Archive for the ‘oil spills’ Category

Court Dismisses Action Against DEC For Breach of VCA

Monday, November 28th, 2016

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

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

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

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

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

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

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

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

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

NYSDEC Adopts Revised Petroleum and Hazardous Substance Bulk Storage Regulations

Monday, January 18th, 2016

The New York State Department of Environmental Conservation (NYSDEC) has made extensive changes to its regulations pertaining to the handling and storage of petroleum and hazardous substances. Specificially, the revisions were made to the Petroleum Bulk Storage (PBS) regulations (6 NYCRR Parts 612-614), the Chemical Bulk Storage regulations (6 NYCRR Parts 596-599), the Used Oil program (6 NYCRR Subpart 374-2) and 6 NYCRR 370.1(e)(2) of the Hazardous Waste regulations.

NYSDEC embarked on the rulemaking to reflect changes made to state and federal laws since the PBS regulations were last revised in 1994. The rulemaking is intended to enable NYSDEC to obtain full delegation of the RCRA Subtitle I program. The agency is currently operating on a memorandum of agreement with EPA. This post is limited to the changes to the PBS regulations.

Former Parts 612-614 of the PBS regulation have been repealed and consolidated into a single new Part 613 which governs both underground storage tanks (USTs). Under the revised structure, Subpart 2 covers UST Systems that are subject to both the federal UST program (Subtitle I) and Title 10 of the Environmental Conservation law (Title 10 tanks). Subpart 3 only pertains to Title 10 tanks (mainly heating oil tanks or motor fuel for non-commercial purposes). Subpart 4 pertains to ASTs. Revised spill reporting, investigation and corrective action requirements are set forth in subpart 6.  Among key changes to the PBS regulations are:

  • New definitions of facility, UST and petroleum;
  • New Categories of USTs;
  • Secondary Containment for piping and dispensers and clarify AST secondary containment requirements;
  • Changing testing frequency for USTs;
  • Changes to Spill Requirements, Investigation, and Remediation Rules;
  • Potential Delivery Prohibition;
  • Operator training requirements;

The particular requirements depend on if the tank system is subject to the federal Subtitle I program or only Title 10 tanks as well as the tank category which is based on installation date. Category 1 tanks are tanks installed prior to December 27, 1986. Category 2 tanks were installed between December 27, 1986 through October 11, 2015. Category 3 tanks means any tank system was installed after October 11, 2015.

NYSDEC plans a second round of rulemaking that will address additional EPA requirements that became effective in October 2015 as well as Changes to Part 611(Spill Response and Corrective Action).

Key Definitional Changes-

Facility– this term is now defined as a single property, or contiguous or adjacent properties (as opposed to tanks) that are used for a common purpose that are owned or operated by the same person or persons Regulated facilities are those with (a) one or more tanks with a combined capacity of 1100 or more gallons or (b) a single UST with a capacity of 110 or more gallons. Heating oil tanks with a design capacity of less than 1100 gallons that are used for on-site consumption are not regulated unless there are other tanks at the property with a combined storage capacity of 1100 gallons.  Note that operational tanks that store petroleum which is not consumed such as transformers and hydraulic lift tanks are exempt.

Operator– is now defined as any person any person who leases, operates, controls, or supervises a facility

Owner– An owner is defined as any person who has legal or equitable title to the real property of a facility.

Petroleum– The definition of “petroleum” has been amended to match the federal definition. The term now includes synthetic forms of certain oils, including lubricating, dielectric, insulating, hydraulic, and cutting oils, as well as complex blends of hydrocarbons and petroleum mixtures.  Animal and vegetable oils and substances that are normally gases are excluded from the definition.

Petroleum Mixture– A new definition of petroleum mixture was added to clarify when a mixture will be regulated as petroleum or a hazardous substance. If the mixture contains one percent or more petroleum and no hazardous substance, then it is regulated as petroleum. If the mixture contains at least 70% petroleum and less than 30% hazardous substance containing no hazardous waste, then the mixture is regulated as petroleum. If the mixture does not contain any petroleum and less than one percent of one or more hazardous substances, it is unregulated.

UST Tank system– The definition of USTs was amended to conform to the federal definition. A UST system is now one or more tanks whose volume is at least 10% beneath the ground. In calculating the volume of the system that is beneath ground, piping must be included. What about the numerous tanks located in basements? DEC has clarified in comments to the new regulations that tanks located in concrete vaults that are not accessible for inspection are considered USTs and subject to the full panoply of UST requirements. If a tank is located in a concrete vault that has weepholes that can be monitored weekly for leaks, the tank will be considered an AST and not subject to tightness testing

Registration Requirements-

The owner of property where tanks are located is required to register the USTs even the total volume of tanks at the property is 1100 gallons or more. The owner obligation applies even where the tanks are owner or operated by multiple tenants (e.g., USTs for emergency backup generators). The NYSDEC contemplates one registration per property for all regulated tanks.  The agency did indicate in its responsive summary that it will allow more than one registration based on a number of factors.

If ownership of the real property on which a facility is located is transferred, the new facility owner must submit an application to initially register the facility with the Department within 30 days after the transfer. The application for an initial registration or transfer of facility ownership must be accompanied by a copy of the current deed for the property at which the facility is located. If the facility is located on multiple properties, deeds for each property must be submitted with the application.

Equipment and Operating Requirements

Federally regulated tanks must have secondary containment and Interstitial monitoring. For new UST systems (category 3), double-walled tanks and piping are now the only acceptable method of secondary containment. Under-dispenser containment is required for new dispenser systems.

All UST systems must be monitored for leaks weekly, and a monthly operability check of the leak detection system is required. 10-day reconciliation inventory monitoring is now only required for retail motor fuel UST systems storing motor fuel or kerosene. NYSDEC cautioned that the NYS Fire Code Section 3404. (inventory control) provides that daily inventory records shall be maintained for underground storage tank systems.

Annual line testing required for suction piping that is part of Title 10 Category 1 UST system. However, no leak detection required for suction piping that is part of Title 10 UST Category 2 or 3 system. Entire piping run must be replaced when 50% or more of piping run is replaced unless piping has been constructed in accordance with section 613-2.1(b)(2).

Federal leak investigation requirements are incorporated. For Title 10 USTs, category 1 UST systems must be tightness tested annually. USTs storing #5/6 oil or have acceptable leak detection are exempt.

UST owners or operations must ensure that the last 30 days of leak detection records are always available for inspection. Cathodic protection monitoring records must be maintained for 3 years

Operator training requirements are also being added to comply with federal requirements. Operators of UST systems regulated by Part 613 will be required to undergo training and pass an exam within one yea by October 11, 2016.

