June 07, 2021

Bidding Adieu to the Connecticut Transfer Act … and Welcoming a New Remedial Approach

Posted on Jun 7, 2021 by Pamela Elkow

In September 2020, during a special legislative session, Connecticut took the plunge and passed Public Act 20-9, a statute that will sunset the Connecticut Transfer Act, and replace it with a release-based reporting and remedial program addressing historical releases throughout the State. Connecticut is – and hopefully in the not too distant future, we’ll be saying “was” – one of only two states with such a transfer statute.  The Transfer Act requires the sellers of certain real property or businesses to confirm that there have been no spills of hazardous waste or substances, or that such spills have been remediated under the supervision of the Connecticut Department of Energy and Environmental Protection (DEEP) or a licensed environmental professional. If the seller cannot, one party to the transaction must agree to investigate the parcel in accordance with DEEP guidance and remediate any pollution resulting from spills in accordance with the Connecticut remediation standard regulations.  In existence for more 30 years, the Transfer Act had become nearly universally disliked. 

Those in the real estate business saw the Act as discouraging investment in real estate in Connecticut.   Because the issue of whether a property or business is an “establishment” is based on use[1], in some cases going back until 1967, it can be difficult to discern; as a result, most commercial real estate and corporate transactions in Connecticut wind up requiring at least an evaluation of whether the Act even applies.  Furthermore, because bad facts make bad law and the legislature would respond to particular circumstances it learned of, the definition of “transfer of establishment” has been tweaked over the years to exempt a host of changes in ownership, some of which make sense, and some of which are utterly confusing and inconsistent with corporate law.  As of September 2020, there were 26 exemptions from the definition, and that reflects a rewriting and consolidation of similar exemptions that had been adopted over the years.   For those sites that are subject to the Act, DEEP guidance mandates extensive investigations based on the potential for spills, often requiring certifying parties to “prove the negative,” i.e., that in fact no spill had occurred at an area of concern, defined as a location where there is potential for a release, not evidence of an actual release. 

Those in the environmental protection business – both DEEP and NGOs – saw the focus on “transferred” “establishments” as a misallocation of limited resources and a missed opportunity to focus on real risk and actual contamination.  The Remediation Division of DEEP currently spends most of its time on Transfer Act sites, and as a result, does not have the resources to focus on other sources of contamination.    Furthermore, if a property is not “transferred,” the Transfer Act does not come into play.  Consequently, many high-risk or contaminated sites not in the Transfer Act fly under DEEP’s radar.

With that backdrop, take a bunch of determined real estate brokers, a few sympathetic legislators, a department facing significant staffing issues as a result of pending retirements, and a governor intent on boosting the economy, and the stage was set for a sea change in how sites are remediated in Connecticut.  

As noted above, Public Act 20-9 did not just (eventually) sunset the Transfer Act; it also contained the framework for the release-based reporting and remedial program. Upon promulgation of the regulations with the details of that program, the Transfer Act will no longer apply to new transactions.   The Public Act also required DEEP and the Department of Economic and Community Development to convene a working group made up of a representative group of stakeholders, as well as designees of DEEP and DECD and the legislature, the purpose of which is to provide guidance to DEEP on those regulations.  The working group has been meeting monthly since January, and the subcommittees created to address specific topics have been meeting weekly.  The initial reports from the subcommittees will be available to review by the public the week of June 7, 2021, as part of the working group’s review. 

For anyone interested in following along with the effort to rewrite the remedial program in Connecticut, all materials are available to the public on the DEEP website, by clicking here.

[1] “Establishments” are businesses or real estate at which there was: the generation of more than 100 kilograms of hazardous waste in any one month (with exceptions) since November 19, 1980, vehicle body repair facilities, dry cleaners, and furniture strippers in existence after May 1, 1967, or to which hazardous waste was brought from another location.