Has EPA Engaged In Stealth Rollback of School PCB Safequards?

August 23rd, 2015

One of our more popular posts  (based on views) has been the 2013 discussion on EPA’s reinterpretation of the regulatory status of building materials that are contaminated by migration of PCBs from PCB bulk product waste as a PCB remediation waste. EPA recently released revised guidance which consists of the following documents:

  • PCBs in Building Materials—Questions & Answers”;
  • Fact sheet titled “Practical Actions for Reducing Exposure to PCBs in Schools and Other Buildings”; and
  • a new webpage titled “Exposure Levels for Evaluation of PCBs in Indoor School Air”

The documents are available Here.

However, according to an analysis posted by Public Employees for Environmental Responsibility (PEER), the new guidance represents a step backward in EPA’s approach to PCBs in schools and other buildings and will result in “thousands of students and teachers occupying schoolrooms containing illegal levels of PCBs”. PEER says that the new guidance:  

  • Fails to recommend testing caulk for PCBs unless the buildings are going to be demolished or reconstructed.
  • The new policy discourages air testing and instead recommends it should be considered only after consultation with the EPA regional PCB Coordinators;;
  • Downplays the need for air testing except in extreme circumstances; and
  • Downgrades the categorization of air testing from “health” or “maximum concentration” levels to factors for “thoughtful consideration” which “should not be interpreted nor applied as ‘bright line’ or ‘not-to-exceed’ criteria.”

In particular, PEER explains that the new “Practical Actions for Reducing Exposure to PCBs in Schools and Other Buildings,” recommends only 1) removal of PCB-containing florescent light ballasts 2) BMPs; 3) removal of PCB-containing building materials during planned renovations or repairs; and 4) considering encapsulation to reduce PCB exposure, which applies only to surrounding materials after PCB building materials are removed during repairs and renovations, and is to be considered on a case-by-case basis by the EPA regional PCB coordinator. Materials identification and testing is not mentioned at all

PEER points out that the old Q&A document identified “Maximum Concentrations of PCBs in School Air” and recommended that the concentrations of PCBs in indoor air be kept “as low as is reasonably achievable and that total PCB exposure be kept below  the reference dose level.” In contrast, the new document refers to “Exposure Levels for Evaluating PCBs in Indoor Air,” and emphasizes that the indoor air levels “were derived to serve as health protective values intended for evaluation purposes. They should not be interpreted nor applied as ‘bright line’ or ‘not-to-exceed’ criteria, but may be used to guide thoughtful evaluation of indoor air quality in schools.”  The new Q & A document also states “Isolated or infrequent indoor air PCB measurements that exceed the exposure levels would not signal unsafe exposure to PCBs. When measured indoor school air PCB concentrations are above these exposure levels, the EPA suggests that school building administrators take further steps to reduce PCB exposure such as reviewing, reevaluating and adjusting BMPs or taking other actions to identify and address PCB sources.”

PEER also noted that EPA has significantly raised the exposure levels for young children – doubling levels to be “thoughtfully considered” for 3 to 6-year olds and raising them for most other age groups.

Because of the changes to the guidance documents. PEER asserts that “owners and  occupants of schools and other buildings will never find out the levels of PCBs to which they are being exposed, and whether they are legally required to be removed, unless and until there is a planned renovation or demolition in which the PCB containing materials will be removed anyway.” Even if a building owner does decide to test the air, the consequences are “greatly attenuated because the standards does not automatically warrant action, but only ‘thoughtful consideration’.”

Several EPA Region offices have launched initiatives that focus on the risks posed by PCBs in schools-particularly PCBs that are found in caulk. PCBs in caulk can volatilize into the air and may be absorbed by surrounding materials, causing wood, brick, concrete and other building materials to become contaminated with PCBs. These secondary sources of PCBs can also volatilize and contaminate the air, dust, and other materials in the building. PCBs in buildings can also volatilize and be deposited into and contaminate surrounding soil. One high profile example has been the discovery of high levels of PCBs in the Malibu and Santa Monica public schools. A Lawsuit has been filed by teachers and parents under the Toxic Substance Control Act (TSCA) seeking to compel the Malibu school district to remove the source of the PCBs.  According to the complaint, testing in 2009 and 2010 revealed elevated levels of PCBs in air and soil samples at Malibu Middle and High School (“MHS”) and Juan Cabrillo Elementary School (“JCES”). Additional testing undertaken since then has revealed that caulk and other building materials used at MHS and JCES contain levels of PCBs in excess of standards adopted by the EPA. The complaint alleges that although the school district has, in consultation with the EPA, agreed to remove the PCB-containing materials from certain areas within the schools, the school district has refused or been slow to test additional areas within MHS and JCES that are also likely to contain building materials with levels of PCBs in excess of those allowed by the EPA. A federal district court recently denied a motion to dismiss filed by the school district.

It is unclear if the changes in the PCB guidance documents is a result of pushback from local school authorities concerned over the costs of complying with the PCB requirements. 

NYSDOH Lowers Vapor Intrusion Action Levels for TCE

August 23rd, 2015

As anyone who has gone through the New York State Brownfield Cleanup Program (BCP) is all too aware, the New York State Department of Health (NYSDOH) has an important role in the cleanup process. The NYSDOH is responsible for determining that work completed under the NYSDEC remedial programs are protective of public health for the intended use of the property.

The NYSDOH is often the critical regulator that BCP applicants have to satisfy during the remedial site cleanup process. The NYSDOH Bureau of Environmental Exposure Investigation will assign staff for each site to investigate the potential for human exposure from environmental contamination as well as coordinate and communicate health-related activities. NYSDOH reviews sampling results, work plans, investigation reports and remediation decision documents, and provide comments or recommendations to NYSDEC. While NYSDEC guidance indicates that the agency project managers will consult with and receive input from NYSDOH, the recommendations from NYSDOH will often drive investigation and remedial decisions.

Back in 2013, we reported that the NYSDOH has lowered its air guideline value for PCE from 100 to 30 micrograms per cubic meter of air (30 ug/m3). The air guidelines are used to evaluate if further action is warranted to address exposures to certain volatile organic compounds (VOCs). Recently, NYSDOH lowered its chronic TCE exposure standard to from 5 micrograms per cubic meter (5 ug/m3) to 2 micrograms per cubic meter (2 ug/m3). NYSDOH has also set 20 micrograms per cubic meter (20 ug/m3) as the default level for taking “immediate and effective action” to protect the fetuses of pregnant women in the first trimester of pregnancy.

The impact of the changes to the TCE air guidelines will likely be geographically expanded remedial investigations and additional remedial obligations such as installation of sub-slab depressurization systems (SSDS). What is unclear is if previously approved workplans at sites that have not yet obtained COCs will now need to be revised. The changes could possibly trigger reopeners for sites that have already obtained COCs for additional investigation or installation of an SSDS to address vapor intrusion or require extended/enhanced Operation, Maintenance and Monitoring if indoor air exceeds the revised TCE air guidelines.