Financial Responsibility-

The revised PBS rules now incorporate the federal financial responsible (FR) requirements. The Oil Spill Fund may be used to satisfy the FR requirement for corrective action / third-party property damage requirements. For third-party bodily injury, acceptable mechanisms include self‐insurance, guarantee, insurance and risk retention group, standby trust fund, local government bond rating test, local government financial test, local government guarantee, and local government fund. However, surety bond, letter of credit are not acceptable.

Spill Reporting, Investigation and Corrective Action

The new DEC regulations incorporate the federal requirements of 40 CFR Part 280 Subparts E, F, and G. Effective October 11, 2015, a “facility” must report a “suspected” leak to the DEC’s Spill Hotline (518-457-7362) within two hours after discovery (The old PBSA regulations had imposed reporting obligations on “any person with knowledge of a spill leak or discharge”). Conditions suggestive of a leak include the presence of petroleum in secondary containment structure of the tank system or in the surrounding area (e.g., product or vapors in basements, sewers, utilities, etc.), unusual operating conditions and results of inventory monitoring.

The facility must commence an investigation with 48 hours of discovery of the suspect leak and complete the investigation within one week.  If a leak is confirmed, the facility must then implement corrective actions.

A facility must report any spill within two hours of discovery unless the spill meets the following conditions: (a) the spill is less than five gallons; (b) the spill is contained and under control; (c) the spill has not reached and will not reach the land or waters of the State; and (d) it is cleaned up within two hours after discovery.


USTs that are out of service for more than 30 days must undergo temporary closure. The facility must continue with certain monitoring and other operating requirements while the UST tank system is temporarily closed.  USTs out of service for more than one year must be removed or permanently closed in place.  DEC must be provided with 30 days advance notice when tank systems are permanently closed or when there is a change in service. Closure report due no more than 90 days after permanent closure.

The rulemaking does not make changes to NY’s quirky rules for closure of heating oil tanks. No closure site assessments are required for Title 10 USTs (heating oil tanks used for on-site consumption). However, NYSDEC strongly recommends performing site assessments when closing heating oil tanks.


The AST standards are now consolidated into one section. The new tank construction standards (UL 80, UL 2258) have been adopted to allow for new technologies. Annual monitoring for adequacy of cathodic protection is now required. Impressed current systems must be monitored every 60 days for operation. Cathodic protection monitoring records must be maintained for 3 years. Tightness testing of ASTs as opposed to 10-year inspections is permitted. While there are no changes to the leak detection requirements, the federal leak investigation requirements now apply.

The revised rules clarify when ASTs must be equipped with secondary containment requirements are clarified. AST systems installed after December 27, 1986 with a design capacity of 10,000 gallons or more must have secondary containment. Smaller ASTs must also be equipped with secondary equipment if they are located within 500 feet of wetlands; a perennial or intermittent stream; a storm drain; a public or private well; lake, pond, estuary, or other similar surface water body or a primary or principal aquifer. Depending on the facility, a standard double-wall tank may not meet the secondary containment requirements.

Note that ASTs that are out-of-service for more than 12 months at an active site do not have to be permanently closed. An active site is where there are one or more other tanks being used.

A handful of counties (Cortland, Nassau, Suffolk, Rockland, and Westchester) have received delegation from NYSDEC to administer the PBS regulations under their local rules.  These counties must adopt the revised rule within 6 months to maintain their delegation. Some of the country UST programs have been stricter than the NYSDEC PBS program. As a result, owners and operators of USTs need to ensure that they comply with any local requirements.

OER Grants Available for Petroleum Assessments But Need to Move Quickly

Friday, July 18th, 2014

The NYC Office of Environmental Remediation just announced that it has a little over $100K to award for petroleum assessments this summer. The source  of the grant money is the brownfield revolving loan fund that was awarded by EPA to OER under section 104(k) of CERCLA. The federally-funded grant may be used for phase 1 or phase 2 investigations. There is no requirement that  the applicant enroll in the OER voluntary cleanup program (VCP) to receive  the federally funded assessment.

OER hopes the money will be used to fund assessments at former gas station sites or other sites impacted by petroleum USTs that will be redeveloped for affordable housing. However, the funding is no  specifically limited  to affordable housing projects.

Because the petroleum assessments will be  federally-funded, there are fairly stringent  eligibility requirements. First, the current owner of the property and immediate prior owner of parcel cannot have caused or be responsible for the petroleum contamination. However, if the immediate prior owner was responsible for the spill, the applicant could be still apply for the grant if the applicant can show that the immediate prior owner is insolvent at the time of the application. In addition, the property could not have been previously owned by the City.

Second, the applicant will also have to have performed an all appropriate inquiry at the eligible site.

Third, the  work (phase I or Phase II) must be performed by one of OER’s retainer contractors and not by a site owner’s or a developer’s environmental consultant.  

Finally, the work itself must be completed by Sept 30. What this means, given the time required for EPA approval of a Phase II workplan and QAAP, the work needs to be done very fast to have field work and lab analysis completed by Sept 30.


NY Senate Introduces It Own BCP Reform Package

Wednesday, March 19th, 2014


A month after Governor Cuomo proposed sweeping reforms to the Brownfield Cleanup Program, the New York State Senate proposed its own BCP amendments. The bill (S. 6359—C) is available at here.

The legislation includes a number of the changes proposed by the Governor’s bill including extending the BCP tax credits to 2025, extending the hazardous waste program fee exemption to cleanups performed under EPA or approved local government programs, allowing sites with groundwater Operation and Maintenance systems or sub-slab depressurization systems to qualify for track 1 (unrestricted) cleanups and eliminating oversight costs for BCP volunteers.

However, the Senate proposal departs from the signature feature of the Governor’s bill-changing eligibility for the tangible property credit (TPC) and redefining what costs qualify for the site preparation credit (SPC). The Governor’s bill proposes to limit eligibility for the TPC to three types of brownfield projects and would preclude so-called “soft costs” from qualifying for the SPC treatment. The feeling within the Executive Branch is that the BCP is paying for lots of excavation costs that would have been incurred in the absence of contamination and only wants to incur tax credit liability for costs required by the approved remedial action plan. The  Executive Branch also thought that some applicants with captive contracting firms were “padding” SPC costs. To minimize this practice, the Governor’s bill proposed to bar costs paid to “Related Parties”. Yet another refining of the SPC definition would be to require applicants to capitalize certain costs such costs as property taxes, loan interest paid during the cleanup, etc.  Since the so-called TPC “soft cap” is 3x the total SPC, reducing the eligible SPC costs would have the effect of reducing the TPC’s generated by the BCP.

In contrast, the Senate legislation retains the current framework that all BCP projects are eligible to claim the TPC and does not narrow the types of costs eligible for the SPC. (Recall that there are actually two types of SPC costs: Costs to qualify the site for the COC and other costs to prepare the site for construction of a building or structural building components.) The Senate would cap the total SPC available for any BCP project to $15MM.

Following are some highlights of the Senate’s legislation.

