Environmental Baseline and Remediation Requirements under the EU Industrial Emissions Directive; New Cleanup Obligations for Industrial Facilities

November 3, 2015


Companies conducting transactions and financings involving industrial facilities in the European Union (“EU”) should be aware of new guidance and policy making it clear that invasive sampling will be required pursuant to the EU Industrial Emissions Directive (“IED”), Directive 2010/75/EU. Adopted November 24, 2010 by the European Parliament, the IED recast seven previous directives, including the Directive on Integrated Pollution Prevention and Control (“IPPC”), Directive 2008/1/EC, into a new directive that provides for all-media environmental obligations for facilities. The IED, for the first time, requires that all EU member states incorporate requirements for a “baseline report” and post-closure site cleanup into the permits for new and existing installations. As such, the IED has the potential to significantly increase site remediation and closure costs.

The IED requires that member states include permit conditions for addressing soil and groundwater contamination upon the cessation of operations, including the preparation of a baseline report documenting soil and groundwater conditions at the commencement of operations. The baseline report and remediation requirements of the IED are phased in based on installation status as follows: (i) any new regulated installation starting January 7, 2013, (ii) any existing regulated installation permitted under the IPPC directive seeking to update a permit for the first time after January 7, 2014, and (iii) any existing regulated installation not covered by the IPPC Directive starting July 7, 2015.1 Regulated installations include many facilities in a wide spectrum of industrial sectors including: energy; production and processing of metals; minerals, including production of cement, glass and ceramics; organic and inorganic chemicals; waste management; pulp and paper; textiles; tanning; intensive rearing of poultry or pigs; surface treatments using organic solvents; production of carbon or electrographite; carbon dioxide capture and storage; and preservation of wood and wood products.2

The operator of a subject facility involving the “use, production or release of relevant hazardous substances and having regard to the possibility of soil and groundwater contamination at the site of the installation,” must prepare and submit to a baseline report to the regulator.3 The baseline report must contain “the information necessary to determine the state of soil and groundwater contamination so as to make a quantified comparison” between site conditions at the time of permitting and cessation of operations, including (i) information on the present and, where available, past uses of the site, and (ii) information, either existing or newly obtained for this purpose, on soil and groundwater measurements related to the possibility of contamination by any relevant hazardous substances.4

The European Commission has provided further guidance on the preparation of the baseline report.5 Unless sufficient information already exists to quantify soil and groundwater pollution by relevant hazardous substances at the site, soil and groundwater sampling and analysis will be required, with the details of the sampling protocol to be clarified by the regulator. In general, the preparation of a baseline report includes the following steps:

  • Identify the hazardous substances used, produced or released at the installation;
  • Identify which such hazardous substances are capable of contaminating soil or groundwater as a result of their hazardousness, mobility, persistence, biodegradability or other characteristics (the “relevant hazardous substances”);
  • For each relevant hazardous substance, identify the potential for soil or groundwater contamination at the site of the installation, including the probability of releases and their consequences;
  • Identify the site’s history, considering the present and past uses of the site, including releases of hazardous substances;
  • Identify the site’s environmental setting including topography; geology; direction of groundwater flow; other potential migration pathways such as drains and service channels; environmental aspects (e.g. particular habitats, species, protected areas, etc.); and surrounding land use;
  • Describe the site, including the location, type, extent and quantity of historic pollution and potential future emissions sources noting the strata and groundwater likely to be affected by those emissions – making links between sources of emissions, the pathways by which pollution may move and the receptors likely to be affected; and
  • Either prepare a baseline report based on the existing information described above, or, if there is not sufficient information to quantify soil and groundwater pollution by relevant hazardous substances, conduct an intrusive investigation of the site.6

