THE TEN COMMANDMENTS OF ENVIRONMENTAL LAW

February 23rd, 2017

The collective wit and wisdom from three decades of practicing environmental law (in no order of importance).

1.Thou shall not call the environmental lawyer the day before the closing

2. Thou shall not accept without further inquiry a Phase 1 reports that says there are no RECs

3. Thou shall be concerned when the Phase 1 says the tank was reportedly removed, asbestos was reportedly abated, or the dry cleaner was reportedly only a drop off location. 

4.If a tank be in the ground, it shall have leaketh

5. If a dry cleaner operated at the property, it shall have leaketh

6. He who is most anxious to close shall bear the environmental risk.

7. Thou shall looketh carefully at Phase 1 recommendations

8. Thou shall be concerned when the real estate partner asketh you to take a quick look at a “clean” phase 1.

9.Thou shall not underestimate the importance of public support during project development.

10. Thou shall know that you need a permit to drain the swamp

 

 

 

 

 

 

Pre-Publication Notice Identifying 30 Environmental Rules Subject to Regulatory Freeze

January 26th, 2017

In a prior post, we discussed the regulatory freeze that had been implemented by the Trump Administration on its first day in office. The moratorium applied to proposed rules issued by the Obama Administration since election day that had not yet gone into effect. We provided a list of environmental and energy rules that were potentially subject to the moratorium.

A notice will be published in the Federal Register identifying 30 environmental laws that will be frozen for up to 60 days. A pre-publication copy of the notice is available Here

What Obama-Era Environmental Regulations May Be Revoked Under the Congressional Review Act

January 24th, 2017

In our prior Post, we discussed the regulations proposed by the Obama Administration since election day that would be subject to the moratorium issued by the Trump Administration. In this post, we cover the Obama-era regulations that have already gone into effect that my be vulnerable to recession under the Congressional Review Act (CRA).  The CRA requires agencies to notify each house when regulations are issued. Congress has 60 “session” days from the date of the notification or after the rule is published in the Federal Register to issue a joint resolution of disapproval by a simple majority.

Once the disapproval resolution is signed by the president, the rule cannot go into effect or continue in effect.  Once rescinded, the executive branch is prohibited from reissuing it “in substantially the same form” or crafting a new rule that is “substantially the same” unless Congress enacts legislation specifically authorizing it.

The Congressional Research Service (CRS) has estimated that the 60-day period for repealing regulations will apply to all federal rules adopted after May 30, 2016.  Several conservative groups and the House Freedom Caucus have developed a “kill list” of environmental and energy-related regulations.  Based on the CRS lookback date and the regulatory “kill list”, the following rules that the Obama Administration finalized in 2016 could be subject to a disapproval resolution under the CRA:

  • Stream Protection Rule[1];
  • Energy Conservation Program: Energy Conservation Standards for Residential Dishwashers; [2]
  • National Pollutant Discharge Elimination System (NPDES) Municipal Separate Storm Sewer System General Permit Remand Rule;[3]
  • Greenhouse Gas Reporting Rule: Leak Detection Methodology Revisions and Confidentiality Determinations for Petroleum and Natural Gas Systems[4];
  • Hazardous Waste Export-Import Revisions[5];
  • Management of Non-Federal Oil and Gas Rights;[6]
  • Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles-Phase 2; [7]
  • Review of the National Ambient Air Quality Standards for Lead;[8]
  • Occupational Exposure to Respirable Crystalline Silica;[9]
  • Finding That Greenhouse Gas Emissions from Aircraft Cause or Contribute to Air Pollution That May Reasonably Be Anticipated to Endanger Public Health and Welfare;[10]
  • Standards of Performance for Municipal Solid Waste Landfills; [11]
  • Emission Guidelines and Compliance Times for Municipal Solid Waste Landfills[12];
  • Enforcement of Regional Standards for Central Air Conditioners; [13]
  • Effluent Guidelines and Standards for the Oil and Gas Extraction Point Source Category;[14]
  • Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources;[15]
  • Source Determination for Certain Emission Units in the Oil and Natural Gas Sector for PSD and NNSR;[16]
  • Energy Conservation Standards for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment and Commercial Warm Air Furnaces.[17]

Disapproval resolutions may only be enacted as individual regulations. While the CRA provides an expedited legislative path for disapproval resolutions and prohibits the use filibusters in the Senate, each resolution is subject to up to ten hours of debate. Since Congress must pass a new budget, plans on repealing the Affordable Care Act and the Senate must complete confirmation hearings, it is unlikely there Congress could rescind more than a handful of regulations.