Senate Proposed Brownfield Site Definition

The Senate bill not only retains the current subjective definition of brownfield site but double downs on its complexity. Currently, a brownfield site is defined as real property where the presence or potential presence of contamination complicates reuse.  The Senate adds additional indicia of contamination and underutilization. The result is an incredibly convoluted definition that could produce as many lawsuits as applications.

Contamination Criteria-

The Senate bill proposes that the “contaminant or contaminants, do not overwhelmingly  consist  of historical fill, and exceed at more than minimal levels the soil cleanup objectives….that are applicable based on the reasonably anticipated use of the property, as determined by  the  applicant. “ The term “overwhelmingly” and phrase “at more than minimal levels” are a recipe for lawsuits.

Them the definition goes on to state that the contamination is to be established “by completion and submission of an ASTM Phase II environmental assessment report.” Why the bill drafters settled on ASTM E1903 as the methodology is nothing short of baffling. E1903 is a standard guide that established procedural framework for collecting soil and groundwater samples. However, the NYSDEC has already promulgated extensive regulations at 6 NYCRR Part375 and published its DER-10 Technical Guidance for Site Investigation and Remediation that sets forth a comprehensive list of standards, guidance and criteria (SGCs) for performing site investigations.  One has to wonder if the drafters of this bill are familiar with NYSDEC’s remedial programs.

Under the Senate bill, applicants could have the option of submitting the ASTM phase with their application or up to 90 days after filing the application to demonstrate that the site meets the contamination criteria in the brownfield site definition of this title. For applicants  that do  not  submit  an  ASTM Phase II investigation report with their application, the start of the 45-day period for NYSDEC to render a decision on the application will be deferred until the filing of the ASTM phase 2 but  no later than  90 days  after  submission  of  the application.

Characterization Criteria- 

The definition then goes on to state that sites with the requisite level of contamination must also exhibit one of more of the following characteristics (known as the “Brownfield Site Characterization Criteria”).

(i) a current legacy of vacancy  or abandonment  from  previous  industrial  or  commercial  activity or tax delinquency for at least one year prior to the date of  application;  or

(ii) a current  and historical legacy of severe economic or functional underutilization including use of such site  as  a  hazardous  waste  or solid  waste  facility;  or

(iii)  in  the case of a site characterized primarily by former industrial  activity,  functional  obsolescence;  or

(iv)  the  projected  cost of the investigation and remediation based on the reasonably anticipated use of the  property  as  determined  by  the  applicant  exceeds fifty percent of the certified appraised value of the  property absent contamination; or (v) the site has been certified by the municipality in which the site is located as meeting any of  the  conditions  set  forth  in  this opening  paragraph.

The phrase “severe economic or functional underutilization” is defined as a brownfield  site and any improvements: (a) on which a building or buildings containing no more than fifty percent of the permissible floor area under applicable zoning is being utilized; or (b) has a value  of  equal to or  less than seventy percent of the floor area of the average valuation of land in the county or city in which the land is located, except in a city having a population of one million or more  inhabitants  where the  average valuation shall be based on the county in which the land is located.

The phrase “functional obsolescence” shall mean the brownfield site and any improvements thereon that:

(a) can no longer be functionally or  economically  utilized  in  the  capacity  in  which  it was formerly utilized because of the configuration of the building or substantial  structural  defects  not brought about by deferred maintenance practices or intentional conduct; or

(b) The entire site or a significant portion thereof, with or without improvements is used irregularly or intermittently; or

(c) The functionality of the equipment inside the building or buildings is obsolete for a modern day application; or

(d) Has been certified by the municipality in which the site is located as underutilized pursuant to the criteria in this subdivision.

The Senate bill would allow the applicant to invoke dispute resolution if the NYSDC determines that it has not met the Brownfield Site Characterization Criteria.

The foregoing criteria would seem to be good starting point for modifying the Governor’s proposal for what sites/projects should qualify for the TPC. However, as part of the brownfield site definition, they they inject too much uncertainty into the BCP. We believe the Governor’s Brownfield Site definition is far superior approach than the Senate’s version. The Governor’s bill provides clear and objective criteria for determining if a site is contaminated (e.g., contaminants exceed applicable standards). The Governor’s definition provides more clarity to potential applicants and would likely result in less litigation over what is a brownfield site.

Of course, the Governor’s brownfield site definition is “cleaner” because it does not try to define factors that describe under what circumstances redevelopment is complicated by contamination as part of BCP eligibility. Instead, the Governor’s proposal focuses on those factors for determining what sites are eligible for the TPC. The NYSDEC became embroiled in lawsuits and the BCP virtually ground to a halt when the agency was unfairly tasked with limiting the costs of the BCP and had to adopt an unnaturally narrow interpretation of what was a brownfield site. The Senate’s proposal with its abundance of subjective criteria is more likely than not to bring us back to the bad old days where NYSDEC limited resources will be consumed defending administrative and legal challenges to its eligibility determinations. It seems far better to have an objective test for accepting sites into the program. Under the Governor’s proposal, these sites would be eligible to claim the SPC for their cleanup costs. With the issues narrowed, we Legislature and the Governor could the focus the time remaining refining the test on what types of projects should be eligible for the TPC.

New Applicant Ineligibility Criterion

Like the Governor’s bill, the Senate proposal provides that an applicant may be denied enrollment in the BCP if it the applicant has been terminated from another NYSDEC remedial program by the agency or a court for failure to substantially comply with an agreement or order. However, unlike the Governor’s bill, the Senate would only extend this debarment to the preceding forty-two months.

Class 2 Eligibility-

There appears to be widespread agreement with the concept that volunteers (i.e., non-responsible parties) who are willing to redevelop class 2 sites on the state superfund list which is formally known as the Registry of Inactive Hazardous Wastes Sites (Registry) should be able to enroll the site in the BCP. The dispute is over what circumstances such sites should be eligible for the BCP. The Governor proposed that volunteers should be eligible where there is no viable responsible party. This was partially out of concern that recalcitrant parties who refused to remediate sites could not profit by selling sites that were now more valuable because of the potential tax credits available under the BCP. In our prior discussion, we said that this test might be too stringent and suggested some alternative formulation.

The Senate bill rejects any limitations on class 2 eligibility or for that matter any of the other statutory exclusions where the applicant is a volunteer.  Specifically, the Senate legislation provides that if a volunteer submits a request for participation for real property that would otherwise be deemed excluded from classification as a brownfield site, such real property shall not be excluded. The bill goes on to state that any on-going state remedial program, enforcement action or order with regard to the site shall  be  stayed  by  the execution of a brownfield  cleanup agreement (BCA) and shall terminate when the volunteer receives a certificate of completion (COC). Upon issuance of the COC, the site would be delisted from the Registry, unless the COC is later revoked for good cause. However, the stay would not apply where the NYSDEC is seeking to require an owner of the site at the time of the disposal, or other responsible party to address an imminent and substantial threat to public health or the environment, or is seeking penalties or reimbursement of response costs.  Moreover, if the BCA is terminated, or the volunteer  or subsequent site owner or operator fails to comply with the terms of an environmental easement, any state remedial program, action or order may resume or be recommenced  after  timely  notice  to  all concerned parties.

