Archive for the ‘Brownfields’ Category
Monday, April 9th, 2018
A little-noticed bill that was passed at the end of 2017 made significant changes to the NJ Hazardous Discharge Site Remediation Fund (HDSRF) grant and loan program. The legislation, A1954 signed into law on 1/15/18. Below are a summary of the changes. Thanks to our friends at the Brownfield Coalition of the Northeast (BCONE) for providing us with this information. These changes will be discusses at the 9th Northeast Sustainable Communities Workshop to be held on May 23, 2018 at the New Jersey Institute of Technology, Newark, NJ
Fourteen changes by the Brownfields Office at NJDEP are:
- 25% matching grants for innovative technology and limited restricted use remedial actions have been eliminated from the program.
- 50% matching grants for innocent parties have been eliminated.
- Annual grant caps to municipal/county/redevelopment authorities are reduced from $3,000,000 to $2,000,000.
- The additional grant amount permitted in a Brownfield Development Area (BDA) is reduced from $2,000,000 to $1,000,000.
- Annual loans caps are reduced from $1,000,000 per year to $500,000 per year.
- The statewide annual award cap for recreation/conservation; affordable housing; and renewable energy grants is reduced from $5,000,000 to $2,500,000.
- At least 30% of the moneys in the fund shall be allocated for grants to municipalities, counties, or redevelopment entities for PAs, SIs, RIs, and RAs of a site not located in a BDA.
- Moves sites in Planning Areas 1 and 2 down to the third priority from the second and makes BDAs the second priority.
- Readiness to proceed has been added as a factor in prioritization of applications.
- NJEDA’s annual reporting requirements are to include the amount of remediation costs expended for each site for the previous calendar year and the remaining balance.
- NJEDA is required to adopt criteria for public entities that indicates that the property will be developed within a 3 year period from completion of the remediation.
- Places timeframes for completing remediation steps based on the date the grant is awarded for:
a. Preliminary Assessments or Site Investigation at 2 years after the date of the award.
b. Remedial Investigations at 5 years after the date of the award.
Failure to complete the task will result in cancellation of the award.
13. Requires the applicant of a supplement grant to demonstrate that the previous grant/loan award was fully expended or will be fully expended.
14. The law took effect on 1/15/18 and applies to any application for financial assistance or a grant from the HDSRF pending before the DEP on the effective date of the law or submitted on or after the effective date. It does not apply to any application determined to be technically eligible and recommended for funding by the DEP and pending before NJEDA on the effective date.
A summary of the changes for private party grants and loans is Attached
Saturday, February 17th, 2018
Earlier this week the Trump Administration unveiled its “Legislative Outline for Rebuilding Infrastructure in America”. Among the proposals were three amendments to the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) that are designed to incentivize redevelopment of contaminated properties. The proposal can be viewed Here. Since this document is an overview, it does not contain statutory language.
The first proposed change involves National Priorities List (NPL) sites. Currently, these sites are not eligible for Brownfield funding under CERCLA § 104(k) since they are excluded from definition of brownfield site of §101(39) (B) and eligible response site of section §101(41) (C). The proposal would allow non-liable parties to be eligible to receive grants and low-interest revolving loans to conduct assessments, complete cleanups, and implement remedy enhancements to accommodate development and perform long-term stewardship at NPL sites or portions of NPL sites. This proposal would include:
- areas of the NPL site that are not related to the response action;
- areas that can be parceled out from the NPL response action;
- areas where the NPL response action is complete but the site has not been delisted yet; or
- areas where the NPL response action is complete but the facility is still subject to orders or consent decrees under CERCLA
Oddly, the Administration proposes to accomplish this goal by amending CERCLA §101(40) which defines a bona fide prospective purchaser instead of the brownfield site definition at § 101(39) where the NPL exclusion is located. This calls into question of other parties that qualify for other landowner liability protections such as the innocent landowner and contiguous property owner as well as the third-party defense would qualify for this financial assistance.
