Regulatory reform is at the centerpiece of the Trump Administration’s plan to stimulate economic growth. During the presidential campaign, candidate Trump vowed to rollback a variety of Obama Administration Climate Change Initiatives but said little about EPA remedial programs such as the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or superfund). Based on his testimony and follow-up written response to Congress, it appears that EPA Administrator Scott Pruitt recognizes the value of brownfield programs and the need to remediate contaminated sites. There also seems to be strong bipartisan support for the brownfield program in the House committee responsible for the EPA budget.
As a result, I have shared the following recommendations to Administrator Pruitt for reforming EPA’s remedial programs. These suggestions could improve the efficiency of the remedial programs without weakening environmental protections. Some of the changes could be achieved through legislative amendments but could be administratively implemented if Congress does not have the time to address environmental issues during the current term. The proposals are not in any order of importance
CERCLA Continuing Obligations Guidance– The 2002 amendments to CERCLA added the Bona Fide Prospective Purchaser (BFPP) and Contiguous Property Owner defenses. These defenses (in particular the BFPP defense) were enacted to help incentivize purchasers to acquire and remediate contaminated properties so they can be put back into productive use. While EPA promulgated an all appropriate inquiries (AAI) rule to help define the pre-acquisition obligations necessary to be able to assert these defenses, there is little guidance from EPA on how property owners or operators may satisfy their “appropriate care” or “continuing obligations” so they can maintain their liability protection after taking title or possession of property. The 2003 “Common Elements Guidance” is inadequate. The lack of guidance and recent caselaw have created uncertainty for developers and undermined the value of these defenses. EPA should issue detailed guidance on what constitutes appropriate care. Developers and property owners should not have to rely on ASTM to provide guidance on how to comply with their legal obligations.
2. Revise “Enforcement Discretion Guidance Regarding the Affiliation Language of CERCLA’s Bona Fide Prospective Purchaser and Contiguous Property Owner Liability Protections” – This memo did not sufficiently address concerns raised by the Ashley decision that purchasers of contaminated property could lose their eligibility for the BFPP by agreeing to indemnify sellers.
3. More Robust Use of PPAs and CPO “Assurance Letters”- With the passage of the 2002 CERCLA amendments, EPA announced in guidance that it would issue PPAs or CPO assurance letters only in rare instances because the landowner liability protections were self-implementing. However, these agreements can be incredibly valuable. EPA should urge its regional offices to issue such documents where they can facilitate redevelopment such as in urban superfund sites (e.g., GowanusCanal, Newtown Creek) and where municipal governments are willing to foreclose on contaminated properties and then convey title to redevelopers.
4. Clarify Scope of Municipal Liability Protections Under CERCLA to Encourage Taking Title of Vacant Properties and Facilitate Reuse- There is considerable uncertainty among local government community if municipalities can invoke the protections of 42 U.S.C. 9601(20)(D) and (9601(35)(A)(ii) where they take title in lieu of formal tax foreclosure proceeding since this may not be “involuntary”. Local governments might be more willing to take title and assemble vacant properties so they would become more attractive to redevelopment if they could obtain clarity on the scope of this protection. Presumably, a purchaser from a municipality would then be able to assert the BFPP or third party defense. A related problem is that the BFPP defense would not apply to local governments who took title prior to January 11, 2002.
5. Reform EPA Remedial Programs Into a Single Unified Cleanup Program- Our nation’s remedial programs were created as we became aware of new concerns. This has resulted in different cleanup standards and procedures. We have separate staffs for CERCLA, RCRA, TSCA (PCBs), USTs, etc. We now have three decades of experience remediating sites. I think we should strongly consider combining these discrete offices into one streamlined remedial office that will provide consistent regulatory approach and reduce unnecessary staff.
6. Clarify Lender Obligations Following Foreclosure- The original EPA lender liability rule contained a “bright-line” test for lenders to follow so they can be deemed to have taken commercially reasonable steps to sell property following foreclosure, thereby staying within the safe harbor created by the secured creditor exemption. Unfortunately, when the rule was vacated and the 1996 lender liability amendments were added to CERCLA, the “bright line” test was omitted. So lenders have no guidance on how to proceed during what is the worst economic downturn since the Great Depression. Can they reject an offer that is equal to artificially depressed price? How long can they hold onto property without losing protection? Some states allow for two years while others allow up to five years to sell the property. Greater clarity will help lenders move these properties.If control of Congress changes, this can be legislative proposal.