While we agree that sites should not be “punished” where there is a volunteer willing to perform a cleanup and invest in redeveloping or re-positioning the property. On the other hand, there are legtimate policy concerns about why New York should incur tax credit liability when there is a responsible party on the hook or creating too broad an exeption that could create moral hazards that incentivize recalcitrant owners of developable property to simply sit back and wait until a volunteer appears who willing to pay a higher price reflecting the increased value of the land due to its potential to generate significant tax credits.

No Automatic Termination-

The Governor’s bill proposed an automatic termination of 12/31/15 for sites admitted into the BCP prior to June 23, 2008 (effective date of the last BCP amendments)  and 12/31/17 for sites accepted into the BCP after 6/23/08 and before 7/1/14. The Senate bill does not contain an automatic termination date and quite frankly, we do not see the need for such a provision. The NYSDEC already has the authority to terminate sites that are not making substantial progress towards completing the remedial program.

Some believe this provision was included for sites that were ordered into the BCP by the courts and therefore NYSDEC is concerned it might not have the authority to terminate those sites. If that is indeed the concern, then it seems the automatic terminaiton should only apply to those sites. It remains unclear why the legislature should automatically terminated sites where NYSDEC has not exercised its statutory authority.

NY RAPID program-

The Senate proposes to establish an alternative to the BCP for applicants who are not interested in tax credits but simply desire liability protection and a covenant not to sue. However, the Senate proposal is far less flexible than the EZ-BCP proposed by the Governor. As an example of how poorly-conceived this proposal is, the legislation provides that sites that received a COC from the New York City Office of Environmental Remediation (OER) under the local brownfield cleanup program would be eligible for the NY-RAPID program. NYSDEC already honors COCs issued by OER. Why would any developer want to go through two remedial programs to obtain the same liability protection?  This is just plain silly.  The Governor’s version is clearly superior and more nimble. It could also be used as a platform by local governments such as NYC that have their own cleanup program

Other Tax Credit Changes-

In addition to retaining the current “as of right” TPC for all projects accepted into the BCP, the Senate bill appears to alters the ten-year period for claiming the TPC. Instead of starting the ten-year clock upon issuance of the COC, it appears to that the ten-year begins  with the first day of the first taxable year in which qualified tangible property is placed in service.

Like the Governor’s bill, the Senate legislation will allow the costs to be included in the SPC for purposes of calculating the 3x site “soft cap” that were not but could have been expensed and deducted under expired IRS section 198 (the federal brownfield tax credit). Likewise, the Senate would allow asbestos, lead or polychlorinated biphenyls abatement costs to be included in the SPC calculation.

Navigation Law Amendments-

Subpart B of the bill contains some interesting changes to the Navigation Law. It provides that a unit of local government will not be liable for the discharge of petroleum at a site where it involuntarily takes title pursuant to tax foreclosure and it has retained such site without participating in the development of such site.

The Senate also appears to inject some teeth into the third party defense that was added to the Navigation Law in 2003 but for some reason has not been widely adopted by the courts. Under the bill, if the party who NYSDEC has identified as a discharger and directed to implement a cleanup, the party may present evidence and request NYSDEC to determine if a third party is solely responsible for the discharge. Following such a request, the NYSDEC would have 30 days to determine in writing if the third party is a discharger. If the NYSDEC determines that the third party is solely responsible, then it would be required to direct that party to undertake the cleanup. If the NYSDEC finds the information presented insufficient to establish the responsibility of the third party by a preponderance of the evidence, the agency shall, within 30 days of such request, advise each of the parties that they are deemed dischargers subject to apportionment of liability for the discharge.

The Administrator of the Oil Spill Fund would also be extended to apportion liability for discharges where there is more than one discharger. An alleged discharger may request the administrator to determine on the preponderance of the evidence that a third party is in fact wholly or partially responsible. Within 30 days of receipt of such request, the administrator is required to determine  in writing, if the third party is deemed an additional discharger to any pending or  anticipated  claim  or  if  an  administrative hearing as to liability is necessary to settle  particular  claims  filed  by  injured  persons or to apportion liability between and among dischargers.

Finally, the Senate bill would require NYSDEC to issue the same kind of liability limitations as under the BCP when dischargers completed petroleum cleanups. The proposed law provides that any person who agrees to remediate the discharge to the satisfaction of the NYSDEC would enter into a liability limitation agreement with the NYSDEC.

The conventional thinking is that the Assembly is holding out introducing legislation so it can extract concessions or maximize its leverage for the larger budget issues of importance to its members.  However, time is running out. Only two weeks remaining for an agreement to be reached on the state budget. If an agreement on amending the BCP is reached as part of the budget deal, the outlook for BCP reform for this legislative session may be bleak.


NY Governor Sends Revised BCP Reform Bill to Legislature

Saturday, February 15th, 2014

Earlier this week, Governor Cuomo sent his sweeping BCP reforms to the State Legislature. Under the state Constitution, the Governor has 30 days to make technical amendments to his budget legislation without involving the legislature.

Despite vociferous complaints by brownfield developers, environmental lawyers and affordable housing advocates about the severe curtailments to the categories of projects that would be eligible for brownfield tax credits, the Governor made only modest revisions to the original bill. However, the Governor submitted his legislation under a self-imposed 21-day amendment process so it is possible that there will be additional tweaking to the BCP portion of the bill.   Once the 30-day period has expired, changes to the BCP would be subject to the usual legislative process.

Notwithstanding the cacophony of critical voices to the proposed BCP changes, there is much to like about the proposed revisions. In this post, we will cover the positive changes. In a second post, we will then discuss the changes that need to be tweaked and then close the series with a review of the changes that threaten to transform the BCP into a zombie program.

The Good 

The changes listed below are not in order of importance but simply track the changes in the legislation.

1. Extension of BCP- Obviously, the most important change is that the legislation would extend the brownfield tax credits (BTCs) to December 31, 2022.  The fact that the Governor agreed to extend the BTCs was a victory for brownfield developers since there was considerable sentiment within the budget office to allow the BTCs to expire because of their costs. Sites accepted into the BCP after December 31, 2022 would not be eligible for brownfield tax credits.

2. New COC Deadlines– Under the existing BCP, all sites had to obtain their COCs by 12/31/15 to be able to qualify for the tax credits. The proposed amendments retain the 12/31/15 COC deadline for sites that were accepted into the BCP prior to the 6/23/08 amendments. Projects that were accepted after 6/23/08 but before 7/1/14 will have an extra two years to obtain their COC (12/31/17)  to remain eligible for the BTCs.  Sites accepted into the BCP after 7/1/14 will have until 12/31/25 to obtain their COCs and qualify for BTCs.