Another important amendment would be to clarify and expand the current liability exemption State and local governments set forth in CERCLA §101(20) (D). This section excludes from the definition of owner or operator units of state government or local governments that involuntarily acquire contaminated property by virtue of their sovereign function. Local governments have been concerned about eminent domain actions where they obtain title through a negotiated purchase in lieu of condemnation (see City of Wichita v. Aero Holdings, Inc, 177 F. Supp. 2d 1153 (D.Kan. 2000)0 or in the absence of a judicial ruling that the local government lawfully exercised its power of eminent domain. The Administration proposal does not explain how it will amend §101(20)(D) to eliminate this concern. However, it does state that such liability protection would be conditioned upon State and local governments not contributing to the contamination and meeting the obligations imposed on Bona Fide Prospective Purchasers (BFPPs), including exercising appropriate care with respect to releases of hazardous substances at the facility
It should be noted that towards the end of 2017, the House of Representatives passed the Brownfields Enhancement, Economic Redevelopment, and Reauthorization Act of 2017 (H.R. 3017) which appears to encompass some of the changes proposed by the Administration. The bill reauthorizes the federal brownfield program and amends the definition of brownfield site to include sites where there is no viable party and EPA determines it is appropriate that the site be assessed, investigated, or cleaned up by a non-liable party. It also amends §101(20)(D) by deleting reference to “involuntarily” acquiring title. The legislature would allow local governments to be eligible for brownfield funding where if they do not qualify as a the BFPP because they acquired the site prior to January 11, 2002 and did not otherwise contribute or cause the contamination. A Senate bill has similar language regarding the local government exemption
Finally, the Administration proposes to amend CERCLA Section §122(a) to provide EPA with express settlement authority to enter into administrative agreements with BFPPs and other statutorily protected parties to perform remedial action in appropriate circumstances (e.g., partial, early remedial action) would promote and expedite the cleanup and reuse of Superfund sites. Currently, this section provides the President with authority to enter into an agreement with any person to perform a response action when the President determines the action will be done properly. However, when EPA enters into a settlement for a remedial action with a potentially responsible party, the settlement must be approved by the Attorney General and entered the United States District Court as a consent decree. The need to obtain DOJ approval can be time-consuming and often discourages EPA regional offices from considering Prospective Purchaser Agreements or other administrative settlements with BFPPs.
Thursday, January 18th, 2018
[Editors’ Note- The final Budget that was approved at the end of March did not include the BCP Tax Credit Deferral ].
In his recent budget proposal, Governor Cuomo proposed a three-year BCP tax credit deferral. The proposed deferral which is located in Part S of Revenue Article VIII is similar to that enacted in 2010 during the depth of the Great Recession. Taxpayers claiming BCP tax credits in 2018-2020 would be limited to $2MM each year. Taxpayers will be able to begin claiming the deferred nonrefundable credits in full starting in 2021. 50 percent of the refundable credits would be able to be claimed in 2021, 75 percent of the remainder in 2022, and the remainder in 2023.
The 2010 deferral had been the subject of a takings claim in Empire Gen Holdings, Inc. v. Governor of New York, 967 N.Y.S.2d 919 (Sup. Ct-Albany Cty. June 25, 2013). Plaintiff had constructed a 65 megawatt natural gas fired electric generating plant that received a Certificate of Completion (COC) in 2008. The plaintiff claimed and received the site prep tax credit. After the property was placed into service in September 2010, plaintiff claimed tangible property tax credit of $86,951,916 for 2010. However, because the Tax Credit Deferral Provisions became effective on August 11, 2010 and plaintiff did not place its property into service until September 2010, plaintiffs’ 2010 BCP tax credit was reduced to $1,663,633 with the balance of the full redevelopment tax credit deferred until 2013 and thereafter.
Plaintiff alleged the Tax Credit Deferral Provisions amount to an unconstitutional taking and was a violation of the Due Process, Equal Protection and Contract Clauses of the State Constitution. The Supreme Court of Albany County granted the State’s motion to dismiss on grounds that the plaintiff had no cognizable injury. The court ruled the plainiff”s rights to claim the BRTC did not vest until the property was put into service. On the Contracts Clause cause of action, the court said that the New York Constitution provides that tax exemptions are freely repealable and found no legislative intent in the brownfield statute (ECL, art 27, tit 14) and the related Tax Law sections that the State was bound to paying the full BRTC without deferral.