To address these constraints and enhance the use of the CRA, though, the House of Representatives recently passed the Midnight Rule Relief Act (H.R. 21)  that would amend CRA to allow Congress to repeal groups of regulations en masse instead of one at a time. It is unclear if the Senate will approve this measure.

[1] 81 F.R. 93,066 (December, 20, 2016)

[2] 81 FR 90072 (December 13, 2016)

[3] 81 FR 89320 (December, 9, 2016)

[4] 81 FR 86490 (November 30 2016)

[5]  81 FR 85696 (November 28, 2016)

[6]  81 FR 79948 (November 14, 2016)

[7]  81 FR 73478 (October 25, 2016)

[8] 81 FR 71906 (October 18, 2016)

[9]  81 FR 60272 (September 1, 2016)

[10] 81 FR 54422 (August 15, 2016)

[11] 81 FR 59332 (August 29, 2016)

[12] 81 FR 59276 (August 29, 2016)

[13] 81 FR 45387 (July 14, 2016)

[14] 81 FR 41845 (June 28, 2016)

[15]  81 FR 35824 (June 3, 2016)

[16] 81 FR 35622 (June 2, 2016)

[17] 81 FR 32628 (May 24, 2016)

What Obama “Midnight Rules” Are Subject to the Trump Regulatory Freeze?

January 22nd, 2017

Since the Carter Administration, it has become customary for outgoing presidential administrations to issue a plethora of new regulations between election day and the inauguration. These rules are often called “midnight rules”. In response, the incoming administrations have issued executive orders or memorandum to temporarily delay or “freeze” these midnight regulations” so the new administration had the opportunity to review these rules.

Several hours after Donald J. Trump took the oath of office, White House Chief of Staff Reince Priebus issued a Memorandum to all executive departments and agencies freezing all pending regulations. The moratorium postpones for sixty days the effective date for any regulation that has been published in the Federal Register but not yet gone into effect. The memo instructs agency heads to withdraw any regulation that had been sent to the Office of the Federal Register (“OFR”) but not yet published so that the rules may be reviewed by the department or agency head appointed or designated by the President. In addition, agency heads are prohibited from sending any proposed or final regulation to the OFR until department or agency nominees have been confirmed and assumed office.

The memo also said that for regulations whose effective date has been delayed to review questions of fact, law, or policy, the agencies should consider potentially proposing further notice-and-comment rulemaking. For delayed regulations that raise substantial questions of law or policy, the memo said agencies should notify the OMB Director and take further appropriate action in consultation with the OMB Director.

The following proposed regulations would appear to be subject ta the regulatory moratorium (in reverse chronological of publication date in the Federal Register):

  • Procedures for Chemical Risk Evaluation under the Amended Toxic Substances Control Act;[1]
  • Trichloroethylene (TCE); Regulation of Use in Vapor Degreasing under TSCA §6(a);[2]
  • Federal Acquisition Regulation: Sustainable Acquisition;[3]
  • Accidental Release Prevention Requirements: Risk Management Programs under the Clean Air Act;[4]
  • Financial Responsibility Requirements under CERCLA § 108(b) for Classes of Facilities in the Hard Rock Mining Industry;[5]
  • Financial Responsibility Requirements for Facilities in the Chemical, Petroleum and Electric Power Industries;[6]
  • Federal Plan Requirements for Commercial and Industrial Solid Waste Incineration Units;[7]
  • Protection of Visibility: Amendments to Requirements for State Plans;[8]
  • Addition of a Subsurface Intrusion Component to the Hazard Ranking System;[9]
  • Addition of Natural Gas Processing Facilities to the Toxics Release Inventory (TRI);[10]
  • Revisions to the Regulations for Candidate Conservation Agreements with Assurances;[11]
  • Trichloroethylene; Regulation of Certain Uses Under TSCA § 6(a);[12]
  • Formaldehyde Emission Standards for Composite Wood Products;[13]
  • Hazardous Waste Generator Improvements Rule;[14]
  • Energy Conservation Program: Energy Conservation Standards for Miscellaneous Refrigeration Products;[15]
  • National Emission Standards for Hazardous Air Pollutant Emissions: Petroleum Refinery Sector Amendments;[16]
  • Revisions to the Prevention of Significant Deterioration (PSD) and Title V Greenhouse Gas (GHG) Permitting Regulations and Establishment of a Significant Emissions Rate (SER) for GHG Emissions Under the PSD Program;[17]
  • Energy Conservation Standards for Uninterruptible Power Supplies;[18]
  • Corporate Average Fuel Economy (CAFE) for light-duty vehicles;[19]
  • National Emission Standards for Hazardous Air Pollutants for the Portland Cement Manufacturing Industry;[20] and
  • Clean Energy Incentive Program Design Details (CEIP) [21]