3. Revised Brownfield Site Definition- The new definition requires that an applicant do sufficient sampling to establish actually contains contaminants that exceed the applicable soil cleanup objectives or other health-based environmental standards promulgated by the NYSDEC.  This change brings more clarity to what constitutes a brownfield site but really just conforms the definition to current NYSDEC policy since the agency was requiring applicants to demonstrate that the site was actually impacted by contamination by performing and including the results if a phase 2 in the BCP application. The revised language indicates that the applicant must submit an investigation that is sufficient to demonstrate that the site requires remediation to meet the remedial requirements of the BCP.

Significantly, 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 the tangible property tax.

4. Eligibility Extended to Class 2 Sites- The original BCP legislation contained a six month amnesty period for class 2 sites to apply to the NYSDEC that expired in July 2004.  Since then, class 2 sites have been ineligible for the BCP even when innocent parties seek to redevelop the properties or the site may simply sit above a regional plume.

The proposed changes would allow state superfund sites (class 2 sites) to be eligible for the BCP where the applicant is a volunteer who owns the site or where the applicant is a volunteer who is under contract to purchase a class 2 site and the NYSDEC has been unable to identify a PRP with the ability to pay for the cleanup. [emphasis added]. It is unclear if the clause containing the limiting language following the “and” only modifies the clause pertaining to volunteers under contract to purchase a class 2 site or if the clause applies to sites already owned by the volunteer.

The explanation for the “viability” test is that the State of New York does not want to incur BTC liability when there is a financially responsible party who could pay for the cleanup. A responsible party is likely only to remediate a site to its current or reasonably anticipated use but in the absence of a development plan, the reasonably antiicipated use of a property with obsolete or deteriorating buildings may not be obvious.  In contrast, a brownfield developer will be enhancing the property and likely doing a more robust cleanup in a shorter period of time. While there is a legitimate concern for requiring class 2 sites that are under contract to be eligible only if there is not a financially viable responsible party, it may be worthwhile to consider other tests for determining when a class 2 site should be eligible for the BCP such as the responsible party does not currently own or has not owned the site since the expiration of the original amnesty period.

While pondering the conditions for allowing class 2 sites to be eligible for the BCP, the legislature should also consider allowing sites that are under enforcement orders to be eligible for the BCP. This would particularly make sense for sites that are covered by multi-site manufactured gas plant (MGP) orders on consent that several utilities have entered into with NYSDEC. Many of these sites will have cleanups that  require long-term institutional and engineering controls because the contaminants lie beneath existing commercial structures. So long as these sites are subject to site management plans (SMPs), the NYSDEC considers these sites to be still subject to an enforcement order and therefore not eligible for the BCP. It seems that the same rationale for allowing class 2 sites to be eligible for the BCP should apply to sites subject to enforcement orders. Indeed, there is precedent for this suggestion. In 2004, the legislature amended the BCP law to allow sites that were subject to petroleum stipulations agreement issued under the Oil Spill Program of the Navigation Law to be eligible for the BCP. If an innocent party is willing to remediate and redevelop a contaminated site, it should be able to enroll in the BCP subject to reasonable conditions such as ensuring that NYSDEC is reimbursed for past costs and the volunteer has not indemnified the responsible party.

5. Expansion of Track 1 Cleanups- 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 to address vapor intrusion as well as for groundwater remediation where the bulk contaminant concentrations have been reduced to asymptotic levels. However, there would no longer be a 2% tangible tax credit bonus for achieving track 1 cleanup;

6. Transfer of COCs- The legislation clarifies that COCs may only be transferred to subsequent legal or equitable title holders of all or a portion of the brownfield site. It had been unclear if the COC could be transferred without title changing hands.

7. BCP-EZ program- The proposed amendment would create a streamlined remedial program that would be called the BCP-EZ program. Applicants that qualify as volunteers 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.

8. Oversight Costs- 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 July 1, 2014. This exemption applies both to applications submitted after July 1, 2014 as well as sites accepted into the BCP prior to July 1, 2014. However,  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 but the NYSDEC may negotiate a “reasonable” flat rate fee for future oversight costs.

9. Extra Tangible Tax Credits For Certain Projects– The Governor’s bill would allow certain categories of projects to be eligible for extra tangible property tax credits above the base of 10%.  A bonus of  5%  would be available for projects with affordable housing (based on square footage of the total affordable housing units(§25), an extra 10% could be claimed by projects on sites located Environmental Zones and a bonus of 5% would be available for “strategic sites” located in and conforming with a Brownfield Opportunity Area (BOA) plan.

10. Clarifies Treatment of Costs for Expired Federal Brownfield Tax Credit-  BCP applicants are currently allowed to claim up to $35MM ($45MM for manufacturing sites) in tangible property tax credits (known as the “hard cap”) or 3x the site preparation costs (6x for manufacturing ), whichever is less. The 3x or 6x times site preparation calculation is known as the “soft cap.”  The proposed legislation clarifies that on-site groundwater remediation costs and costs that could have been  ”expensed” and deducted for purposes of the IRS 198 brownfield tax credit but were not given such treatment may be used in calculating the “soft cap.”

11. Clarifies Treatment of Costs To Address Treatment of Contaminated Groundwater From Off-Site Source– Based on the way the qualifier in section 3 of the proposed legislation excluding tangible property tax credits for off-site contamination migrating onto property, it appears that site preparation tax credits will be available for costs to address contamination migrating onto site if required in the approved remedial action plan.

12. Abatement and Disposal of Hazardous Building Materials- The proposed amendment would allow applicants to include abatement costs for removing and disposing asbestos-containing materials, lead-based paint or PCB caulking in their site preparation costs provided the work is done under supervision of the Department of Labor or Department of Health would be eligible.

13. Hazardous Waste Generation Fee Exemption– 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 tax assessments or fees that can significantly add to the total project costs.

If the remediation is performed under the state superfund program or BCP, the generator of the waste does not have to pay the hazardous waste tax or fee. 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. Depending on the size of the site or the depth of the excavation, the hazardous waste taxes could approach or even exceed the total remediation costs. Click here for more information about the hazardous waste fee and tax

The bill would also exempt remediation wastes from the state hazardous waste generator fee that are generated for cleanups are done 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.

The “Meh” 

The legislation also includes some new submission deadlines and grounds for revoking COCs that have been criticized by some business groups but seem to fall into the  into the “Meh” category (for readers who are not fans of the TV show “The Simpsons”, the term is like a verbal shrug of the shoulders that expresses  indifference or lack of enthusiasm). At the very least, the provisions do not seem to be worth expending political capital and advocates would probably be better served keeping their powder dry for other more important issues raised by the bill.