NYSDOH reduced its TCE air guideline because of new information on TCE. In 2011, the federal EPA recommended a 2 ug/m3 reference concentration (RfC) which is the level of a chemical in air that is unlikely to cause harmful non-cancer health effects. Because NYSDOH policy has been to set a guideline for a chemical at an air concentration that is equal to or less than its RfC, NYSDOH replaced its old RfC with EPA’s revised RfC.

In the revised fact sheet, DOH indicates that it is particularly concerned about exposure during pregnancy to air concentrations higher than 20 ug/m3 especially during the first trimester because the major steps of heart development occur during this period and TCE may be a risk factor for fetal heart defects in humans. Thus, NYSDOH recommends taking immediate and effective action to reduce exposure when an air concentration is equal to, or above 20 ug/m3. In all cases, the specific recommended action depends on a case-by-case evaluation of the situation.

By way of comparison, the EPA Region 9 office recently published Interim TCE Indoor Air Response Action Levels for residential and commercial/industrial exposure scenarios to address non-cancer risks posed by exposure to TCE. The EPA Region 9 TCE “urgent response action level” (interim measures implemented and completed within days) is 6 ug/m3 for residential exposures, 24 ug/m3 for commercial exposures for 8-hour workdays and 21 ug/m3 for 10-hour workdays. The EPA Region 9 “accelerated response action level” (interim measures completed with a few weeks) is 2 ug/m3, 8 ug/m3, and 7 ug/m3, respectively. Meanwhile, EPA Region 10 office has also established a short-term (21-day) non-cancer residential exposure of 2 ug/m3 while the commercial/industrial exposure setting is set at 8.4 ug/m3. Both of these regional offices have adopted a cancer risk chronic (lifetime) level of .43 ug/m3 and chronic non-cancer level of .21 ug/m3 for residential settings with the commercial/industrial settings set at 3.0 ug/m3 and .88 ug/m3, respectively. It should be noted that the use of the non-cancer risk level for TCE is very controversial and EPA is facing litigation over

DOH cautions that the air guideline is not a bright line between TCE concentrations that cause health effects and those that do not. The guideline was set at an air concentration that is lower than air concentrations known to cause, or suspected of causing, effects in humans and animals. Thus, exposure to concentrations above, but near the guideline, is not expected to cause health effects in people. In addition, the guideline is based on the assumption that people are continuously exposed to TCE in air all day, every day for months or as long as a lifetime. Continuous exposure is rarely true for most people, who, if exposed, are more likely to be exposed for a part of the day, part of a week, or part of their lifetime.

NYSDOH has developed two decision matrices to provide guidance about actions that should be taken to address current and potential exposures related to soil vapor intrusion. Actions recommended in the matrix are based on the relationship between sub-slab vapor concentrations and corresponding indoor air concentrations. NYSDOH is in the process of updating its matrices to reflect the changes to the TCE and PCE air guidelines.

EPA recently issued new VI guidance which is available Here. Look for a future post discussing the revised EPA VI guidance.

New BCP Application Can Be a Trap for the Unwary Applicant

July 16th, 2015

The New York State Department of Environmental Conservation (NYSDEC) has unveiled its revised Brownfield Cleanup Program (BCP) application to implement the sweeping changes to the BCP that became partially effective on July 1st. The new form is available HERE

The revised application requires applicants to provide more detailed information about the brownfield site, the development project and the applicant. While some of the changes reflect best practices that experienced brownfield counsel had been including in BCP applications, the bulk of the changes are designed to enable NYSDEC to determine if the site qualifies under the new brownfield site definition and if projects located in New York City will qualify for the tangible property cost (TPC) tax credit.

Because of the changes to the BCP application, it is critical that applicants ensure they engage experienced brownfield counsel to assist with the preparation of the application. The BCP application process was never purely a technical exercise and with the addition of new criteria, revised definitions and ambiguous terms, it is important that applicants ensure their applications are vetted by counsel not only to enhance eligibility but also so applicants can preserve their rights in the event of the application is denied or NYSDEC determines the project is not eligible for one of the TPC gates.

Following are some of the more significant changes to the BCP application:

Section II (“Project Description”)- this section asks for more specific information than the former Section VI. Applicants must now describe the reasonably anticipated use and benefits of the project to the community, anticipated remedial costs and cost of future development, the date that the remedial program is to start and the date the Certificate of Completion is anticipated.

For applicants that have performed remedial investigation without NYSDEC oversight (i.e., “self-directed” or “at risk” sampling) and want to enroll in the BCP to implement a cleanup, the applicant is required to confirm that the RIR meets the requirements of the ECL. The BCP application instructions require specific information for investigations that were completed without the oversight of the NYSDEC.

Section III (Property’s Environmental History”) – this part of the application has been revised to reflect the new definition of a brownfield site. The Applicant must provide sufficient information to establish the presence of contamination requiring remediation based on the reasonably anticipated use of the property as set forth in section II.

For each media that the applicant believes requires remediation, the application must now include a site drawing that includes the following:

  • Sample location;
  • Date of sampling event;
  • Key contaminates detected;
  • For soil contamination, the drawing must highlight exceedances for the reasonably anticipated use;
  • For groundwater contamination, the drawing must highlight exceedances of 6 NYCRR PART 703.5;
  • For soil gas/soil vapor/ indoor air samples, the drawing must highlight sampling results above the mitigation levels set forth in the NYSDOH vapor intrusion matrix

The application instructions caution that the drawings are to be representative of the site conditions that the applicant is using to demonstrate that the site requires remediation.

Section IV (“Property Information”) includes more questions than the old Section II and includes more extensive instructions.

  • Question 5 asks about soil vapor or groundwater contaminated from off-site sources. The reason for this question is that the 2015 BCP Amendments clarified that a site may be eligible for the BCP where there are impacts are solely from off-site sources but will not be eligible for the TPC.
  • Question 6 asking if the site was previously remediated responds to yet another tax credit limitation wrinkle by the 2015 Amendments. Sites that were remediated under the supervision of NYSDEC to a level that is consistent with the then land use will not be eligible for the TPC.
  • Question 10 (property narrative description) is no longer open ended but more proscriptive. Applicants must now provide the specific information that NYSDEC references in the application instructions.
  • Question 11 asks the applicant if it wants a determination that the project is eligible for the TPC. Note that the application instructions provide that applicants seeking to qualify for the TPC “underutilized” gate must request the determination at the time of the application. However, applicants may request determination for the other gates any time before the COC is issued.

Section VI (Current Property Owner/Operator Information where not applicant) - this part of the application are essentially unchanged from the old application but the instructions are more specific.

  • The application instructions advise applicants that they are to list ALL parties having an interest in the property. Since owners are referenced elsewhere in this instruction, this request could be construed to require applicants to identify lenders, easement holders and others with fractional property interests in the land.
  •  If the applicant is not the owner, the application not only asks to describe the relationship with the current owner but also asks if any of applicant’s corporate members has any relationship with the current owner.

Section VII (Requestor Information) – Some of the statutory eligibility questions have changed from the old application and there are two new questions.