7. Encourage States to Adopt Licensed Professional Programs– States are facing severe staffing constraints which are creating backlogs in site remediation. EPA could use its authority under section 128 of CERCLA (approval of state response programs) as well as its RCRA delegation authority to have states adopt licensed site professional programs like MA, NJ and CT so that states could devote their limited resources to the sites that pose the greatest risk to human health and the environment. EPA could establish a national licensing program for consultants that sets forth minimum professional requirements and states could adopt these programs as part of their remedial programs. One way to accomplish this could be by amending the All Appropriate Inquiries (AAI) Rule to revise the definition of Environmental Professional. This could avoid having to promulgate a new regulation.
8. Revise NCP- revising the NCP. It was last revised in 1990. Since then we’ve learned a lot about cleanup and have lots of informal guidance to help streamline the process and make it more cost-effective. Doesn’t make sense to continue to follow the RI/FS lockstep process. Why review five alternatives? The NY brownfield program requires applicants tp propose remedy and an unrestricted cleanup alternative, and this approach has been able to generate robust cleanups. The NCP could be revised to incorporate streamlined provisions for brownfield sites that will produce faster and more cost-effective cleanups while preserving right of contribution. Right now, firms are incentivized to follow the lock-step approach to preserve their ability to pursue cost recovery.
9. Revise CERCLA Disclosure Requirements With Amnesty Program To Incentivize Accelerated Cleanups- Property owners are not currently required to disclose historic contamination. As a result, many sites remain unremediated until the owner is ready to sell the property. To help accelerate cleanups, I think EPA could announce it was going to change its disclosure rules from reportable quantity approach to contaminant concentrations and at the same time provide current property owners a one year amnesty period to voluntarily disclose contamination. Much like the EPA audit policy, owners who disclose the existence of contamination that they are not responsible for would be afforded BFPP status. They would have to exercise “appropriate care” but not full cleanup. The SARA Title III program resulted in substantial reductions in pollution. It seems worth the try to experiment with an amnesty period for contaminated sites.
10. Seek Cost Recovery from Responsible Parties When Brownfield Grants Are Awarded – According to a 2004 EPA study, there may be 300,000 contaminated sites in the nation that may cost over $200 billion (not adjusted for inflation) to remediate. Many brownfield sites were created when corporations closed plants and either relocated elsewhere in the country or exported the jobs overseas yet remains financially viable. EPA has been granting brownfield grants to local governments without considering if there is a responsible party. Before EPA gives away public money, it should make a determination that there are no responsible parties. If responsible parties are available, RPA should give the responsible party an opportunity to conduct an investigation and remediation of the contaminated property is has left behind. If the responsible party declines to participate int he cleanup, EPA could then award the Brownfield grant and seek cost recovery. In this way, the brownfield funding program would not have to rely entirely on Congressional appropriations.
11. Move Away from Brownfield Grants/Loans and To Tax Credits- The brownfield financial incentives are becoming like public works projects. The funding often takes too long for private development. Rather than giving funds to local government to investigate and reuse planning, EPA could incentivize the private market to do this work by expanding and extending brownfield tax credits. The New York Brownfield tax credit program has resulted in an estimated $7.5B in investment in the state at a cost of $750MM. Tax credits put the upfront risk on the developer instead of the taxpayers.
12.Adopt National Environmental “WARN” Obligations Under RCRA- to prevent future brownfields, companies closing operations should be required to notify relevant permitting authority at least 90 days in advance of closing to ensure that appropriate closure occurs so that public money does not have to be used to address cleanup or local government seeks brownfield funds.
13. Require States To Use Parceling To Encourage RCRA Brownfields- EPA RCRA Brownfield Reforms urged states to allow owners or operators of TSDF to sell off clean parcels of their facilities (e.g., portions never used for any waste management) while the HWMUs or SWMUs were undergoing corrective action. EPA should more forcefully use its delegation authority to allow this much needed reform.
14. Clarify RCRA liability for Generator-only sites- There is much confusion if closure obligations for a generator site run with the land. In other words, a site may have been owner or operated by a defunct generator. A prospective purchaser is interested in redevelopment but is concerned it will become subject to closure obligations for the areas where wastes were managed. Presumably, generator sites could be treated as any brownfield site without the need to undergo formal RCRA closure.