  • An applicant will not be eligible for the BCP if it has failed to substantially comply with an agreement or order under another NYSDEC remedial program and the applicants participation in that other remedial program has been terminated by the NYSDEC or a court;
  • NYSDEC will now have 30 days to advise an applicant if its application is complete;
  • Applicants must implement work plans within 90 days of approval and complete the work in accordance with the schedule set forth in the document;
  • Every report required to be submitted under the BCP must include a schedule for submitting subsequent work plans required under the BCP;
  • 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;
  • The period of time for recording an environmental easement by an owner of an inactive hazardous waste site or the person responsible for implementing the remedial program is extended from 60 days to 180 days of commencement of the remedial design;
  • Applicants seeking tangible property tax credits must evaluate two alternative remedies, with one alternative being a track 1 cleanup;
  • Where the NYSDEC approves an alternative remedy (cleanup tracks 2,3 or 4) at a site that has been determined not to pose a significant threat, the public comment period notice shall apply to both the selected remedy and the approval of the alternative analysis by the NYSDEC;
  • Final Engineering Reports now have to describe any interim remedial measures (IRMs) and the costs of the IRMs;
  • 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;
  • A COC may be revoked if the applicant makes a misrepresentation of a material fact concerning its eligibility for the tangible property tax credit. There was already a revocation for misrepresentation about the applicants qualification for volunteer status;
  • A COC may be revoked if the environmental easement is not effective or enforceable. This was revocation condition was added as part of the streamlining of the environmental easement process to highlight the consequences of not properly preparing and recording the environmental easement;
  • NYSDEC authority to grant waivers from local permits extends to investigations or remediation for contamination migrating from a brownfield site;
  • 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;
  • The Department of State has responsibility for not only certifying Brownfield Opportunity Areas (BOA) but also confirming conformance with BOA plans for purpose of qualifying for the tangible property tax credit;
  • Elimination of the environmental insurance tax credit for sites admitted after July 1, 2014;
  • A municipality seeking to apply for funds from the Environmental Restoration Program (ERP) must assist in identifying responsible parties for the site by searching local records including property tax records;
  • 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.


New York’s Quirky Rules for Heating Oil Storage Tanks

Monday, November 11th, 2013

Storage tanks used for the storage of heating oil for on-site consumptive use are excluded from federal underground storage tank (UST) program.  However, a number states including New York regulate heating oil tanks.

There are approximately 3 million residential heating oil tanks in New York State. While home heating oil tanks for single family homes typically range from 275-to 1,000-gallons.  However, heating tanks for multi-family or commercial properties frequently have capacities up to 20,000-gallons.

The New York Petroleum Bulk Storage Act (PBSA) program generally regulates USTs and aboveground storage tanks (ASTs) that are used to store petroleum and have a combined storage capacity (either individually or collectively) of more than 1,100 gallons. If the combined total capacity of all petroleum storage tanks at a property that have least 110 gallon capacity exceeds 1100 gallons, then all the tanks at the property are subject to the PBS program.

However, there are special rules for heating oil tanks. For purposes of determining if the property exceeds the 1100 gallon threshold for regulation, the volume of heating oil tanks with a capacity less than 1,100 gallons are not included in the calculation. Thus, if a property has a 1,000-gallon gasoline USTs and a 500-gallon heating oil tank, none of the tanks will be subject to regulation. Likewise, a property with four 500-gallon heating oil tanks will also not be subject to the PBS program even though the total capacity of the tanks at the property is 2000-gallons.

The performance and operating standards for regulated USTs under the PBS program are considerably more extensive than those for ASTs. Thus, it is particularly important to ensure that tanks in multi-family or commercial buildings are properly registered. However, the rules for classifying a tank as an UST or AST are-yes quirky. A tank located in a basement could be regulated as an UST under some circumstances which means it could be subject to periodic testing and other performance standards.

NYSDEC has commenced numerous enforcement actions against residential buildings for failing to properly register tanks, report spills and remediating contamination. Indeed, a number of multi-family buildings in NYC have been required to pay in excess of $1MM for tank violations and cleanup. One of the recurring themes I have seen in the cases involving significant fines or cleanup costs has been when the property or building management has hired a “tank” company to repair a failed tank system. The building manager believes that the “tank” company will deal with all of the issues associated with the failed tank system and are then shocked when they get a notice of a hefty fine from NYSDEC for failing to properly close out a spill. See our prior post on the importance of hiring the right kind of consultants for leaking heating oil tanks.

Another quirk of the NYSDEC PBS program is the closure requirements for heating oil tanks. Regulated PBS tanks that are out-of-service for more than one year must undergo closure. Unlike the federal UST program, though, the NYSDEC PBS program does not require an environmental assessment to close heating oil tanks. The tank has to be cleaned out and visually inspected for holes but soil or groundwater samples are not ordinarily required to achieve closure of heating oil tanks unless there is visual evidence or a leak.

Thus, it is possible that a heating oil tank that was closed in place and obtained regulatory closure by the NYSDEC may have impacted the property. Accordingly, it is advisable for purchasers of property with abandoned heating oil tanks to review the closure documentation to see if sampling was conducted. In the absence of such documentation, the purchaser should consider conducting its own sampling since the purchaser could be strictly liable under the state Navigation Law if an abandoned tank that was closed in place has impacted the environment.

In New York City, chapter 34 of the Fire Code establishes requirements for Out-of-Service Storage Systems storage tanks (3 RCNY §3404-01.  Closure of storage tank systems that have not been used for one year must be closed a certain licensed individuals. The owner or operator of a permanently out-of-service storage system or the permit holder for the tank system must also file an affidavit with the Fire Department certifying that the tank system was removed and disposed or abandoned in place in compliance with the requirements of Fire Code. If an environmental site assessment is required by federal or state law or regulations, the owner/ operator of the storage system, the permit holder for the system or the person filing the affidavit of compliance must submit a written statement to the Fire Department that such environmental site assessment has been performed in accordance with such law and regulations.

Finally, the New York City Department of Environmental Protection (NYDEP) has issued regulations to phase-out the use of Number 6 oil (No. 6) and Number 4 oil (No. 4) fuel oil that is burned at approximately 10,000 buildings to reduce the quantity of fine particulates emitted by buildings. Studies had shown that 1% of the buildings in the city produce 86% of the total soot pollution from buildings.

Effective May 23, 2001, all newly-installed/permitted boilers may only burn low sulfur No. 2 oil, natural gas, or the equivalent from an emissions standpoint. For existing boilers, the regulations provide for a phase-out of No. 6 oil. Beginning July 1, 2012, building owners are required to convert to a cleaner fuel (No. 4 oil or cleaner) before their three-year certificate of operation expires. Building owners will not be able to renew Certificate of Operation for a boiler burning #6 heating oil unless the applicant demonstrates that the No. 6 fuel that will be used will emit the same or less PM and NOx than No. 4 on an annual basis. All boilers must be converted to low sulfur No. 4 heating oil or an equivalent cleaner fuel by mid-2015. By 2030, existing boilers that have not been replaced must be modified to meet the equivalent emissions of burning low sulfur No. 2 oil or natural gas. The regulations are available here.