History shows that only a very small percentage of the regulations that have been temporarily frozen end up being rescinded or significantly modified. For example, President Clinton repealed less than 10 percent of the midnight regulations issued by the outgoing George H.W. Bush Administration. Of the 90 rules subject to the freeze imposed by the George W. Bush Administration, one rule was withdrawn in its entirety, three rules were withdrawn and replace and nine others were altered (e.g., different implementation date or reporting requirement). This is because to eliminate or change midnight regulations, a new administration would need to commence a new notice-and comment rulemaking and provide a rational explanation for why the rule is no longer appropriate.[23] Courts have invalidated changes that did not comply with notice-and-comment rulemaking, especially where EPA did not make specific factual findings.[24].

The regulatory freeze does not apply to recent rules that have already become effective. However, Congress could invoke the Congressional Review Act (CRA) to revoke some of those finalized regulations. We will identify the rules that are vulnerable to recission under the CRA in our next post.

 

[1] 81 FR 7562 (January 19, 2017)

[2] 81 FR 7432 (January 19, 2017)

[3] 81 FR  5490 (January 18, 2017)

[4] 81 FR 4594 (January 13, 2017)

[5] 81 FR 3388 (January 11, 2017)

[6] 81 FR 3512 (January 11, 2017)

[7] 81 FR 3554 (January 11, 2017)

[8] 81 FR 3078 (January 10, 2017

[9] 81 FR  2760 (January 9, 2017)

[10] 81 FR 1651 (January 6, 2017)

[11] 81 FR 95053 (December 27, 2016)

[12] 81 FR 91592 (December 16, 2016)

[13] 81 FR 89674 (December 12, 2016)

[14] 81 FR 85732 (November 28, 2016)

[15] 81 FR 75194 (October 28, 2016)

[16] 81 FR 71661 (October 18, 2016)

[17] 81 FR 68110 (Oct. 3, 2016)

[18] 81 FR 52196 (Aug.5, 2016)

[19] 81 FR 49217 (July 27, 2016)

[20] 81 FR 48372 (July 25, 2016)

[21] 81 FR 42940 (June 30,2016)

[22] reserved

[23]  Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983)

[24] See, e.g., New Jersey v. EPA, 517 F.3d 574 (D.C. Cir., 2008)(vacating Clean Air Mercury Rule); Nat. Res. Def. Council v. Abraham, 355 F.3d 179 (2d Cir. 2004); Envtl. Def. Fund, Inc. v. Gorsuch, 713 F.2d 802 (D.C. Cir. 1983); Nat. Res. Def. Council v. EPA, 683 F.2d 752, 761-63 (3d Cir. 1982).

EDR Commonground Interview On the State Environmental Due Diligence

December 9th, 2016

This interview occurred at the old Yankee Stadium in 2008 shortly after the last game was played. 

Court Dismisses Action Against DEC For Breach of VCA

November 28th, 2016

A 20-year old voluntary cleanup agreement (VCA) was the subject of the dispute before the New York Court of Claims in Alaskan Oil, Inc., v. State of New York, Claim No. 116072 Motion No. CM-81863 (Ct. Claims 7/25/16).

In this case, claimant Alaskan Oil Inc. acquired approximately 40 properties owned by Parrish Energy Fuels, Inc., and Webber Oil Company in 1994 and then sought to enroll the sites into the newly-created New York State Department of Environmental Conservation (NYSDEC) Voluntary Cleanup Program (VCP). After over negotiating for more than a year, Alaskan Oil entered into a VCA dated February 5, 1996 that covered all 40 sites. The VCA provided, inter alia, that Alaskan Oil would implement and complete remedial actions at all of the covered sites as well as reimburse NYSDEC for up to $66,000.00 in oversight costs.

Initially, work progressed pursuant to a schedule approved by NYSDEC that contemplated completing cleanup of all 40 sites by December 1998. However, only a handful of sites were remediated by the end of 1998. The pace of cleanups continued to lag and when Alaskan Oil ceased work in 2004, 19 sites remained unremediated. As a result,  NYSDEC advised Alaskan Oil in October 2005 that it had failed to comply with the VCA and that the VCA would be terminated within thirty days unless Alaskan Oil came into substantial compliance with the terms of the VCA. After a series of meetings failed to produce any progress, NYSDEC terminated the VCA in September 2007 based on material breach of contract for failure to perform its obligations.