15. Add Landowner Liability Protections to TSCA for PCB Cleanups- Purchasers often take steps to qualify for CERCLA BFPP only to learn after taking title that the property has been impacted with PCBs and they are subject to TSCA cleanup. This might require Congressional action but I do not see any reason why TSCA should not have a BFPP defense. Congress added AAI and BFPP to OPA in 2004 with little controversy.
16. TSCA PCB Reform- The PCB cleanup and disposal rules are a bit RCRA-like, a bit CERCLA-like and not well integrated. The cleanup should also not depend on the original spill concentration but on current concentrations and media. I’d like to see the entire Subpart D to 40 CFR 761 repealed, and disposal of PCB-containing material handled entirely within RCRA via the listed-waste and LDR route.
17. Adopt Restatement (Third) of Torts Approach to Joint Liability– When CERCLA was enacted, Congress said that liability should be premised on evolving concepts of common law. At the time of its enactment, the Second Restatement was in effect which favored use of joint liability for indivisible harm. However, this was before states began adopting comparative negligence statutes. The Third Restatement states that the law has shifted dramatically from the use of joint liability and that courts should try to find a basis for apportioning liability where there is a reasonable basis. Despite the publication of the Third Restatement in 2000, federal courts continue to cling to the doctrine espoused by the Second Restatement. Recently an appeals court declined to adopt the suggestion of an amicus brief submitted by The American Tort Reform Association to use the Third Restatement to apportion liability for the Fox River cleanup. My post on this case is at: http://www.environmental-law.net/2012/08/7th-circuit-declines-to-apply-third-restatement-of-torts-in-apportionment-case/ . The Administration might want to have Congress clarify that CERCLA liability should be based on the Third Restatement or EPA could issue interpretative guidance that it now considers the Third Restatement to be the governing law for CERCLA liability. This would reflect the Congressional intent to follow the evolving common law and confirm the direction where the law has moved.
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
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:
Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles-Phase 2; 
Review of the National Ambient Air Quality Standards for Lead;
Occupational Exposure to Respirable Crystalline Silica;
Finding That Greenhouse Gas Emissions from Aircraft Cause or Contribute to Air Pollution That May Reasonably Be Anticipated to Endanger Public Health and Welfare;
Standards of Performance for Municipal Solid Waste Landfills; 
Emission Guidelines and Compliance Times for Municipal Solid Waste Landfills;
Enforcement of Regional Standards for Central Air Conditioners; 
Effluent Guidelines and Standards for the Oil and Gas Extraction Point Source Category;
Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources;
Source Determination for Certain Emission Units in the Oil and Natural Gas Sector for PSD and NNSR;
Energy Conservation Standards for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment and Commercial Warm Air Furnaces.
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.
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;
Trichloroethylene (TCE); Regulation of Use in Vapor Degreasing under TSCA §6(a);
Federal Acquisition Regulation: Sustainable Acquisition;
Accidental Release Prevention Requirements: Risk Management Programs under the Clean Air Act;
Financial Responsibility Requirements under CERCLA § 108(b) for Classes of Facilities in the Hard Rock Mining Industry;
Financial Responsibility Requirements for Facilities in the Chemical, Petroleum and Electric Power Industries;
Federal Plan Requirements for Commercial and Industrial Solid Waste Incineration Units;
Protection of Visibility: Amendments to Requirements for State Plans;
Addition of a Subsurface Intrusion Component to the Hazard Ranking System;
Addition of Natural Gas Processing Facilities to the Toxics Release Inventory (TRI);
Revisions to the Regulations for Candidate Conservation Agreements with Assurances;
Trichloroethylene; Regulation of Certain Uses Under TSCA § 6(a);
Formaldehyde Emission Standards for Composite Wood Products;
Energy Conservation Program: Energy Conservation Standards for Miscellaneous Refrigeration Products;
National Emission Standards for Hazardous Air Pollutant Emissions: Petroleum Refinery Sector Amendments;
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;
Energy Conservation Standards for Uninterruptible Power Supplies;
Corporate Average Fuel Economy (CAFE) for light-duty vehicles;
National Emission Standards for Hazardous Air Pollutants for the Portland Cement Manufacturing Industry; and
Clean Energy Incentive Program Design Details (CEIP) 
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. Courts have invalidated changes that did not comply with notice-and-comment rulemaking, especially where EPA did not make specific factual findings..
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.
 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983)
 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).
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.
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.
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  [a], [b], [c]. Now it is true that § 27-1313[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 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[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(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(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.
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
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.
the proposed use is at least 75% for industrial uses; or
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.