes the actions a person must undertake and are necessary to protect people, ecological and natural resources from exposure to contamination present in soil, groundwater, and subsurface vapors whenever that person has knowledge that their property (owner or operator) is contaminated. To understand the full nature and extent of the contamination (within the bounds of the subject property), Due Care provisions/obligations may sometimes involve additional subsurface investigations.

These actions and responsibilities of the new owner/operator include, but are not limited to, taking precautions to not exacerbate existing contamination, and not change property use in such a way that might increase cleanup costs in the future. Exacerbation means any activity taken by the property owner that may cause contamination to migrate off site, or worsen conditions of the present onsite contamination. Reasonable precautions must be taken against foreseeable action or omission by third parties that may impact future liability. To read more about Due Care obligations and related due diligence considerations, read a recent blog about due diligence in Michigan by Wes Skinner.

It goes without saying that all sites and transactions are unique! To ensure that you properly address any issues and to minimize liability through environmental risk management, reach out to a local Michigan Partner consultant.