  • Question 4 asking about prior violations includes an expanded list of violations.
  • Question 7 expands the list of criminal offenses to include handling, storing, treating, disposing or transporting of contaminants.
  • Question 8 asking if the applicants has knowingly made falsified statements or concealed material facts as been expanded to include “in any matter within the jurisdiction of DEC”.
  • Question 10 is new and asks if the applicant was previously terminated from the BCP
  • Question 11 is new and asks if all known tanks subject to the Petroleum or Chemical Bulk Storage laws have been registered. Failure to do so can cause an applicant to be considered a participant.

The old application stated that where the applicant did not own the property at the time of the application, the applicant had to provide evidence that it has access to complete the requirements of the BCP. Revised section VII provides more detail on the nature of the documentation that needs to be submitted, The application now states that the a proof must show that the requestor will have access to the property before signing the BCA and throughout the BCP project, including the ability to place an easement on the site. The application also clarifies that a purchase agreement is not sufficient evidence of proof of access.

Cautionary Note for Volunteer Applicants- The application requires applicants  to indicate if they are enrolling as a “volunteer” or “participant”Where the applicant currently owns the property and is seeking to enroll in the BCP as a “volunteer”, the application now requires that the applicant submit a statement explaining why it should be considered a volunteer and specifically identifying how it complied with the appropriate care obligations that are part of the Innocent Landowner Defense of both CERCLA and the state superfund law.

This statement is fraught  with risk to the applicant since if it cannot satisfy NYSDEC that is qualifies as a volunteer, the applicant will be deemed to be a responsible party. If the application is then denied,  the applicant could find itself subject to an enforcement action for  both on-site and off-site contamination. It would be prudent for recent purchasers of contaminated property to consult with counsel prior to submitting an application to determine if they have met the appropriate care obligations. If not, the potential applicant should work with counsel and their consultant to design a due care or appropriate care plan, and document that they have implemented prior to attending a pre-application meeting.

Section VIII (Property Eligibility Information) – The 2015 BCP Amendments provide that a site that are on the Registry of Inactive Hazardous Waste Disposal Sites as a Class 2 Site or has been issued RCRA TSDF permits pursuant to ECL 27-0900 et seq. parties that are owned by or under contract by a volunteer and there is no financially viable party at the time of the application may be eligible for acceptance into the BCP.

Thus, this section now contains questions for volunteers who wish to enroll Class 2 or RCRA TSDF sites. Volunteers are asked to provide any information available to the related to previous owners or operators of the facility or property and their financial viability, including any bankruptcy filing and corporate dissolution documentation. Like Section VII, the applicant will have the burden of establishing that it both qualifies as a volunteer and that there is no financially viable party at the time of the application.

Section IX (Land Use Factors) - This section now only has six questions. The answers that the applicant provides in this section will be used by NYSDEC to determine if the site meets the new the definition of a “brownfield site” as well as to determine whether the proposed use is consistent with the currently identified, intended and reasonably anticipated future land use of the site at this stage. Furthermore, this land use finding will be used to determine if a previously remediated site will be eligible for the TPC.

  • Question 1 asks about the current zoning. Note that if a zoning change is imminent, the applicant must provide documentation from the appropriate zoning authority.
  • Question 2 asks about current use. Applicants are expected to discuss current business operations or uses with an emphasis on identifying possible contaminant source areas. If operations or uses have ceased, applicants are asked to provide the date that operations ceased.

Note that sites that are impacted with contaminated soil gas or groundwater from an off-site source are eligible for acceptance into the BCP under the new Brownfield site definition but will not be eligible for TPC tax credits. Thus, it will be important for the application to identify potential on-site sources of contamination from the current or former uses.

  • Question 5 asks if the proposed use consistent with applicable zoning laws/maps> However, this is no longer just a “yes” or “no” question. Instead, applicants will now be expected to explain their answer.
  • Likewise question 6 asking if the proposed use is consistent with local plans, the applicant must support its answer.

 

Supplemental Questions for Sites Seeking Tangible Property Credits in New York City- The BCP application now contains a supplemental section for sites located in NYC  where the applicant is seeking a determination that the site one of the meets one or more of the TPC eligibility criteria set forth at ECL 27 1407(1-a).

If the applicants wants a TPC eligibility determination at the time of the application, it must mark the “yes” box in the second row. It is important to note that an application only has to mark the “yes” box at the time of the application if is seeking TPC eligibility under the underutilized category. If the applicant is plans to qualify under the En-zone, upside-down or affordable housing criteria, it can request a TPC eligibility at any time before issuance of a certificate of completion

Applicants are instructed they must provide “sufficient information” to establish that the site meets one or more of the criteria. The application instructions do not shed any further light on the kind of documentation that should be submitted.

Interestingly, the application contains the text of the definitions of “underutilized” and “affordable housing projects” that NYSDEC proposed on June 10th. A public hearing is scheduled for July 29th and deadline for submitting written comments is August 5th. If NYSDEC amends the definitions in the final rule, the BCP application will need to be revised again.

New Application Review Period and Procedure

The 2015 Amendments expanded the period that the NYSDEC has to determine if an application is complete to 30 days from ten days. As reflected in the instructions to the new BCP application, it appears that NYSDEC is formalizing the process it used to notify applicants about the status of its application.

If NYSDEC determines the application is incomplete, the agency will notify the applicant via email or phone call regarding minor deficiencies. The applicant must then submit information correcting the deficiency to DEC within the 30-day completeness review period . Applicants that fail to comply within 30 days will receive a formal Letter of Incomplete Application (LOI) that will identify the deficiencies in the application. An LOI will be issued if:

  • an application is substantially deficient;
  • the information needed to make an eligibility determination is missing or found to be incomplete,; or
  • a response to a minor deficiency is not received

If the information is not submitted within 30 days from the date of the LOI, the application will be deemed withdrawn. In this case, the requestor may resubmit the application without prejudice.

If the application is determined to be complete, DEC will send a Letter of Complete Application (LOC) that includes the dates of the public comment period

Amended BCP Becomes Effective but Not Fully Operational For NYC Sites

July 6th, 2015

The amendments to the New York State Brownfield Cleanup Program (BCP) became effective on July 1st—that is except for two key tax credit eligibility criteria for properties located in New York City. Moreover, the rollout of an important alternative to the BCP will be delayed until 2016.

As regular readers of this blog are aware, Governor Andrew Cuomo and the State Legislature agreed to sweeping changes to the BCP as part of the 2015-16 budget agreement.  Among the key changes was that sites located in NYC would not be eligible for the Tangible Property Cost tax credit (TPC) unless they satisfied one of four tests commonly referred to as the TPC “gates”. Another important change was a curtailment of the costs that would be eligible for the Site Preparation Cost tax credit (SPC).  The changes to the SPC apply state-wide.

The 2015 BCP Amendments provided that the changes would take effect on July 1st provided the New York State Department of Environmental Conservation (NYSDEC) published a draft rule providing definitions of the “Affordable Housing” and “Underutilized” TPC gates. NYSDEC published its draft rule in the June 10th New York State Register. While the proposed “Affordable Housing” gate is very broad, the “Underutilized” gate is very narrow. Click HERE for our blog post discussing the proposed rule .