The parties again held several meetings but could not resolve their dispute. Alaskan Oil then filed an article 78 proceeding in January 2008, seeking to determine if DEC had acted within its authority. However, since the proceeding involved contract action against the State, the action had to be discontinued. Alaskan Oil then filed a claim with the Court of Claims in May 2008 alleging that it had suffered $1.3 MM in monetary damages as a result of NYSDEC’s actions. Specifically, the claimant alleged NYSDEC made it more difficult under the VCA to bring its sites into compliance, that the Region 6 technical staff continually interrupted business operations that caused or contributed to claimant’s inability to meet the terms and conditions of the VCA. Alaskan Oil also claimed that the Region 6 staff forced it to comply with more stringent cleanup than required for other sites under the VCA or sites operated by its competitors.

NYSDEC initially claimed that Alaskan Oil had filed its complaint too late because the alleged actions of interference occurred from the 1990s to 2001. However, in a Decision and Order dated September 29;2008, the Court ruled that the claim arose on the date the VCA was terminated and therefore, the claim was timely.

After Alaskan Oil was granted leave to file a late claim, the NYSDEC moved for summary judgement arguing it was immune from liability because it was acting pursuant to its authority under the Navigation Law, citing the savings clause of Navigation Law § 176 (2)(b)., which states:

“Section eight of the court of claims act or any other provision of law to the contrary notwithstanding, the state shall be immune from liability and action with respect to any act or omission done in the discharge of the department’s responsibility pursuant to this article; provided, however, that this subdivision shall not limit any liability which may otherwise  exist for unlawful, willful or malicious acts or omissions  on the part of the state,· state agencies, or their officers, employees or agents or for a discharge  in violation of section one hundred seventy-three  of this article.”

In response, Alaskan Oil asserted that NYSDEC was not immune because its employees committed unlawful, willful or malicious acts or omissions. In support of this argument, Alaskan Oil pointed to notices of violations and a proposed administrative Consent Order issued by the NYSDEC Region 6 office for non-compliance with the Petroleum Bulk Storage ACT, that the Region 6 office required more stringent cleanups at two sites than required at other similar facilities and a demand for reimbursement of $261,223.58 incurred for a cleanup conducted by Region 6 related to a 1988 spill which Alaskan Oil alleged breached the indemnity.

However, the Court found these allegations did not fall with the exception to the Navigation Law’s immunity shield because they related to sites or events outside of the VCA. Accordingly, the Court concluded that NYSDEC carried out its responsibilities under the Navigation Law in a lawful, non-willful and non- malicious manner, and dismissed Alaskan Oil’s claim.

Appellate Court Restricts NYSDEC Ability to Spend Superfund Money

November 14th, 2016

A legal maxim is that  bad facts often make bad law. It appears that complex facts may have confused an Appellate Division court in In the Matter of FMC Corporation vs New York State Department of Environmental Conservation, 2016 N.Y. App. Div. LEXIS 6785 (App. Div.-Third Dept. 10/20/16) where the three judge-panel appeared to rule that the NYSDEC may not spend money from the state superfund until it first provides a hearing to a potentially responsible party.

BACKGROUND

The facts are dense but can be summarized as follows. FMC Corporation (FMC) operated a 103-acre facility located in the Village of Middleport, New York that manufactured a variety of organic and inorganic pesticides, fungicides, herbicides and insecticides containing calcium arsenate and lead arsenate since the early 1940s. In 1980, the NYSDEC added the facility to the Registry of Hazardous Waste Disposal Sites which is informally known as the state superfund (SSF) list. In 1986, the agency reclassified the facility as a class 2 site. The facility was  an interim status facility under the federal Resource Conservation and Recovery Act (RCRA).

In 1988, NYSDEC completed a RCRA Facility Assessment (RFA) that identified 53 solid waste management units (SWMUs), including eight hazardous waste management units (HWMUs). Contaminants consisting of heavy metals and dozens of other organic compounds were detected in the soil and groundwater at the Facility. Heavy metals were found in the soils at a nearby school and nearby private residences primarily from aerial deposition.

In 1991, FMC, EPA and the NYSDEC entered into an administrative order on consent (AOC)  pursuant to RCRA § 3008(h) and ECL § 71-2727(3). The AOC required FMC to complete an RCRA facility investigation (RFI), implement interim corrective measures (ICMs) and conduct a corrective measures study (CMS) if EPA determined that additional work was necessary to protect human health or the environment.

