Pennsylvania Enacts Uniform Environmental Covenants Act

January 8, 2008
by MATTHEW SULLIVAN
MGKF Special Alert

On December 18, 2007, the Commonwealth of Pennsylvania enacted the Uniform Environmental Covenants Act (hereinafter referred to as UECA and the Act) which takes effect on February 16, 2008. As described below, UECA imposes various substantive and procedural requirements on the creation and recordation of instruments documenting engineering and institutional controls with which owners and developers of contaminated property will need to comply. UECA grew out of a national effort to create a standardized approach to creating and documenting activity and use limitations imposed on contaminated sites. More specifically, UECA imposes new recording requirements where engineering or institutional controls are currently or will be used to demonstrate compliance with state laws, including Pennsylvania's Land Recycling Act ("Act 2") and Storage Tank and Spill Prevention Act (the "Tank Act").

Basic Requirements: UECA establishes certain basic requirements that apply to "environmental covenants," defined to mean a servitude "arising under an environmental response project which imposes activity and use limitations." The phrase "activity and use limitations" is defined by UECA to include both engineering and institutional controls and apply to any environmental remediation performed under a state or federal program, including a cleanup performed under a voluntary cleanup program. While UECA does not impose any substantive change on the type or extent of cleanup that must be performed, it establishes recording requirements with broad applicability. Even the erection of fencing to limit access and exposure to contamination on a property, when undertaken as part of a voluntary cleanup under Act 2 or the Tank Act, would appear to now be subject to the recording and content requirements imposed by the Act.

Recording Requirements: Under UECA, environmental covenants must (i) describe the real property that is the subject of the covenant, (ii) describe the pertinent contamination and remedy, (iii) describe the activity and use limitation being imposed, and (iv) identify any administrative record for the environmental response project that gives rise to the covenant. Among the basic obligations imposed by UECA is also a requirement that the environmental covenant be executed by (i) the state or federal agency overseeing the remedial work, (ii) every grantee (also referred to in the Act as a "holder") of the covenant (which can include property owners and agencies) and (iii) every fee simple owner of the property subject to the covenant. The environmental covenant must then be recorded in the county in which the property is located.

Termination and Amendment: Pursuant to UECA, an environmental covenant runs with the land and is perpetual unless it falls within a few specific categories. More specifically, an environmental covenant can be written to include a self-terminating provision which limits its effect to a specific duration or termination on the occurrence of a specific event. Otherwise, an environmental covenant can only be terminated by judicial decree (and only in certain circumstances), the foreclosure of an interest with priority over the covenant, or by consent. Termination by consent requires the signature of numerous parties, including the current owner of the property and each person that originally signed the environmental covenant or that person's successor in interest, unless that party waived the right to consent or has been found by a court to no longer exist or be identifiable.

The same consent/signatory requirements also apply to an amendment of a covenant. Other than by consent, an environmental covenant can only be modified or amended by judicial decree. The burden associated with locating and obtaining the signatures of each original signer of the covenant to terminate or amend a covenant should lead the parties creating these covenants to include self-termination provisions and waiver of consent to amendments whenever possible.

Existing Covenants, DEP's Registry of Covenants, and Review of DEP Action: Within 5 years of the passage of the Act, any instrument imposing an activity and use limitation that was created prior to the enactment of UECA to demonstrate compliance with Act 2 or the Tank Act must be converted to an environmental covenant in accordance with the Act. In addition to reviewing and signing all of the environmental covenants prepared in compliance with UECA, the Pennsylvania Department of Environmental Protection ("DEP") is also charged under UECA with creating a registry "which contains all environmental covenants and any amendment or termination of those covenants." Presumably at least in part because of the daunting amount of work associated with reviewing and signing all of these environmental covenants along with creating the registry, UECA includes a provision whereby DEP's failure to approve (e.g., by signing) or deny an environmental covenant within 90 days will result in a deemed approval thereof. The decision to approve or disapprove an environmental covenant, along with any other DEP action under the Act, may be appealed to Pennsylvania's Environmental Hearing Board.

Finally, the Act empowers Pennsylvania's Environmental Quality Board to develop and promulgate regulations to implement UECA. While the Act is designed to ultimately make the use of environmental covenants more standardized and to provide a registry to easily determine whether a particular property is subject to any activity or use limitation, it is currently unclear how DEP will apply the requirements of the Act. We expect the implementing regulations to provide further clarification as to how UECA will be applied. In the meantime for further information on UECA, please contact Matthew C. Sullivan (msullivan@mgkflaw.com or 484-430-2305).