Earlier, the plaintiff sought a permanent injunction in federal court seeking to bar New York from enforcing the deferral provision and a ruling that they were unconstitutional. However, the United States District Court for the Northern District of New York ruled the challenge was was barred by the Tax Injunction Act and the principle of comity because the plaintiff sought a federal-court ruling on a local tax matter because the relief plaintiffs sought (i.i.e., money damages and a judgment declaring the statutes unconstitutional and enjoining their enforcement) would have interfered with New York’s assessment and collection of tax revenue, and thus with New York State’s administration of its fiscal operations. Empire Gen Holdings, Inc. v. Governor of New York, 2012 U.S. Dist. LEXIS 96023 (N.D.N.Y. July 11, 2012)
If the Governor’s proposal is enacted into law as currently drafted, BCP projects that received Certificates of Completion but have not placed the property into service (e.g., received a certificate of occupancy)will be subject to the deferral. Sites that are under a deadline to obtain a COC by December 31, 2019 would probably want to delay putting their project into service until after the deferral period expires.
Tuesday, February 28th, 2017
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.
Tuesday, March 8th, 2016
The NYSDEC’s much awaited revised definition of underutilized that was required as part of the 2015 Brownfield Cleanup Program (BCP) reforms will be published in the March 9, 2016 New York State Register (NYR). The proposed definition is currently available on the NYSDEC website
As previously discussed, the 2015 BCP amendments replaced the ‘as of right” tangible property tax credit (TPC) for New York City brownfield sites. Instead, new applicants would qualify for the TPC if they satisfied one of four the four tests or “gates: At least half of the site is located within an Environmental Zone; The site was “upside down”, the site will be used for affordable housing or the site is underutilized. NYSDEC was required to publish a definition of “underutilized” by July 1st and to adopt the rule by October 1st. The agency met the first deadline when it published the definition in the June 10, 2015 issue of the NYR.
The proposed “underutilized” definition was widely criticized as being too narrow and essentially reading out the term from the statute. As a result, NYSDEC withdrew the definition and missed the statutory deadline to adopt the definition by October 1st.
Despite the adverse comments, the NYSDEC declined to make significant changes to the definition of underutilized despite a plethora of adverse comments. The reason cited by NYSDEC was that only three actual examples were provided for DEC’s evaluation and agency concluded those sites would be eligible under one of the other TPC gates. The agency dismissed other “broad statements” about the effect of the proposed rule on small property owners as unpersuasive. Click here for our blog post on this issue
The revised proposed definition of underutilized provides that at the time of the application no more than 50% of the permissible floor area of the building or buildings is certified by the applicant to have been used under the applicable base zoning for at least three years prior to the application and one of following tests are satisfied.
- 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.
DEC’s response to the comments is available here
Monday, December 28th, 2015
The NYC Board of Standards and Appeals (Board) granted a variance to facilitate construction of a four-story residential building in Marine Park, Brooklyn because of the costs to remediate soil contamination associated with historic uses at the development parcel. (BSA Bulletin No. 15, Vol. 100, BSA calendar no. 254-13-BZ, CEQR #14BSA032K)
The Department of Buildings (DOB) had denied the applicant’s request for a building permit because the proposed floor area exceeded the maximum permitted for building, the initially-proposed twenty-six dwelling units exceeded the maximum permitted for the zoning lot, the proposed building exceeded the maximum aggregate street width of one hundred and twenty-five feet, did not have a required front or side yard, and exceeded the maximum permitted height. The applicant then requested a variance to permit the building but the community board recommended disapproval of the variance.
As part of the variance application, the applicant prepared an Environmental Assessment Statement (EAS) pursuant to the City Environmental Quality. The EAS revealed that the development site had been used for auto repair in the past and now housed a car wash with an oil change repair bay that extended into the basement. A phase 2 found VOCs, SVOCs and metals to a depth of 12 feet but no impacts to groundwater. The Board held a public meeting that extended over six sessions. The applicant’s counsel contended that the costs to excavate and dispose contaminated soil was approximately $1,.4MM and that the applicant would lose money if it was only allowed to construct the building that was allowed as-of-right.