Under section section XXIX, FMC had the right to invoke the dispute resolution procedures if EPA determined additional work and/or CMS was required or if FMC disagreed with EPA decisions to disapprove or amend submissions. To exercise its right to dispute resolution, the AOC provided that FMC would have to tender a written “Notice of Dispute and Request for Resolution”  containing the basis or the objection within 15 days of receipt of any such disapproval or modification. The AOC also provided that it would be deemed satisfied and the FMC’s obligations would shall terminate upon receipt of a written statement from EPA that FMC has completed to the satisfaction of the terms and conditions of the AOC including any additional investigatory work that EPA may have determined was be necessary. The AOC also contained a reservation of rights for EPA and NYSDEC.

Between 1996 and 2003, FMC implemented a number of ICMS to address soil contamination at the school and several dozen private residences. In 2009, the agencies approved a draft RFI and directed FMC to perform a corrective measure study (CMS) to develop a corrective action plan. One year later, FMC submitted its draft CMS report, which proposed eight corrective measure alternatives (CMAs).

In June 2012, NYSDEC issued a draft statement of basis (SOB) for the remediation of OUs 2 (consisting of 285 residential properties), OU4 (school property) and OU5 (a storm water drain discharging into several creeks). In addition, the agencies rejected FMC’s preferred remedy and proposed a hybrid remediation program, known as CMA 9 that established a more stringent arsenic remedial goal of 20 parts per million (ppm) for soils at all locations and depths.

Two months later, FMC submitted a written response challenging the selection of CMA 9. EPA and NYSDEC notified FMC in a joint letter dated October 19, 2012 that the CMS report for the three OUs had been accepted and that the AOC was “deemed by the Agencies to be closed.” Although the purpose of the AOC was to compete an RFI and an CMS if required, FMC sent a remarkable letter to EPA and NYSDEC on October 25, 2012 claiming the agencies did not have the right to close the AOC because a final CMA had not been selected by the EPA. However, FMC did not specifically invoke the dispute resolution procedures in the AOC.

On May 28, 2013, NYSDEC issued its final SOB formally selecting CMA 9. FMC and the NYSDEC then entered into a series of tolling agreements extending the time in which to challenge this selection through April 30, 2014. On May 1, 2014, FMC sought to invoke the dispute resolution provisions of the AOC. NYSDEC then sent a letter dated May 7, 2014 to FMC’s counsel because FMC had refused to implement CMA 9, FMC planned to complete the work using the SSF.

In a letter dated May 22,2014,  EPA informed FMC that NYSDEC’s selection of a remedy in its Statement was not subject to the dispute resolution provisions of the AOC because the AOC had been closed. FMC then filed an article 78 proceeding on May  30, 2014 asserting NYSDEC’s unilateral selection of CMA 9 was arbitrary and capricious, that the agencies could not unilaterally modify the AOC and had acted arbitrarily when they declared the AOC closed and that NYSDEC did not have the authority to decision to use the hazardous waste remedial fund to pay for the remediation. FMC also sought a declaratory judgment finding that the Final Statement of Basis should not be used for the selection of a remediation program. In response, the DEC asserted its October 19, 2012 letter was a final determination and moved to dismiss the petition as time-barred.

The Supreme Court ruled that the October 19th was as a final determination for purposes of triggering the statute of limitations because the court said that the letter left “no doubt that there would be no further administrative action” and the agency would not alter its position. In addition, the court said FMC’s October 25th letter did not extend the statute of limitations because a request for reconsideration of an agency decision does not expand the statute of limitations. Since FMC did not file its petition by February 16, 2013, the court dismissed the petition.   Application of FMC Corporation vs NYSDEC, Index No. 2884-14 (Sup. Ct.- Albany, 08/20/15).

On appeal, the appellate division held the court had erred because the October 19th letter made no reference to the selection of a remedy. The court said the actual selection of a remedy did not occur until NYSDEC issued its final statement of basis in May 2013. Since there was no dispute that the parties entered into the tolling agreements in an effort to negotiate a resolution, the court held FMC timely filed its article 78 petition.

Since the trial court had only addressed the statute of limitations question, the appeals court could have stopped there and remanded the matter for further proceedings on the substantive claims. However, the panel then plunged into reviewing the merits of the dispute and this is where the judges went off the rails.

The court acknowledged that NYSDEC was authorized to assert its authority under titles 9 and 13 of Article 27 of the ECL and to issue the SOB. The court also found the SOB was the final corrective measure for OUs 2, 4 and 5 and also served as the Record of Decision (ROD) for purposes of selecting a remedial plan for these OUs under the SSF.

NYSDEC argued it was authorized to select CMA 9 and proceed with the remedial work pursuant to ECL 27-0916 (1) because FMC “unlawfully” dealt with hazardous waste. The court disagreed, saying that FMC at all relevant times was operating lawfully pursuant to its interim status. In so holding, the court confused having interim status and improperly allowing hazardous waste to released into the environment.