Financing and other incentives are available for building owners required to convert to cleaner-burning fuels.  NYC has established a webpage that provides information on financing options  and incentives available to building owners. Click here for Information on the permitting process


NYSDEC Proposes Changes to Petroleum and Hazardous Substance Storage Tank Regs

Sunday, November 10th, 2013

During the summer, NYSDEC issued draft revised regulations to its Petroleum Bulk Storage (PBS), the Major Oil Storage Facility (MOSF) program and the Chemical Bulk Storage (CBS) program. The revisions are intended to make the PBS and CBS regulations consistent with the federal underground storage (UST) regulations codified at 40 CFR Part 280 so that these program may qualify for delegation under 40 CFR Part 281.

Proposed PBS Revisions

The New York “Control of the Bulk Storage of Petroleum Act” (PBSA) regulates USTs and aboveground storage tanks (ASTs) that are used to store petroleum and have a combined storage capacity (either individually or collectively) of more than 1,100 gallons.  Note there are slightly different threshold rules for heating oil tanks which are discussed in our companion piece on NY’s Quirky Heating Oil Tank regulations here.

The New York State Department of Environmental Conservation (NYSDEC) issued regulations implementing the PBS program in 1985 that are currently codified at 6 NYCRR 612-614.  Under the draft revised regulations, NYSDEC proposes to replace at 6 NYCRR 612-614 with a new Part 613. The revised Part 613 will establish separate requirements for tanks that are regulated by the federal UST program as well as those that are only subject to the PBS program such as heating oil tanks. See our companion post on New York’s quirky heating oil regulations here.

The revisions will include requirements mandated by the federal Energy Policy Act of 2005 including ensuring that facility operators have been trained, authority to prohibit delivery of petroleum and hazardous substances to tanks that are or may be leaking, tanks operated in significant non-compliance, and requirements for piping and dispenser secondary containment. The proposed changes will also changes to the definition of “petroleum” and of “facility that were made by the 2008 amendments to PBSA.

NYSDEC has issued a number of guidance documents and policies governing USTs and ASTs that are subject to the PBS program. These documents are available here.

It should be noted that Nassau, Suffolk, Rockland, Westchester and Cortland Counties administer the program in these localities, pursuant to delegation from DEC. Because these counties may have more stringent requirements than the PBS program, owners and operators with tanks in these jurisdictions should be familiar with the specific local requirements. In particular, some of these delegated counties have adopted regulations that apply to smaller heating oil tanks than the NYSDEC PBS program.

It is important to remember that the PBS  closure and corrective action requirements are not the only source of liability for owners or operators of property contaminated with petroleum.  Article 12 of the Navigation Law imposes strict and joint liability on dischargers who are defined as persons who are “in any way responsible” for petroleum discharges. While mere ownership of property that is contaminated with petroleum discharges may not automatically result in liability for a property owner, state courts have broadly construed this phrase so that owners who had the ability to control storage tanks such as landlord have been found liable under the Navigation Law. Moreover, purchasers of property contaminated by abandoned petroleum tanks have often been found to be ineligible for reimbursement from the Oil Spill Fund on the grounds that they owned the abandoned tanks. Thus, it is important for purchasers to determine if abandoned tanks, in particular abandoned heating oil tanks, are present at the property prior to taking title. If tanks are discovered, they should be removed prior to the closing or before the purchaser assumes control of the property.

Proposed CBS Revisions

NYSDEC is also proposing changes to its CBS program which implements Articles 37 (Substances Hazardous to the Environment) and 40 (Hazardous Substances Bulk Storage Act). Article 37 requires the NYSDEC to regulate all substances covered by CERCLA, FIFRA, and TSCA along with other chemicals that NYSDEC determines to be hazardous. Article 40 regulates the sale, storage and handling of hazardous substances.

NYSDEC proposes to consolidate and amend its CBS regulations as follows:

  • Repeal Part 595 (Releases of Hazardous Substances) and move these requirements in Parts 597 ((general requirements for spill reporting) and 598 (facility specific reporting requirements).
  •  Replace Part 596 with a new Part 596 titles Hazardous Substance Bulk Storage Facility Registration. Significant changes include:

 -This section modifies the definition of hazardous substances so that the term is not limited to those listed on the table in Part 597.

-The definition of owner is to clarify that the property owner will be responsible for registration and that the tank owner will be responsible for all other “owner” requirements designated in the rule.

-The definition of UST is also modified to conform to the federal definition.

  •  Replace current Part 597 (List of Hazardous Substances) with a new Part 597 (Hazardous Substance Identification, Release Prohibition and Release Reporting). Among the key changes:

-The definition of hazardous substance is being clarified to include listed substances, substances meeting certain characteristics, certain mixtures, and hazardous waste.

-The list of hazardous substances is being updated to be consistent with CERCLA. The existing definition of hazardous substance had included petroleum but this was deleted to avoid conflicts with the PBS program.

-The persons required to comply with reporting obligations have been changed to any person in actual or constructive control or possession of the hazardous substance when it is released or any employee, agent, or representative of such person who has knowledge of the release.

-The reportable quantity is also being changed to conform to the federal definition that refers to a 24-hour period. Because the existing requirement did not have a time period, the proposed change will narrow the reporting obligations;

-elimination of the exemption for releases that were the result of an unavoidable accident

-elimination of the exemption to the spill reporting requirements for carries and transporters;

  •  Amend Part 598 (Handling and Storage of Hazardous Substances). This section now includes the release reporting, investigation, confirmation, and corrective action requirements previously contained in Parts 595 and 596.  In addition, the federal public participation requirements for corrective action plan have been added;
  •  Amend Part 599 (Standards for New Hazardous Substance Tank Systems). 

NYSDEC Adds New Categories of Sites To Database To Chagrin of Some Property Owners

Wednesday, November 6th, 2013

The New York State Department of Environmental Conservation (NYSDEC) recently announced that it had added approximately 1,950 sites to its Environmental Site Remediation Database Search database of sites that are subject to one of the agency’s remedial programs. The  NYSDEC said it was adding these additional sites to facilitate real estate transactions and address the rising number of requests from the public for information about possible environmental contamination.

Previously, the NYSDEC searchable database contained summary information on on approximately 2,500 sites that were subject to one of the NYSDEC remedial programs such as the Brownfield Cleanup Programs (BCP), the Voluntary Cleanup Program (VCP), Environmental Response Program (ERP) for municipal sites, the Oil Spill Response Program (Spill Program) as well as sites on the Registry of Inactive Hazardous Waste Disposal Sites” (commonly referred to as the list of State Superfund Sites). The newly added 1,950 sites include three site classification types: Class P, Class PR, and Class N.