The Board unanimously approved the variance, finding the hardship was not caused by the applicant or a predecessor in title, but years of industrial use as an auto repair and car wash. The Board concluded that there was no reasonable possibility that development in strict compliance with applicable zoning requirements will provide a reasonable return and that proposed variance was the minimum necessary to offset the hardship caused by the unique physical conditions of the site. The Board’s resolution provided that the applicant comply the Remedial Action Report (RAP) and Construction Health and Safety Plan (CHASP) prepared in conjunction with the proposed development and submit Remedial Closure Report to the NYC Department of Environmental Protection (DEP) upon the completion of the project confirming that all remedial requirements as set forth in the RAP and CHASP had been properly implemented.
The record does not indicate if the applicant considered applying to the state Brownfield Cleanup Program (BCP) or the NYC Office of Environmental Remediation (OER) voluntary cleanup program or that the Board was even aware of these options. Under either the BCP or the VCP, the applicant could have pursued a track 4 cleanup and would not necessarily have had to excavate all of the contaminated soil which would have eliminated the rationale for the granting of the variance.
Developers with cleanup obligations imposed as a result of the CEQR process should consider enrolling in the OER VCP rather than simply complying with NYCDEP-approved RAPs. In addition to satisfying their CEQR obligations, parties enrolled in the VCP will also be able to receive covenant not to sue as well as be exempt from any fees or taxes that might be imposed if the excavated soil has to be managed as a hazardous waste.
The decision is available Here
Thursday, October 1st, 2015
As we have previously discussed, the 2015 Brownfield Cleanup Program (BCP) reforms that removed the tangible property cost (TPC) tax credit as an “as of right” benefit for NYC brownfield sites required NYSDEC to issue proposed definitions of “underutilized” and “affordable housing” by mid-June and to finalize the definitions by October 1st. The agency met the first deadline but failed to issue final definitions by the October 1st deadline.
Indeed, sources tell us that the NYSDEC plans to issue a revised definition of “underutilized” within a month that will be subject to another round of public comments. On the one hand, this is good news since it means that NYSDEC has realized that the proposed definition was unreasonably narrow. All of the speakers at the public hearing criticized the proposed definition but there was concern that NYSDEC was going to publish the rule on the grounds that it would be able to withstand any legal challenges. Hopefully, the agency’s revised rule will be more reasonable.
However, what this means for new applicants is unclear. Under the 2015 BCP reforms, applicants seeking to qualify for the TPCs must indicate at the time of their applications that they are seeking TPC determinations. Will NYSDEC process applications seeking a TPC determination and accept them without the applicant knowing it is entitled to TPC? Will NYSDEC put a freeze on applications seeking TPC determination? Will NYSDEC allow the applicants to seek a determination after acceptance. Having missed the deadline, can new applicants claim the TPCC changes are not in effective so that they should be entitled to the TPCC as of right? stay tuned.
Tuesday, 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.
Wednesday, 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.
Thursday, January 22nd, 2015
Governor Andrew Cuomo unveiled his 2015-16 budget on January 21st. As anticipated, the budget contains sweeping reforms to the Brownfield Cleanup Program (BCP) in Part R of the Revenue Article VII Legislation. The BCP amendments are substantially similar to the changes proposed in 2014 which some tweaking around the margins. Click here for a copy of the proposed BCP changes.
The amendments would become effective on April 1, 2014. This means that applicants would have to be accepted into the BCP prior to that date to remain eligible for the site preparation and tangible property tax credits as a matter of right. Following are some of the highlights of the proposed changes to the BCP.
1. Brownfield Site (§2) -The proposed legislation changes the definition of brownfield to a site where contaminants exceed “soil cleanup objectives or other health-based or environmental standards, criteria or guidance” adopted by NYSDEC for the reasonably anticipated use. It is unclear if the “reasonably anticipated use” is to be determined by current zoning or the proposed use set forth in the BCP application.
If adopted, this definition will mean that applicants will probably need to have completed phase 2 reports prior to submitting applications. Indeed, §3 of Part R provides that applicants “shall” submit an investigation report sufficient to demonstrate that the site requires remediation in order to meet the remedial requirements of this title.