Not surprising, NYSDEC was swamped with applications seeking to enroll in the  BCP before the TPC and SPC changes went into effect. Following the publication of the May 27th Environmental Notice Bulletin (ENB), NYSDEC ceased accepting BCP applications so that the agency could revise its forms and procedures.  On July 1st, NYSDEC unveiled its new BCP application form on its website along with some additional guidance on how the agency will process and handle the applications. The new application which requests significantly more detailed information can be accessed HERE. Look for our forthcoming blog post that will discuss the new application requirements and procedures .

Program Not Fully Operational Yet for NYC Sites

Although NYSDEC is once again accepting BCP applications, the program is not fully operational for some  NYC sites. This is because the “Affordable Housing” and “Underutilized” definitions will not be finalized until October. While NYSDEC may now make ELIGIBILITY determinations for NYC sites,  the agency cannot yet make any determination on if the project  qualifies for the “Affordable Housing” or “Underutilized” gates since these regulation establishing these definitions is not yet effective. In other words, an applicant may be accepted into BCP during the summer but it will not learn if it qualifies for the “Affordable Housing” or “Underutilized” gate until the middle of the Fall. This raises an interesting conundrum for applicants seeking to confirm that the site is eligible for the “Underutilized” TPC. gate since according to the instructions for the new BCP application, the “Underuitilized” determination can only be made at the time of the application. 

EN-Zone Maps

One of the TPC gates that are immediately effective in NYC is that a site be at least 50% is in an Environmental Zone (En-Zone).  The En-Zones consist of census tracts with a poverty rate of at least 20%  and an unemployment rate of at least 125% of the New York State unemployment rate, or a poverty rate of at least double the rate for the county in which the tract is located. The  NYS Department of Labor has developed En-Zones based on the 2009-2013 American Community Survey.  To help applicants determine if their sites are located in an En-Zone, NYSDEC now has a webpage  providing downloadable En-Zone maps . 

BCP-EZ Program Delayed

In addition to the delayed implementation of the two TPC gates, NYSDEC announced that it does not expect to promulgate proposed rules for the BCP-EZ until early 2016. As a result, the agency said it is unlikely the BCP-EZ program will become available until the summer of 2016.

For sites in NYC, the voluntary cleanup program administered by the Mayor’s Office of Environmental Remediation (OER) remains a viable BCP alternative for parties with moderately contaminated sites who are not interested in tax credits. Look for a forthcoming blog on some of the new initiatives that OER will be implementing to jump start brownfield projects in NYC.

One Last Set of Bills for BCP Volunteers

Finally, the 2015 BCP amendments provide that parties accepted into the BCP as a Volunteer will no longer have to pay state oversight costs beginning July 1, 2015. However, this change did not remove the obligation to pay state costs incurred up to that date. Accordingly, applicants should expect to receive final invoices from NYSDEC for oversight cost incurred up to the July 1st effective date.  

NYSDEC Proposed “Underutilized” Definition Will Adversely Affect Small Commercial Property Owners

June 15th, 2015

Environmental issues can be particularly vexing for small real estate development projects. A $200K-$300K cleanup may just be a rounding error for a $100MM project but could jeopardize the financial viability of a $5MM or even $10mm project.  In most cases, the lender for a small project will hold back 125% to 150% of the estimate costs of the cleanup which not only means those funds will not be available for the project but that the developer will have to reach into its pocket or ask investors for the additional  funds to cover the cleanup.

Add to this expense the increased interest and other carrying costs due to delays associated with completing investigation and remediation and it can be easy to see why these smaller projects cannot absorb any significant amount of environmental liability. The tangible property tax credits available under the Brownfield Cleanup Program (BCP) help to defray these costs, provide a source of reimbursement to the equity partners, and help lenders get comfortable that the project will be able to be successfully completed and that the loan will be paid back.  Yet it is these very projects that will be hurt the most if the New York State Department of Environmental Conservation (NYSDEC) adopts the “underutilized” definition that it proposed for the BCP in the June 10th issue of the New York State Register.

The proposed “underutilized” and “affordable housing project” definitions were required by the Brownfield Cleanup Program (BCP) amendments that were enacted as part of the 2015-16 state budget  (Chapter 56 of the Laws of 2015). These definitions, along with the other criteria for eligibility for tangible property tax credits (the site’s location in an En-Zone or the site meeting the statutory definition of “upside down”), will be used to determine whether a site in New York City will be eligible for those credits. The “affordable housing project” definition will also be used statewide to determine a site’s eligibility for the five percent affordable housing tax credit bonus. The rulemaking will also amend the “brownfield site” definition at 6 NYCRR 375-1.2(b) to meet the definition in the new BCP law as well as deleting 6 NYCRR 375-3.3(a)(1) to conform to this definition

The good news is that the proposed affordable housing definition is very broad.  It includes developments that are subject to a federal, state, or local government housing agency’s affordable housing program, or comply with a local government requirement for minimum percentage of affordable housing units. Developers had feared that the NYSDEC would have linked BCP eligibility to building more affordable units than the minimum amount required so this definition will likely be well received.

On the other hand, the proposed “underutilized” definition (set forth at new subdivision 375-3.2(l)) is extremely narrow. According to the NYSDEC regulatory statement, the intent of the BCP amendments was to address “regional imbalance within the BCP” due to “high development costs for some Downstate projects.” NYSDEC goes on to state that:

The primary driver for the regional imbalance within the BCP is attributed to high development costs for some Downstate projects, which were reflected in excessive tangible property tax credits. Limiting the eligibility of New York City sites to specific affordable housing projects and underutilized properties through criteria established by regulation should help to target projects in New York City areas with the most need.”

The agency then explains that the proposed regulations will “reduce the amount of tangible property tax credits available to applicants for brownfield sites in high-value real estate markets while further incentivizing development on brownfields where certain project criteria are met.”

Unfortunately, the stringency of the proposed underutilized test will not only apply to “high-value” properties but also exclude large swaths of small commercial properties in the outer boroughs of New York City from the BCP and have a devestating impact on  owners and developers of small contaminated properties such as dry cleaners, gas stations, and vehicle repair and maintenance shops.

To qualify for the underutilized gate, a property must satisfy ALL of the following four criteria:

(1)  For the five years preceding the application, 50% of the existing building or buildings have been vacant based on the permissible floor area under the zoning rules that have been in effect for at least five years. New York City would have to certify that the property satisfies this criteria.

Commentary: During the March negotiations that led to the 2015 BCP Amendments, representatives of the business community had proposed that a property should be considered underutilized if the gross square footage of a building was 50% or less than that allowed by the current zoning in effect for the past 18 months. This test was borrowed from that used in the CEQR process when determining if a building was likely to be redeveloped as part of a rezoning action. NYSDEC negotiators balked at this concept on the grounds that the property values would have increased in rezoned areas and therefore owners of these properties did not need any further state incentives for redevelopment.

By focusing on the vacancy of the building itself rather than what is allowed by the zoning, the NYSDEC proposal ignores the realty of commercial real estate. Because of the high real estate taxes, only the largest developers can afford to keep individual sites vacant while they assemble the number of parcels required for their development projects. The rest of the commercial property owners will need to generate rental income to pay property taxes and other carrying costs. Thus, very few buildings are going to be more than 50% vacant much less for five years.