Section § 27-0916 is titled “Department authority for cleanups”. § 27-0916(1) provides:

The department shall have authority to clean up or return to its original state any area where hazardous wastes were disposed, possessed or dealt in unlawfully in violation of section 27-0914 of this article.

Section 27-0914(2), in turn, provides “No person shall dispose of hazardous wastes without authorization”.

What the court got wrong, though, was that while FMC was authorized by its interim status to manage waste in compliance with law, it was not authorized to dispose of wastes at the facility.

However, that was not the court’s worst stumble. In the last two paragraphs of the opinion, the court held that the agency was not authorized to implement the remedial work without first giving FMC an opportunity for a hearing to assert its challenge to CM, relying on ECL § 27-1313 [5] [a], [b], [c].  Now it is true that § 27-1313[3][a] provides that when a site poses a significant threat to the environment, the NYSDEC may order an owner (i) to develop an inactive hazardous waste disposal site remedial program, subject to the approval of the agency and (ii) to implement such program within reasonable time limits specified in the order. [emphasis added] Clearly, the use of the word “may” means that NYSDEC has the authority to issue an order but is not required to do so.

ECL § 27-1313[4] then provides that any such order “shall be issued only after notice and the opportunity for a hearing is provided to persons who may be the subject of such order.”

ECL 27-1313[5][a] also provides that when person ordered to eliminate a significant threat fails to do so within the time limits specified in the order, the NYSDEC may develop and implement a remedial program for the site. [emphasis added] Again, note the use of the word “may”.

However, the court ignored two other important provisions of § 27-1313 that give NYSDEC the discretion to unilaterally implement a remedial action. For example, § 27-1313[3](b) authorizes NYSDEC to spend money when the agency commissioner finds:

(i) that hazardous wastes at an inactive hazardous waste disposal site constitutes a significant threat to the environment; and

         (ii) that such threat is causing or presents an imminent danger of causing irreversible or irreparable damage to the environment; and

         (iii) the threat makes it prejudicial to the public interest to delay action until a hearing can be held pursuant to this title, the department may, pursuant to paragraph c of subdivision five of this section and within the funds available to the department…”

The court also ignored § 27-1313[5](d) authorizes NYSDEC to develop and implement a remedial program where the agency determines it is cost-effective. In determining if it is cost-effective to develop and implement a remedial program, the NYSDEC is required to consider the following four factors:

         (i) the ability of the department to determine, through the exercise of its scientific judgment, whether the elimination of the imminent danger of irreversible or irreparable damage to the environment can be achieved through limited actions;

         (ii) the ability of the department to identify the owner of the site and/or any person responsible for the disposal of hazardous wastes at such site with sufficient financial resources to develop and implement an inactive hazardous waste disposal site remedial program at such site;

         (iii) the nature of the danger to human health and the environment which the actions are designed to address; and

         (iv) the extent to which the actions would reduce such danger to human health or the environment or would otherwise benefit human health or the environment.[emphasis ended]

Based on the record in this case, it appears that NYSDEC made these requisite findings. For example, the agency determined that the interim actions that had been taken had been insufficient to eliminate the risks to human health, the contamination still posed a threat that warranted further action, that CMA 9 would eliminate that threat and that while FMC had sufficient financial resources, it had refused to implement the required cleanup.   Likewise, State Finance Law § 97-b(4) provides that NYSDEC does not have to obtain a voluntary agreement with owners or operators of inactive hazardous waste sites or other responsible parties to pay the costs of necessary remedial actions when it has been determined that condition dangerous to life or health exists.

In so ruling, the court ignored the legislative history of the SSF. The Legislature gave the NYSDEC Commissioner “[b]road powers … to respond to situations which significantly threaten public health or environmental degradation” with State funds (1982 Legis. Ann, at 273). The idea that the NYSDEC would first have to hold a hearing and have the responsible party refuse to implement a remedy before spending money to protect human health is simply contrary to the purpose of the statute. The decision also flies in the face of Allied Princess Bay Co. #2 v. Atochem N. Am., 855 F. Supp. 595 (E.D.N.Y. 1993) where the court ruled that NYSDEC could act to clean up the site itself under ECL § 27-1313(5)(d) if the NYSDC determines it is cost-effective.