The revised brownfield definition does not require the contamination to be from an on-site source which represents a significant eligibility expansion since applicants are currently required to establish an on-site source of contamination to be eligible for the BCP. Instead of excluding these sites from the BCP, the proposed bill would simply prohibit applicants of these sites from claiming tangible tax credits for addressing such contamination. For example, an applicant who would have to install an sub-slab depressurization system (SSDS) to address vapors from contaminated soil gas because of a plume that originated from an adjacent dry cleaner could enroll in the BCP and be eligible for site preparation costs tax credit but not for the tangible property tax.
2. Class 2 Sites (§2)- The original BCP legislation contained a six-month amnesty period for class 2 superfund sites to apply to the NYSDEC that expired in July 2004. Since then, class 2 sites have been ineligible for the BCP even when an innocent party sought to redevelop the property.
The proposed change would allow class 2 sites owned by parties who are determined to be “volunteers” to be enrolled in the BCP. If a volunteer is under contract to purchase a class 2 site, the site would be eligible for the BCP only if the NYSDEC has been unable to identify a PRP with the ability to pay for the investigation or cleanup of the site.
3. Tangible Property Tax Credit Eligibility Changes(§3) -Like the 2014 proposal, the Governor would limit eligibility for the tangible tax credit to three categories of sites, projects or areas of the state that are believed to need the tax credits to incentivize redevelopment. The three criteria are: (i) at least half of the site area is located in an environmental zone (En-zone); (ii) the projected costs of the investigation and cleanup based on reasonably anticipated use exceeds the certified appraised value of the property in a “clean” condition; or (iii) the project is an affordable housing project.
Note that the proposal changes the definition of an En-Zone definition. The Commissioner of the Department of Labor is to identify En-zones based on 2009-2013 American Community Surveys and is required to update the En-zones upon request of the NYSDEC. In addition, NYSDEC is to advise the applicant if the site is located in an En-Zone when the agency determines that the application is complete.
Applicants seeking to qualify for the tangible property tax credit will have to submit information sufficient to establish that the site qualifies for one of the three categories of eligible sites. An applicant may request an eligibility determination for tangible property credits at any time from application until the site receives a certificate of completion. NYSDEC will notify the applicant upon acceptance into the BCP if the project meets the criteria for qualifying for the tangible property tax
Sites are not eligible for the tangible property tax credit where the contamination is SOLELY from an off-site source or the on-site contamination was previously remediated and the cleanup is suitable for the proposed development.
Other changes to the tangible property tax credit made in other sections of Part R include:
- the base tangible tax credit now begins at 10% (current corporate tax payers may claim a base credit of 12% while individuals begin with 10% base)(§25);
- Eligible tangible property eligible costs shall not include payments made to “related” parties(§21);
- Eligible tangible property costs are limited to costs “associated with actual construction of tangible property incorporated into the physical structure and costs associated with the foundation of any buildings constructed as part of the site cover that are not properly included in the site preparation component” (§21);
- If the property was put into use prior to the issuance of the COC, the tangible property tax credit may be claimed for up to five years from start of the “redevelopment of the site provided the redevelopment starts within ten years of the issuance of the COC(§21);
- In calculating the so-called “soft cap” ( 3x site preparation costs), applicants may use on-site groundwater remediation costs and costs that would not have been ”expensed” and deducted for purposes of the IRS 198 brownfield tax credit (§22);
- Applicants seeking to qualify for the tangible property tax will be required to prepare two remedial alternatives with one being a track 1 cleanup (§9);
- An extra 5% tax credit would be available for the following projects: affordable housing (based on square footage of the total affordable housing units, sites located in En-Zones, sites located within a BOA that conform to the BOA plan, and for sites used primarily for manufacturing activities(§25);
4. Site Preparation Tax Credit Changes– This tax credit has applied to costs incurred to qualify a site for a COC and to prepare a brownfield site for redevelopment (i.e., erection of a building or portion of a building) that are “properly chargeable” to a capital account. Examples of eligible costs include demolition, excavation, dewatering, temporary wiring, scaffolding, sheeting, fencing and security.