The proposal would also undermine the purpose of the rezoning which is to incentivize redevelopment. Indeed, the proposed would incentivize the very conduct that has led to the creation of brownfields—warehousing of contaminated properties by deep pocket property owners who can afford such tactics. Given rising rents, well-financed property owners could simply keep their property off the market for five years and rent just enough of the property to a non-conforming but grandfathered use to pay the real estate taxes (but see item 4 below) to the detriment of the neighborhood.  Meanwhile the mom and pop owners whose one-story commercial building may be the primary source of their net worth and income will be stuck with contaminated properties that cannot realize their full potential under the rezoning because the parcels will not quality for the BCP “underutilized” gate even though by all other reasonable measures their properties are not fully utilized.

(2)  the proposed development is solely non-residential

Commentary- This criterion would preclude residential or mixed use developments to enroll in the BCP even where the purpose of the zoning is to encourage such use. Given the scope of the proposed affordable housing definition, this criterion may not be overly onerous depending on how the outcome of the 421-a tax abatement negotiations. If the affordable housing mandate is significantly expanded, then many developers will be able to rely on the affordable housing gate and this criterion would only apply to luxury condos and rentals.

More problematic is this interplay of this criterion with item 4(iii) below. It is unclear if this criterion will be used to exclude commercial uses such as office buildings and only allow developments with industrial use.

(3)  The development could not be developed without “substantial government assistance”, as certified by the City of New York; and

Commentary: During the March negotiations, the business community, Legislature and the Executive all agreed it would be preferable to develop objective criteria that had little room for interpretation to avoid the kind of Article 78 litigation that occurred after NYSDEC adopted an unnaturally narrow view of what constituted a brownfield site. The use of the phrase “Substantial government assistance” could not be further from that stated goal and is about as vague a definition as one could craft—perhaps because NYSDEC would not be the agency making this determination.

The proposed rule defines the phrase as “a substantial loan, grant, land purchase subsidy, or land purchase cost exemption or waiver, from a governmental entity; or for properties to be developed in whole or in part for industrial uses, a substantial loan, grant, land purchase subsidy, land purchase cost exemption or waiver, or a tax credit, from a governmental entity, or a low-cost loan from an industrial fund managed by the municipality and partner financial institutions.”

This test  places the City of New York in a pivotal role in BCP application process—a role which we suspect it does not welcome since this would put the City in the litigation cross-hairs if it declines to certify a project. Obtaining project approvals in New York City is already a costly and time-consuming process. Requiring yet another layer of approvals only adds further complications to sites that are already challenged by the presence of contamination and the uncertainties over the extent of the cleanup costs.

(4)  New York City certifies that the property is subject to one or more of the following conditions:

(i)    Property tax payments have been in arrears for at least five years immediately prior to the application;

Commentary: This test will create a perverse incentive by punishing property owners who pay their taxes.  Owners of contaminated properties often complain that their properties are assessed as if they are clean and that their tax payments should be reduced. Until now, the primary option was to challenge the tax assessment. If adopted as proposed, the underutilized definition will give property owners a reason not to pay what they feel are excessive taxes. Since the New York City Tax Lien Trusts Trust will no longer acquire tax liens associated with contaminated properties much less foreclose on them, this criterion may actually have the effect of creating more brownfield sites as these sites are placed in tax foreclosure limbo with no one controlling the property. Private bidders would likely only be interested in the property if it would be eligible for the BCP. Thus, the test could actually undermine the purpose of the BCP and cause properties to go into disuse and become delinquent in taxes.

(ii)   The site contains a building that is presently condemned, or exhibits structural deficiencies certified by a professional engineer  which present a public health or safety hazard; or

Commentary: This criterion could also incentivize property owners to not maintain their buildings so they could qualify for the BCP.

(iii)  The proposed use is in whole or in substantial part for industrial uses.

Commentary: The reference to industrial use is puzzling and injects further confusion into the application process. Does this criterion mean that only applications involving industrial uses may qualify for the underutilized gate? Item 2 above which refers to non-residential use could be interpreted to allow office and retail buildings which bring new jobs to communities. Yet obviously commercial. Such a limitation would be contrary to the bulk of the NYC rezoning that has shifted away from industrial uses as manufacturing operations have left the City.   

While we do represent some large developers, the bulk of our BCP matters are small projects consisting of one or two tax lots that contained single-story buildings that are projected to generate between $2-3MM in total brownfield tax credits. We doubt that the legislature would have amended the BCP law twice for these projects. Yet based on the proposed definition, it appears that the following small BCP projects located in the Bronx, Brooklyn and Queens would not be eligible for the BCP after July 1st under the new criteria.

  • Six BCP projects involving former dry cleaners/laundries (not vacant);
  • Three BCP projects currently used for truck maintenance (not vacant);
  • Two BCP projects that were operating gas stations at the time of the application (not vacant);
  • A former gas station site that was used for parking at the time of the BCP application (not vacant);
  • A site with two one-story commercial buildings that have only been vacant for one year at the time of the BCP application;
  • A one-story building occupied by an auto repair that has been vacant for less than three years at the time of the BCP application;
  • A one-story building occupied by automotive repair operation at the time of the BCP application;
  • A one-story bus garage and metal door/storefront fabricator at the time of the BCP application
  • A one-story commercial building occupied by former metal operation until three years ago with potential off-site contamination. The BCP application deferred the site from being placed on the registry of inactive hazardous waste sites as a Class 2 Site;
  • A one-story commercial building vacant less than five years at the time of the BCP application;
  • A site that was an active junk yard impacted with PCBs at the time of the BCP application.

After the NYSDEC released its proposed rule on its website, we became aware of a number of proposed transactions were now in jeopardy because of the sites would not qualify for the BCP because of the proposed underutilized definition. None of these projects was anticipated to generate more than $500K in brownfield tax credits yet they would be swept by NYSDEC’s effort to prevent up “excessive tangible property tax credits.”

  •  An elderly couple wanted to sell a one-story commercial building in Queens that used to contain a dry cleaner. They hoped to use the sale proceeds to support their retirement. Prior sampling detected PCE in groundwater from the historic use. The owners reduced the purchase price but the potential purchaser has now decided to walk away from the transaction because of concerns that the contamination may have migrated off-site and that the site could be placed on the state superfund list. The purchaser does not plan on constructing a luxury condo but simply wanted to upgrade the existing building and increase income stream generated by the property. If the site was eligible for the BCP, purchaser could have limited its cleanup costs to the property and the income stream would likely have been able to support this limited cleanup.
  •  A Brooklyn business owner wants to buy a vacant land across the street for additional parking to support business expansion. However, the parcel was formerly a gas station and sampling has revealed the petroleum may have had migrated off-site. He declines to exercise his purchase option because he is concerned he will become liable as a discharged under the Navigation Law. If he was able to enroll in the BCP, he could limit his liability to removing the contaminated soil. The state of New York would not have incurred any tangible property tax credits but is not eligible under the proposed underutilized definition.
  •  Two potential purchasers walked away from an abandoned dry cleaner property in Brooklyn after learning the NYSDEC planned to place the site on the state superfund list. The owner defaulted on its mortgage and NYSDEC ended up implementing a remedial investigation/feasibility study (RI/FS) and finalized a Record of Decision (ROD). After the BCP amendments made Class 2 sites eligible for the BCP, the private lender planned to foreclose on the defaulted loan, enroll the site in the BCP and construct a townhouse development. Because of the proposed underutilized, though, the lender reconsidered its plans. Not only will the property remain in foreclosure limbo but NYSDEC will not be reimbursed for its past costs and will have to pay for the remedy.