Under this decision, NYSDEC might not have been able to respond to the Hoosick Falls crisis earlier this year. Unlike EPA which can issue unilateral administrative orders (UAOs) under section 106 of CERCLA and section 7003 of RCRA, NYSDEC lacks the authority under the SSF to issue UAOs. The principal tool DEC has to respond to human health emergencies involving hazardous wastes is the SSF. The last three paragraphs of the decision are written almost like an afterthought but they have the potential to cripple NYSDEC’s ability to spend money under the SSF.  With rumors leaking from the Trump transition team that the incoming administration is consider eliminating the federal Superfund program, it is more important than ever for the NYSDEC to have the right to use the SSF to respond to hazardous wastes that pose a risk to human health.

NYSDEC Adopts Final Definition of “Underutilized” for NYC Brownfield Sites

August 3rd, 2016

Over a year after the 2015 amendments to the state Brownfield Cleanup Program (BCP) went into effect and eight months after the legislative deadline, the New York State Department of Environmental Conservation (NYSDEC) announced it was adopting amendments to its Part 375 regulations defining what constitutes  “underutilized” and “affordable housing”.  The definitions are important because they establish two of the four criteria  for qualifying NYC brownfield sites for the qualified tangible property (QTP) tax credit. The definitions become effective  on August 12th.

NYSDEC had  proposed revised definitions in March 2016. There is not much to say about these final definitions beyond what we discussed in our prior post because the agency made virtually no changes to the definition of “underutilized”. No changes were made to the “affordable housing project” or “brownfield site” definitions which remain as published in the  March 9, 2016 State Register.

In its announcement, the NYSDEC proclaimed the rule revisions as an improvement to the BCP.  However, in adopting the final definitions, the agency  completely ignored two rounds of comments from the Brownfield Task Force of the New York State Bar Association  and other stakeholders explaining how the proposed rulemaking was too restrictive and would undermine the legislative goals of the BCP.  The comments asserted that the “underutilized” definition was unduly restrictive and would cause small, family-owned  properties located in vast swaths of   middle class  areas in Queens, Brooklyn and Staten Island from qualifying for the QTP tax credit, thereby discouraging their redevelopment into more productive use. This is because most of Queens and Staten Island and a little more than half of Brooklyn are not located in Environmental Zones (the third criteria for qualifying for the QTP tax credit), and would not qualify for ‘upside-down” test (the fourth QTP criterion) because of real estate values.  The NYSDEC simply concluded that these brownfield sites in these areas could still qualify for the  QTP by satisfying the other QTP criteria ( i.e., En-Zone,  upside-down, or affordable housing) without any meaningful analysis.

The commentators also pointed our that the tax arrears and structurally unsound tests for qualifying for the “underutilized”  definition were not valid tests because  of tax delinquency policies and procedures, and that few buildings would be deemed condemned or as having acute structural deficiencies because of building code violations. Nevertheless, NYSDEC said it believed that these criteria “are valid indicators of underutilization and the regulations provide objective tests with clear parameters” again without explaining the basis for this conclusion.

The final definition of “underutilized”is contrary to the plain meaning of the word because focuses on FUTURE use and not the current use of the property. Continuing to Include factors such as tax arrears and buildings that are condemned in the definition when confronted with evidence that these factors have little relevance to NYC would appear to be the very definition of arbitrary and capricious rulemaking.  The “underutilized” “definition will undercut the program’s goal of providing incentives for redevelopment of brownfields sites

In our opinion, this rulemaking is not only inconsistent with the Legislative intent but represents another unlawful attempt by DEC to narrow the scope of the brownfield program.  We predict  this rulemaking will spawn a wave of multi-year litigation much like what happened  when the NYSDEC adopted an unnatural definition of “brownfield site” in the mid-2000s,  and could  cause irreparable harm to the BCP since will not know if they qualify for the important tangible property tax credits until after the litigation is concluded. The BCP was just beginning to recover from the damage done by DEC’s prior illegal interpretation and this rulemaking could be the death throe of the program. At the very least, this

The definition of “underutilized”  located in 375-3.2(l)  read as follows:

(l) “Underutilized” means, as of the date of application, real property on which no more than fifty percent of the permissible floor area of the building or buildings is certified by the applicant to have been used under the applicable base zoning for at least three years prior to the application, which zoning has been in effect for at least three years; and

(1) the proposed use is at least seventy-five percent for industrial uses; or

(2) at which:

(i) the proposed use is at least seventy-five percent for commercial or commercial and industrial uses;
(ii) the proposed development could not take place without substantial government assistance, as certified by the municipality in which the site is located; and
(iii) one or more of the following conditions exists, as certified by the applicant:
(a) property tax payments have been in arrears for at least five years immediately prior to the application;
(b) a building is presently condemned, or presently exhibits documented structural deficiencies, as certified by a professional engineer, which present a public health or safety hazard; or
(c) there are no structures.