The proposed legislation clarifies that eligible site preparation costs are limited to costs directly associated with actual site preparation-related construction, including costs associated with all requirements of site remediation and easements such as architectural and engineering fees, appraisal, surveys, soil borings/other investigations, legal fees associated with any environmental easement required, operation, maintenance and monitoring of treatment systems, testing for asbestos or lead paint, legal fees associated with construction loan closing, cost certification and insurance(§27).
Other provisions relating to the site preparation tax credit include:
- The costs must now be “charged” to a capital account and must be paid by the applicant within six months of the date the expense is incurred by the taxpayer;
- Eligible site prep costs shall not include payments made to “related” parties;
- Eligible costs would also include activities undertaken under the oversight of the Department of Labor or in accordance with standards established by the Department of Health to address asbestos, lead-paint or PCBs;
- For a building foundation, only those costs equivalent to the cost of a site cover for the area covered by the foundation shall be eligible for the site preparation costs;
5. Track 1 Cleanups With Controls(§10)– If a BCP project has to use institutional or engineering controls, it is not eligible for a track 1 cleanup which allows for a higher site preparation cost tax credit and a 2% bonus for the tangible property tax credit. Where all the contaminated soil has been removed but elevated levels of contaminants remain in groundwater, the NYSDEC has been willing to approve conditional track 1 cleanups if there has been a significant reduction in the contaminant mass and contaminant levels have reached asymptotic conditions. Under this approach, the applicant will have to record an environmental easement and continue to monitor groundwater for five years. However, if the contaminant concentrations remain above groundwater standards after five years, the cleanup would revert to a lower cleanup track that could cause recapture of tax credits.
The proposed legislation will allow sites to qualify for an unconditional track 1 status where engineering or institutional controls are required for more than five years solely for groundwater remediation where the bulk contaminant concentrations have been reduced to asymptotic levels or to address vapor intrusion.
6. Transfer of COCs (§14) – The proposed legislation clarifies that COCs may by the applicant or subsequent holder of the certificate of completion to a successor to a real property interest, including legal title, equitable title or leasehold, in all or a part of the brownfield site for which a COC was issued. However, A COC shall not be transferred to a responsible party.
7. BCP-EZ program (§18)– The proposed amendments would create a streamlined remedial program that would be called the BCP-EZ program. Applicants that qualify as “volunteers” under the BCP would be exempt from certain procedural requirements for implementing remedial investigations and remedial actions for sites where the contamination does not pose a significant threat provided the applicant waives rights to any tax credits and the work satisfies the technical requirements of Part 375. The applicant would be eligible to receive a COC after the NYSDC accepts a certification by the applicant that the remediation requirements of this title have been achieved and an environmental easement, if necessary, has been created and recorded. NYSDEC would have to promulgate regulations implementing the BCP-EZ program.
8. VCP Applicants– The bill contains a curious provision that authorizes NYSDEC to accept BCP applications from parties currently enrolled in the old administrative voluntary cleanup program (VCP). However, such applicants would not be eligible for any brownfield tax credits. It is unclear why the Governor or NYSDEC believes a second non-tax credit program is required.
9. Oversight Costs (§47)– Because both the NYSDEC and the New York State Department of Health (NYSDOH) play a role in the state remedial programs, oversight costs can be significant especially for larger projects. Under the proposed bill, volunteers will no longer be required to pay oversight costs on or after April 1, 2015. This exemption applies both to applications submitted after April 1, 2015 as well as sites accepted into the BCP prior to April 1, 2015.
Parties that are accepted into the BCP as “participants” will be required to pay the NYSDEC for past costs incurred prior to the effective date of the brownfield cleanup agreement. However, the proposed amendment provides that NYSDEC could negotiate a “reasonable” flat rate fee for future oversight costs. (§7)
10. New COC Deadlines (§31)- Under existing law, BCP sites have to obtain their COCs by 12/31/15 to qualify for the brownfield tax credits (BTCs). The Governor’s proposal would allow applicants accepted before 4/1/15 to have an extra two years to obtain their COC (12/31/17) to remain eligible for the BTCs. If an applicant accepted prior to 4/1/15 does not obtain a COC by 12/31/17, it would only be able to be eligible for tangible tax credits if it qualifies for the post 4/1/15 criteria. Sites accepted into the BCP before 12/31/22 will have until 12/31/25 to obtain their COCs and qualify for BTCs.