The NYSDEC has used the proverbial hammer to kill the fly on the glass pane when a fly swatter would have worked.  It is our sincere hope that the NYSDEC will take another look at its well-intentioned yet ill-advised definition to avoid the damage that will be inflicted on small property owners if is adopted. We think NYSDEC should consider using a version of the CEQR 50% FAR test-perhaps based on the zoning in effect for the prior five years.  At the very least, the proposed rule should be changed so that property owners only have to meet ONE of the criteria, not ALL four. However, NYSDEC should consider allowing projects of a certain size (perhaps three or fewer city lots) or developments below a certain threshold ($10MM) to be eligible for the underutilized gate. After all, according to NYSDEC, the purpose of the 2015 BCP amendments  was to “correct regional imbalances …attributed to high development costs for some Downstate projects, which were reflected in excessive tangible property tax credits.” 

In an old Star Trek episode titled “Operation Annihilate”, Mr. Spock temporarily loses his sight. After he regains it, Dr.. McCoy mumbles a compliment that Mr. Spock overhears. Capt. Kirk tells Dr. McCoy “You were so worried about his Vulcan eyesight that you forgot about his Vulcan ears”.  Likewise, NYSDEC seems to have beecome so concerned about reining in “excessive tangible property tax credits” from the larger projects that is has forgotten or ignored tthe small commercial real estate developments outside the En-zones that are the lifeblood of New York City.  Developers of small contaminated sites will not live long and prosper unless NYSDEC reconsiders its proposed underutilized definition .

The proposed rule and associated rulemaking findings are available on the NYSDEC website. A legislative hearing will be held in NYC on July 29th at 1:00 PM at the New York City Department of Health auditorium at 125 Worth Street. NYSDEC will accept written public comments through August 5, 2015.

 

NYSDEC Proposes BCP “Underutilized” and “Affordable Housing Project” Definitions

June 8th, 2015

NYSDEC has released its proposed its “affordable housing project” and “underutilized” definitions that were required by the Brownfield Cleanup Program (BCP) amendments. These definitions, along with the other criteria for eligibility for tangible property tax credits (the site’s location in an EnZone or the site meeting the statutory definition of “upside down”), will be used to determine whether a site in New York City will be eligible for those credits. The “affordable housing project” definition will also be used statewide to determine a site’s eligibility for the five percent affordable housing tax credit bonus.

The Notice of Proposed Rule Making will be published in the June 10, 2015 issue of the State Register. Written public comments will be accepted by DEC from June 10 through August 5, 2015.

The rulemaking will also amend the “brownfield site” definition at 6 NYCRR 375-1.2(b) to meet the definition in the new BCP law as well as deleting 6 NYCRR 375-3.3(a)(1) to conform to this definition

The proposed affordable housing definition at 6 NYCRR 375-3.2(a) is as follows:

(a) “Affordable housing project” means, for purposes of this part, title fourteen of article twenty seven of the environmental conservation law and section twenty-one of the tax law only, a project that is developed for residential use or mixed residential use that must include affordable residential rental units and/or affordable home ownership units.

(1) Affordable residential rental projects under this subdivision must be subject to a federal, state, or local government housing agency’s affordable housing program, or a local government’s regulatory agreement or legally binding restriction, that defines (i) a percentage of the residential rental units in the affordable housing project to be dedicated to (ii) tenants at a defined maximum percentage of the area median income based on the occupants’ households annual gross income.

(2) Affordable home ownership projects under this subdivision must be subject to a federal, state, or local government housing agency’s affordable housing program, or a local government’s regulatory agreement or legally binding restriction, that sets affordable units aside for tenants at a defined maximum percentage of the area median income.

(3) “Area median income” means, for purposes of this subdivision, the area median income for the primary metropolitan statistical area, or for the county if located outside a metropolitan statistical area, as determined by the United States department of housing and urban development, or its successor, for a family of four, as adjusted for family size.

The proposed “underutilized” definition set forth at new subdivision 375-3.2(l) is as follows:

(l) “Underutilized” means, as of the date of application, real property:

(1) on which a building or buildings, can be certified by the municipality in which the site is located, to have for at least five years used no more than fifty percent of the permissible floor area under the applicable base zoning immediately prior to the application which has been in effect for at least five years;

(2) at which the proposed development is solely for a use other than residential or restricted residential;

(3) which could not be developed without substantial government assistance, as certified by the municipality in which the site is located; and

(4) which is subject to one or more of the following conditions, as certified by the municipal department responsible for such determinations of the municipality in which the site is located:

(i) property tax payments have been in arrears for at least five years immediately prior to the application;

(ii) contains a building that is presently condemned, or presently exhibits documented structural deficiencies, as certified by a professional engineer, which present a public health or safety hazard; or

(iii) the proposed use is in whole or in substantial part for industrial uses.

“Substantial government assistance” shall mean a substantial loan, grant, land purchase subsidy, or land purchase cost exemption or waiver, from a governmental entity; or for properties to be developed in whole or in part for industrial uses, a substantial loan, grant, land purchase subsidy, land purchase cost exemption or waiver, or a tax credit, from a governmental entity, or a low-cost loan from an industrial fund managed by the municipality and partner financial institutions.

 

DEC will hold a legislative public hearing during the public comment period to receive public comments on the amendments to Part 375, as follows:

July 29, 2015 at 1:00 PM

New York City Department of Health

1235 Worth Street

Second Floor Auditorium

New York City, NY

NYSDEC Swamped With BCP Applications Seeking to Beat Changes to Tax Credits

June 8th, 2015

As we previously discussed, Governor Andrew Cuomo and the Legislature reached an agreement on sweeping reforms to the Brownfield Cleanup Program (BCP) as part of the 2015-16 state budget. Among the significant changes which are scheduled to take effect on July 1st are that sites located in New York City will no longer be eligible to claim the tangible property credit (TPC) tax credit as of right but will have to qualify for one of the four TPC eligibility criteria. Another notable change was that the costs eligible for the Site Preparation (SPC) credit will be significantly curtailed for all applicants.

The July 1st effective date is conditioned on the New York State Department of Environmental Conservation (NYSDEC) publishing a draft rule in the New York State Register that defines the TPC “underutilized” criteria after consulting with the business community and the City of New York. If NYSDEC fails to publish the “underutilized” definition by July 1st, the effective date of the BCP changes would be delayed until the draft rule is published. NYSDEC representatives have indicated that the agency is on track to publish the draft rule (which will also include a definition for the “affordable housing” TPC gate as well as the new brownfield site definition) in accordance with the statutory deadline.