The complete text of the rulemaking as well as the NYSDEC response to comments is availableHERE

 

 

NYSDEC Proposes Revised Brownfield “Underutilized” Definition

March 8th, 2016

The NYSDEC’s much awaited revised definition of underutilized that was required as part of the 2015 Brownfield Cleanup Program (BCP) reforms will be published in the March 9, 2016 New York State Register (NYR). The proposed definition is currently available on the NYSDEC website

As previously  discussed, the 2015 BCP amendments replaced the ‘as of right” tangible property tax credit (TPC) for New York City brownfield sites. Instead, new applicants would qualify for the TPC if they satisfied one of four the four tests or “gates: At least half of the site is located within an Environmental Zone; The site was “upside down”, the site will be used for affordable housing or the site is underutilized. NYSDEC was required to publish a definition of “underutilized” by July 1st and to adopt the rule by October 1st. The agency met the first deadline when it published the definition in the June 10, 2015 issue of the NYR.

The proposed “underutilized” definition was widely criticized as being too narrow and essentially reading out the term from the statute. As a result, NYSDEC withdrew the definition and missed the statutory deadline to adopt the definition by October 1st.

Despite the adverse comments, the NYSDEC declined to make significant changes to the definition of underutilized despite a plethora of adverse comments. The reason cited by NYSDEC was that only three actual examples were provided for DEC’s evaluation and agency concluded those sites would be eligible under one of the other TPC gates. The agency dismissed other “broad statements” about the effect of the proposed rule on small property owners as unpersuasive. Click here for our blog post on this issue

The revised proposed definition of underutilized provides that at the time of the application no more than 50% of the permissible floor area of the building or buildings is certified by the applicant to have been used under the applicable base zoning for at least three years prior to the application and one of following tests are satisfied.

  1. the proposed use is at least 75%  for industrial uses; or
  2. The following conditions exist

(i) the proposed use is at least seventy-five percent for commercial or commercial and industrial uses;

(ii) the proposed development could not take place without substantial government assistance, as certified by the municipality, AND

(iii) one or more of the following conditions exist:

(a). taxes are in arrears for the five years preceding the application; or

(b) a building is condemned, or exhibits structural deficiencies as certified by a professional engineer that present a public health or safety hazard; or

(c) there are no structures on the site.

Note is is unclear if 2 (i) through (iii) are all required since there was no “and” following 2(i).

It appears there is a fundamental disagreement between the NYSDEC and the real estate community as to what constitutes an underutilized property.  As it stated in its responsiveness summary, the agency believes that “ If the majority of a site is in productive use as stated in the comment, it should not be considered underutilized even if there may be some contamination present.” This view would seem to undermine the intent of rezoning and prevent properties that are by all reasonable measures obsolete from qualifying for BCP tax credits because they have tenants generating some income. Under this interpretation, an abandoned gas station with a tenant selling flowers or that is being used for parking would prevent the site being considered “underutilized”. A small, obsolete shopping center impacted by a former dry cleaner would not meet the proposed “underutilized” definition if it is more than 50% leased.

The proposed “underutilized” appears to favor industrial sites which is somewhat incongruous that this term applies to New York City sites. A mixed-use project that has more 25% residential would not satisfy for criterion 2(ii) and not qualify for the tangible property tax credit if  2(i) through 2(iii) are required to be met  to qualify for the tangible property tax credit. Unless a site with a proposed mixed-use project with market-rate residential units falls is located in an Environmental Zone or is “upside down” as defined by the statute, the project would not qualify for the tangible property credit component.

In our view, NYSDEC has arbitrarily dismissed adverse comments that the restrictive definition would exclude large swaths of small commercial properties in the middle class neighborhoods located outer boroughs of New York City from the BCP tax credits that were not the high value” sites that the legislature was targeting and would have a devastating impact on owners and developers of small contaminated properties such as dry cleaners, gas stations, and vehicle repair and maintenance shops. The agency simply disagreed with these comments and assumed these properties could qualify for the “upside-down” test  without any meaningful analysis.

DEC’s response to the comments is available here

Searchable BCP Tax Credit Database Show Who Has Received Tax Credits and How Much

February 18th, 2016

Because of the changes and controversy surrounding the  NYSDEC Brownfield Cleanup Program (BCP), there has been some skepticism in the real estate community about the amount of  tax credits that the Department of Taxation and Finance actually approves and if those amounts are near what is supposed to be available under the BCP.

The following searchable database provides information about the amount of tax credits awarded to BCP projects.  Searches can be done by county, year and taxpayer. Each entry shows the amount of the costs claimed and the actual tax credits that were received.

Click here to access the searchable database