11. .Hazardous Waste Generation Fee Exemption (§§ 38 & 39)- Urban sites often contain significant swaths of fill material that may contain constituents such as heavy metals, semi-volatile organic compounds (SVOCs), petroleum and lead-based paint from demolished buildings. As a result, construction projects in urban areas can generate large quantities of excavated soil that may have to be managed as hazardous waste. Having to dispose soils and building debris as hazardous waste not only significantly increases disposal costs but can also trigger two types of state hazardous waste fees: a hazardous waste program fee and a special tax assessments. Depending on the size of the site or the depth of the excavation, the hazardous waste fees can approach or even exceed the total remediation costs.
Under current law, generators of hazardous remediation waste are exempt from paying the hazardous waste tax or program fee exempt if the remediation is performed under the state superfund program or BCP. However, projects enrolled in the Voluntary Cleanup Program (VCP) administered by the New York City Office of Environmental Remediation (OER) are not exempt from the tax or fee.
The proposed amendments would exempt remediation wastes from the state hazardous waste generator fee that are generated for cleanups performed under an agreement with EPA, pursuant to an order issued by a court or an agreement with a municipality such as OER that has entered into a memorandum of agreement with NYSDEC.
12. Miscellaneous Changes- Other notable changes include:
- The NYSDEC will now have 30 days to determine if an application is complete (§4). In the acceptance letters, the NYSDEC will advise the applicant if it has met the qualifying criteria for the tangible property tax credit (§6);
- The NYSDEC may reject a BCP applicant if the applicant had another site in a NYSDEC remedial program that was terminated by NYSDEC or a court for failing to substantially comply with an order or NYSDEC oversight agreement (§6);
- Applicants must implement work plans within 90 days of approval and complete the work in accordance with the schedule set forth in the document (§8);
- Applicants must execute environmental easements within 180 days of commencement of the remedial design or at least 90 days prior to the anticipated issuance of the COC (§11);
- COCs will now include the date of the brownfield cleanup agreement (BCA); the names of the parties eligible for the tax credits and the applicable percentage available as of the date of the COC(§13);
- Final Engineering Reports would have to describe any interim remedial measures (IRMs) and the costs of the IRMs(§13);
- 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. There was already a revocation for misrepresentation about the applicants qualification for volunteer status (§14);
- A COC may be revoked if the environmental easement no longer provides effective enforcement mechanism for ensuring performance of the remedy(§14);
- NYSDEC is exempt and authorized to grant waivers from local permits extends to investigations or remediation for contamination migrating from a brownfield site (§16);
- NYSDEC is expressly authorized to inspect sites for compliance with site management plans including evaluating operation and maintenance of remedial components, confirming site use and collecting samples (§17);
- The Brownfield Advisory Board is abolished (§29);
- The insurance remediation tax credit and the real property tax credit are repealed due to lack of interest (§31);
- Municipalities seeking to apply for funds from the Environmental Restoration Program (ERP) will now have to assist NYSDEC in identifying potentially liable parties by searching local records including property tax records. The amount of any assistance provided to the municipality would be adjusted if the payments are received by responsible parties. NYSDEC may implement an ERP project on behalf of a local government provided the municipality periodically pays its share of the costs to the state (§42).
The Governor’s budget includes a new $100 million appropriation to extend the State Superfund cleanup program for ten years. The lack of superfund funding had been a key obstacle in 2014.
The Constitution authorizes the Governor to amend the Executive Budget within 30 days of submission, allowing for technical corrections and revisions based on the latest information. However, to help achieve timely budgets, the 2007 Budget Reform Act requires the Executive, to the extent practicable, submit any necessary amendments within 21 days. After the 21 day period, the legislation will be formally submitted to the Legislature.
We will provide further updates and commentary on the 2015 BCP reform proposals