Applicants that receive a notice of acceptance prior to the effective date will be “grandfathered” and be able to claim the brownfield tax credits (BTCs) available under the current framework. What ensued was a scramble by applicants to submit complete applications in time to be published in the May 20th or May 27th Environmental Notice Bulletin (ENB).The reason for the mad dash was that BCP applications must undergo a ten-day “completeness” review and then a 30-day public comment period that begins with a notice in the weekly ENB. The sheer volume of applications nearly overwhelmed NYSDEC’s completeness review staff. At one point, NYSDEC cautioned that it could not be able to finish the completeness review for applications received after May 8th .   Somehow, NYSDEC managed to process the unprecedented volume of applications. Indeed, a total of 26 applications were noticed in the May 27th ENB.

Getting published in the ENB was only half the battle. Applicants still have to receive a notice of acceptance by June 30th. The comment period for applications noticed in the May 20th ends on June 19th which gives NYSDEC seven business days to issue a notice of acceptance. However, the public comment period for applications published in the May 27th ends on Friday, June 26th. This means that NYSDEC would only have two business days to issue notices of acceptance. Given the volume of applications that appeared in the May 27th ENB, the last two days of June are going to be a very tense time for many BCP applicants

Since the BCP amendments were announced, brownfield practitioners have been engaged in friendly wagers on how many applications NYSDEC would receive before the July 1st  effective date. The most common estimate was two dozen with some setting the over-under number at 40.  They were all wrong.

The final tally based on the ENB notices was 46 applications—a record number of applications for a two-month period. Indeed, the number of applications roughly equals the number of Certificates of Completion (COCs) that NYSDEC issued for all of 2014.

Not surprisingly, the overwhelming number of applications were for sites in New York City followed by Buffalo and Westchester. Until the May 20th ENB, Buffalo and Westchester actually led in the number of applications—presumably in response to the severe curtailments in the SPC tax credit since these changes will lower the tangible property tax credit cap.  

It is obvious that the May BCP application experience was extremely stressful on both applicants and NYSDEC staff. And now just like Brody, Hooper and Quint in the movie Jaws (which celebrates its 40 anniversary around the effective date of the BCP amendments) after the Orca engines fail, the applicants must sit back and wait…..  

Lender that Sold Contaminated Property Agrees to $1.4MM Settlement

May 6th, 2015

We have previously reported on instances where banks have incurred cleanup costs in connection with properties they have sold.  For some examples, click here, here, here, here and here

The latest installment of this saga involves Bank of America (BOA) which agreed to pay $1.4MM as part of a settlement involving a dry cleaner property that a BOA predecessor owned decades ago. A federal district court approved the settlement in Whitehurst v. Heinl, 2015 U.S. Dist. LEXIS 49147 (N.D.Ca. 4/14/15).

In this case, Charlotte A. Heinl (“Heinl”) operated a Norge Cleaners in Oakland, California from approximately 1965 to 1987. Bank of America, National Trust & Savings Association (“NTSA”) owned the property from approximately 1969 to 1987 and had leased it to Heinl. Bank of America became the successor to NT&SA when BankAmerica Corp. merged with NationsBank in 1998. As part of that merger, Bank of America, NTSA, was renamed Bank of America, NA (BOA).

NTSA sold the property to Richard and Lorraine Whitehurst (“Plaintiffs”) in 1987 for $265,000 pursuant to an “as is” agreement. The Plaintiffs had also been provided with a opportunity to investigate the property prior to the closing and had obtained a 120-day extension. The Property had been part of a larger parcel of real property that NTSA subdivided shortly before it sold the property to the Plaintiffs. The remainder of the parcel is still owned by Bank of America, NA and is potentially impacted by the former dry cleaner.

Sampling conducted September 2007 revealed elevated levels of PCE and its breakdown products in the groundwater. After the California Regional Water Quality Control Board, San Francisco Bay Region (“RWQCB”) sent an information request to the Plaintiffs, they filed a complaint against the Heinl and BOA asserting the defendants were liable under RCRA 7002,  CERCLA and various state common laws claims. The plaintiffs sought an order compelling the defendants to remediate the contamination and sought damages because they had been unable to lease or sell the property due to the presence of the contamination. The bank subsequently filed claims against both Whitehurst and Heinl alleging they were responsible for the contamination.

After several court-sponsored mediations failed to achieve a settlement, the parties reached an agreement on the eve of trial. Under the settlement, the parties agreed to establish a $2MM remediation fund. BOA agreed to contribute $1.4K with $200,000 of that amount representing a contribution from the Plaintiffs Whitehurst in the form of an interest free loan. The plaintiffs will be required to repay the loan within 6 months of receipt of a NFA letter from the RWQCB.  The Fireman’s Fund agreed to tender $600K on behalf of Heinl who passed away during the course of the litigation.

The plaintiffs and BOA entered into Fixed Price Remediation Agreement  with a consultant to implement remedial actions required by the RWQCB. BOA is required under the agreement to designate a Project Manager to supervise the cleanup and handle various administrative tasks associated with the cleanup.

A copy of the order approving the settlement is available from Google Scholar here 

 

Deal Reached on Sweeping BCP Reforms

March 24th, 2015

A two-year effort to extend the state Brownfield Cleanup Program (BCP) reached fruition when Governor Andrew Cuomo and both houses of the Legislature struck a deal on sweeping reforms to the BCP. The legislation may be viewed  here. The compromise addressed the concerns about the costs of the BCP but  limited some of the more draconian aspects of the Governor’s proposed legislation.  Two key definitional terms remain to be addressed so the true impact of the changes will not be known until later in the year.

The principal changes are as follows:

1. Tangible Property Tax Credit (TPCC) Gates-Governor Cuomo prevailed on his proposal that BCP applicants will only be eligible to claim the tangible property tax credit (TPCC) if their projects fall into one of the three categories: Sites that are at least 50% located within Environmental Zones, sites that meet the upside-down test or sites that qualify as affordable housing projects. However, the so-called gates  apply to sites in cities with a population of more than one million (i..e, New York City) so applicants for sites located outside New York City will still be entitled to the TPCC as of right  when they are accepted into the BCP. Applicants for NYC sites will have to submit information sufficient to demonstrate it qualifies for one of the TPCC gate criteria.

The “upside-down” gate includes an “under-utilized” TPCC gate. This term as well as the term “affordable housing” project will be defined in regulations to be issued by DEC. Thus, key terms for two of the three gates are undefined.

A site is not eligible for the TPCC if NYSDEC has determined that the property has previously been remediated pursuant to the RCRA  corrective action program, the state superfund program, the BCP, the Environmental Restoration Program  and the Navigation Law  and where the site may be developed for its then intended use.

2. TPCC Percentage Changes- The TPCC base percentage for sites accepted into the BCP on or after July 1st shall be ten percent for all eligible sites. Applicants shall be entitled to an additional 5% for sites: in the En-Zone at the date of the notice of acceptance, that achieve track 1 cleanup, that are to be used “primarily” for manufacturing activities projects,  that are developed for affordable housing project, or are located in a brownfield opportunity area (BOA) provided the project complies with the is developed in conformance with the goals and  priorities established for that applicable BOA. Applicants seeking to qualify for the BOA tax credit enhancement will have to submit a certification from the secretary of state that the development is in conformance with such brownfield opportunity area.