Upon “definitive cessation of operations” (which is not defined), the operator of the installation must “assess the state of soil and groundwater contamination by relevant hazardous substances used, produced or released by the installation” and, in certain circumstances as described below, undertake response actions.7 If the installation caused “significant pollution” compared to the baseline condition established by the baseline report (where a baseline report was filed), the operator must take “necessary” measures to return the site to the baseline condition, taking into consideration technical feasibility.8 However, because the baseline condition includes contamination present at the time the baseline report is prepared, simply returning a site to the baseline condition may not be adequate to address contamination from installations in existence prior to January 7, 2013. As a result, for such installations, upon cessation of operations, the operator also must take “necessary” actions to mitigate any “significant risk” to human health or the environment (taking into account the site’s current and approved future use) posed by soil or groundwater contamination that is identified in the baseline report and that was caused by permitted activities carried out by the operator.9 Finally, where a baseline report has not been required, upon cessation of operations, the operator must take “necessary” actions to mitigate any “significant risk” to human health or the environment (taking into account the site’s current and approved future use) due to contamination of soil and groundwater as a result of the permitted activities.10

The baseline report and associated cleanup requirements still are new programs, with many issues still to be clarified. Important outstanding issues include:

  • How clean is clean?
    • The IED requires that operators take “necessary” cleanup actions, but also allows modification of cleanup standards in some instances based on technical feasibility, and the current and future use of the site. Among other issues to be addressed are whether existing structures must be removed to address underlying soil contamination, and when industrial rather than residential cleanup standards can be used.
  • What is the appropriate scope of a baseline report, including relevant hazardous substances and contaminant pathways?
    • The IED specifies that the baseline report should give “regard to the possibility of soil and groundwater contamination at the site.”11 The Baseline Report Guidance explains that this captures several “important” elements: (i) the quantities of hazardous substances concerned, with small quantities likely to be insignificant for the purpose of the baseline report; (ii) the soil and groundwater characteristics of the site and the impact of those characteristics on the possibility of soil and groundwater contamination; and (iii) pollution control measures at existing installations that make it impossible in practice for contamination to occur.12
  • When are existing soil and groundwater reports acceptable, such that further sampling and analysis is not required?
    • The Baseline Guidance identifies several risks associated with using existing information, including the use of historic data that fails to take adequate account of (i) all relevant hazardous substances, (ii) releases of relevant hazardous substances that may have taken place since the original data was collected, and (iii) changes in the activities at the site since that may have resulted in changes to the hazardous substances used, produced or released from the installation.13 Notably, for existing installations, the Baseline Report Guidance cautions that “where the reliability and quality of historic soil state information cannot be established (for example because the results are based on out of date methods or were incomplete), the most suitable course of action is to re-take the measurements.”14
  • Can material changes in permitted activities trigger cleanup requirements?
    • The operator of a regulated installation must address soil and groundwater contamination upon the “definitive” cessation of activities.15
  • At what point (if any) does a change in operations become a cessation of prior activities?
  • How does an asset sale affect obligations under the IED, including whether cleanup obligations are triggered by a change in operator/permittee, and whether a permit transfer request triggers the requirement to prepare a baseline report (if one has not been prepared)?
  • What credentials are required for the party preparing the baseline report?
  • What information can be claimed as confidential?
  • What are the implications for notice to insurers if contamination is identified?

We will provide further updates on implementation of the IED as the same becomes available.

[1] IED at Arts. 22(2), 82(1). EC IED FAQ, II.1, see here
[2] Id. at Annex I, Annex VII.
[3] Id. at Art. 22(2).
[4] Id.
[5] European Commission guidance concerning baseline reports under Article 22(2) of Directive 2010/75/EU on industrial emissions, Official Journal of the European Union, C 136/3 (6/5/2014) (the “Baseline Report Guidance”).
[6] Id. at §5.
[7] IED at Art. 22(3).
[8] Id. at Art. 22(3).
[9] Id.
[10] Id. at Art. 22(4).
[11] Id. at Art. 22(2).
[12] Baseline Report Guidance at §4.2.
[13] Id. at §5.7.
[14] Id.
[15] IED at Arts. 22(2), (3).

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Eric Rothenberg, an O'Melveny partner licensed to practice law in Missouri and New York, and John Renneisen, an O'Melveny counsel licensed to practice law in the District of Columbia, contributed to the content of this newsletter.

Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York's Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, Phone:+1-212-326-2000. © 2015 O'Melveny & Myers LLP. All Rights Reserved.