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Michigan May Impose Penalties on Owners/Operators of Environmentally Contaminated Property

January 01, 1997-When Michigan's so-called "Polluters Pay Law" (Part 20l of the Natural Resources and Environmental Protection Act, MCL 324.20101 et seq.) was substantially revised on June 5, 1995, it imposed a new duty on property owners (or operators) who caused or contributed to environmental contamination of their property. These owners/operators not only are liable for the costs of remediation, but are now required to "diligently pursue" any remediation that may be necessary to meet state cleanup criteria. The 1995 revisions, however, also included a two-year moratorium on any penalties for failure to meet this cleanup duty.

The moratorium expired on June 5, 1997, exposing violators to potential penalties of up to $10,000 a day. The Michigan Department of Environmental Quality ("MDEQ") has taken the position that liable owners/operators maintain the duty to diligently pursue cleanup even if they transfer the contaminated property after June 5, 1995. MDEQ has indicated that it is compiling a list of potential targets for enforcement action after the penalty moratorium expired on June 5, 1997. The Michigan Attorney General's office has suggested that in egregious cases it may attempt to impose penalties retroactive to June 5, 1995. In addition, it is possible that citizen groups may file their own actions to enforce this duty and impose penalties on violators.

To be subject to this duty, the owner/operator must: (1) have owned or operated property on or after June 5, 1995, (2) have "knowledge" that the property is contaminated with a hazardous substance above residential cleanup criteria (which represent the state's most stringent cleanup standards), and (3) have caused or contributed to the contamination, or otherwise be liable for the contamination (for example, a new owner/operator after June 5, 1995, who does not perform and disclose to MDEQ a Baseline Environmental Assessment of the property or qualify for any other liability exemption).

Owners/operators who believe that they may be subject to this duty, but who have not actively addressed cleanup, should determine their best course of action promptly.