3.   Site Preparation Limitations- The governor also prevailed on a revised definition of site prep so that costs will only be eligible for the site preparation tax credit (SPC) if they are incurred to implement the remedy. In other words, if an applicant excavates a site to a depth of 15 feet to accomodate its building design but only the first five feet are contaminated, only those costs associated with the five feet of excavation would be eligible for the  SPC. This in turn would lower the “soft cap” for the TPCC since the soft cap is 3x the SPC.

4. Eligible Sites- Class 2 sites and RCRA sites will now be eligible for the BCP where the applicant is a volunteer and DEC has determined no financially viable party is available.

5. Brownfield Site Definition- applicants must now show that the sites have contamination that requires remediation. In other words, some sampling data will have to accompany the application. Sites impacted by off-site contamination (e.g., vapor intrusion, groundwater) will be eligible for the BCP but the applicants of those sites will not be eligible for the TPCC. However, they will be eligible to claim the SPC.

6. COC Dates- Sites that were accepted into the BCP prior to the 2008 amendments would have to obtain a COC by 12/31/17. Sites accepted into the BCP before the effective date of the 2015 amendments will have to obtain COCs by 12/31/19. Sites accepted under the new program will have to obain COCs by 03/31/26.

7. Effective Date- The changes will become effective on July 1st though if DEC fails to publish its under-utilized definition by this date, the start date for the new program  will be pushed back to the date the proposed regulations are published. While DEC is required to publish its affordable housing project definition by June 8th, the effective date for the BCP changes will not be delayed if DEC misses this target date.

Applicants who want to be grandfathered under the current program– perhaps because their sites would not qualify for one of the new gates– will need to obtain a notice of acceptance from the DEC prior to July 1st. Since applications must undergo a 30-day public comment period and DEC usually takes one to two weeks to issue a notice of acceptance after the public comment period, an application will have to be published no later than the May 13th Environmental Notice Bulletin (ENB) to be able to be grandfathered under the current program. This, in turn, means requests to participate in the BCP will have to submitted to DEC no later than May 1st to complete the ten-day application complete determination in time for the May 13th ENB.

8. Oversight Costs- Volunteers will not be charged oversight costs after July 1st.  Participants must pay NYSDEC for past response costs incurred before the effective date of such agreement provided that such costs may be  based on a reasonable flat-fee for oversight, which shall reflect the projected future state costs incurred in negotiating and overseeing implementation of such agreement.

9.BCP-EZ-  NYSDEC is authorized to promulgate regulations to establish a BCP-EZ program for expedited investigation and remediation of sites that do not pose a significant threat. The applicant must waived its rights in writing to any tax credits and the work satisfies the technical requirements of Part 375. For parties seeking to implement a Track 4 cleanup where the soil cleanup objectives, site-specific data may be used to demonstrate that the contaminant concentrations are consistent with background levels. In such cases, the remedial objectives may be set at such levels provided the NYSDEC determines that the levels are protective of human health and the environment. Parties that comply with the BCP-EZ will be entitled to a COC;

10. Hazardous Waste Program Fee Exemption- The exemption for the program fee for remediation waste that qualifies as a hazardous waste is extended to cleanups performed pursuant to an oversight document with EPA or with a municipality that has entered into a memorandum of agreement as of August 5, 2010;

11. Miscellaneous Provisions-

  • The NYSDEC may reject an application if the person seeking to enroll in the BCP was terminated from a NYSDEC remedial program by NYSDEC or a court for failing to substantially comply with an order or NYSDEC oversight agreement;
  • The NYSDEC will now have 30 days to determine if an application is complete; 
  • Likewise, DEC will now have 45 days from receiving a complete application to notify the applicant if the request is either for participation has been accepted and if the applicant meets the criteria for the tangible property tax credit; 
  • COCs may only be transferred to subsequent legal or equitable title holders, or leasehold of all or a portion of the brownfield site but may not be transferred to a responsible party. The current law simply refers to the applicant’s successors or assigns; 
  • COCs may be revoked or modified if DEC determines that the applicant made a misrepresentation of material fact concerning its status as a volunteer or its eligibility for the tangible tax credits; 
  • The liability release not only applies to successors and assigns of the applicant bur now specifically extends to lenders who acquire indicia or ownership primarily to protect the lenders’ security  interest in the brownfield site after the effective date of the brownfield site cleanup agreement for the site;  
  • NYSDEC may waive local permit requirements to implement an investigation and/or remediation of contamination at or emanating from a brownfield site. Current law did not extend to off-site contamination; 
  • NYSDEC is authorized to have access to sites to ensure compliance with site management plans, verify site use and to collect samples; 
  • An applicant shall include with every report submitted to the department a schedule for the submission of any subsequent work plan  required to meet the requirements of this title; 
  • Environmental easements must be executed at least three months prior to the anticipated issuance date of the COC or within 180 days of the start of the remedial program;The Department of Labor is required to update the En-Zones within 90 days of the effective date of the law.

Expiration of BCP Tax Credits Could Lead to Surge in “Pave and Wave” Cleanups

March 18th, 2015

The New York Brownfield Cleanup Program (BCP) is known for producing robust cleanups. One reason is the stringent cleanup standards of 6 NYCRR Part 375 but another is the BCP  tax credits that reward applicants who achieve track 1 unrestricted cleanups. Applicants that achieve unrestricted (track 1) cleanups are entitled to claim 50% of their site preparation costs and an extra two percent for the tangible property tax credit (TPCC). In addition, track 1 cleanups will result in higher site preparation costs which can increase the amount of the TPCC that applicants until they hit the $35MM cap.

However, with the looming expiration of the BCP tax credits, applicants may need to implement less comprehensive cleanups to ensure that they will be able to obtain a COC by the end of the year and qualify for the BCP tax credits (BTCs). One possible approach may be to borrow from a strategy that was used during the Great Recession and simply implement track 4 cleanups that only require two feet of clean fill.

Under this strategy, applicants or their successors would be able to claim the site preparation tax credit for costs that were incurred to qualify the site to obtain a COC. They would then have five years to incur additional site prep costs such as excavation to prepare the site for development after the expiration date of the BTC. If the applicants put the building into use within five years, they would be able to use the entire site prep costs incurred for the site (i.e., those incurred to achieve the 2015 COC and those to prepare the site for vertical development) towards the cap for the tangible property tax. For example, the applicant could spend $100K to achieve a track 4 cleanup by the end of 2015. Thereafter, it incurs an additional $1MM in site prep costs for excavation, support of excavation, dewatering, etc. to prepare the site for construction of the improvements. Thus, the applicant would be able to claim 3x the total site prep costs of $1.1MM for a cap of $3.3MM. 

Hopefully Governor Andrew Cuomo and the State Legislature will be able to reach an agreement that extends the BTCs. In the meantime, applicants should review their cleanup plans with their consultants and attorneys to develop contingency plans for preserving their eligibility for the BTCs.