The “P” classification is used for are properties that the NYSDEC is considering placing on the Registry  because preliminary information indicates that a site may have contaminated at levels that could warrant listing on the Registry.  Generally, to qualify for placement on the Registry, there must be evidence that hazardous waste was disposed on the site and that any resulting contamination presents a significant threat (or reasonably foreseeable threat) to public health or the environment. If a site is found to present a significant threat, the NYSDEC may place the site on the Registry as a “Class 2” site unless a party agrees to implement remedial actions pursuant to an oversight document. Class P sites require information and/or investigation to if the property  qualifies for listing of the site on the Registry.   This contrasts to Class 3 Registry sites where NYSDEC has determined that contamination does not presently and is not reasonably foreseeable to constitute a significant threat to public health or the environment. A Class 3 designation is not used for sites where insufficient data is available to make a definitive decision concerning significant threat.  Many Class P sites do not end up being listed on the Registry. Sites that do not qualify for Registry listing are typically then reclassified on the database as a “Class N” (No Further Action At This Time) site.  In making information available about Class P sites, the NYSDEC emphasized that the information provided for a Class P site is preliminary in nature and unverified and that NYSDEC has not yet completed its investigation. Due to the preliminary nature of this information, NYSDEC said that significant conclusions or decisions should not be based solely upon these summaries.

Class PR sites (Potential RCRA Corrective Action)  are sites that are, or have been, subject to the Resource Conservation and Recovery Act (RCRA) program because hazardous wastes are or have been actively managed. These sites may have been contaminated if hazardous wastes were improperly stored, treated, or disposed. Similar to a Class P site, Class PR sites are investigated and reviewed to determine if RCRA corrective action is necessary. If so, remediation is carried out under a RCRA permit, order, or other legal mechanism.

The last category of sites that have been added to the Remediation Site Database are Class N sites. Many Class N sites were investigated decades ago before NYSDEC had an online database to store site information. This category can former Class P site where NYSDEC determined that contamination did not warrant placing the site on the Registry or it is being addressed under a brownfield program. Other Class N sites may include BCP, ERP or VCP sites where an application to participate was submitted but was either withdrawn or did not proceed because it did not qualify for the program. Other Class N sites include those where work was began under the brownfield program or voluntary cleanup program but work was not completed for lack of funding or some other reason.

Prior to 2013, information about Class P, PR, and N sites was usually only available by filing a Freedom of Information Law. In now making the information, NYSDEC  cautions users that the information should be used with caution and should not be used to form conclusions about site contamination beyond what the definition of the classification provides.

Finally, another important category is the Class A (Active) site. This classification has been used for sites in the BCP where the work halted for economic reasons and the contamination qualifies for placement on the Registry. If a new party proposes to re-enroll the site in the BCP or other remedial program, the NYSDEC can reclassify the site to Class A (active) to indicate that work has recommenced as  a non-registry site. This classification has also been used for Manufactured Gas Plant sites or those being remediated under an EPA Cooperative Agreement.

The newly added sites will make it easier to perform environmental due diligence as well as help developers identify potential brownfield sites. However, owners of Class P sites may be concerned that there properties may become stigmatized by the incomplete information about the extent of the contamination at their sites.

The NYSDEC Environmental Remediation Site Database Search is available at: The Petroleum Spills database is available at:

Ct Allows Claim Agst Consultant For Missing Contamination at Lowe’s Site To Proceed

Tuesday, October 8th, 2013

Some time ago, we discussed the $14MM lawsuit filed by Lowe’s Home Centers  against a consultant. Lowe’s alleged  that the consultant failed to identify all areas that had been contaminated with PCBs and the store opening was delayed because of complications associated with the previously unknown PCB-contaminated soil was improperly disposed. The matter eventually settled

Another Lowe’s Home Center store development site has led to a lawsuit against a consultant, this time by an insurance company that issued an environmental insurance policy to Lowe’s Companies, Inc (Lowe’s). The complaint alleges that that the consultant failed to identify contamination associated underground storage tanks (USTs) during pre-acquisition due diligence and resulted in the plaintiff paying $1,050,103 under its insurance policy. Recently, the federal district court denied the consultant’s motion for summary judgment in Chartis Specialty Ins. Co. v. Aqua Science Engineers., 2013 U.S. Dist. LEXIS 124090 (N.D.Cal. 8/29/13).

In this case, Lowe’s was considering purchasing a 28-acre property in Concord, California for a proposed Lowe’s Home Center store. The property had a history of light industrial use including contractor equipment yards, diesel generator repair business, drilling company, automotive wrecking, wood truss manufacturer, ornamental iron fabricator and mobile home sales lot.

A phase 1 conducted by Anton Geological (Anton) in 2001 had identified a number of Recognized Environmental Conditions (RECs) including an abandoned oil-water separator, potential soil contamination from automotive wrecking operations, an above-ground storage tank (AST), areas where hazardous materials and wastes had been used by a variety of tenants and former underground storage tanks (USTs). A total of 11 underground storage tanks had been removed from the Site in the 1990s. Several of the USTs were removed without any regulatory oversight. Two USTs that had been operated by Judd Drilling were particularly notable.  The USTs were removed in the early 1990s and the Regional Water Quality Control Board (the Board” ) granted closure in 1998 despite the fact that sampling detected over 1,000 parts per million (ppm) of benzene, toluene, ethylbenzene and xylene (BTEX) in soils and 15,000 ppb of diesel range total petroleum hydrocarbons (TPH-D) in groundwater.

In 2004, Aqua Sciences Engineers, Inc (AES) was retained by the Winton Jones Development Company (WJDC) to obtain regulatory closure on the RECs identified in the Anton  phase 1 report to facilitate redevelopment of the property. AES identified significant petroleum contamination in one well that was located downgradient from the former Judd Drilling UST. However, no elevated levels were detected in the on-site drinking water well. Three test pits detected elevated concentrations of TPH-D, gasoline-range total petroleum hydrocarbons (TPH-G), and motor oil (TPH-MO) in the shallow soil.

In 2006, ASE excavated contaminated soils from the three test pits in the central portion of the Site known as the Winton Jones Development Parcel (WJDP) pursuant to a workplan approved by the Board. Post-excavation sampling confirmed the residual contamination was below environmental screening levels (ESL) used by the Board for commercial property. ASE originally requested that the Board issue a site-wide NFA. However, the Board responded that the sampling performed to date was limited for a size and history of site and that the Board believed additional soil and groundwater contamination was present in areas such as where the USTs had been removed without regulatory supervision. As a result, ASE then modified its request, indicating that ASE was comfortable with the issues elsewhere as the property and was simply seeking confirmation that the 2006 soil remediation was completed in accordance with the approved workplan. In response, the Board advised AES in 2007 that if the owner wanted to receive an NFA letter allowing for unrestricted land use in the future but restricting shallow groundwater use via a deed restriction, it would need to undertake a more robust and complete investigation of the environmental conditions of the entire site that could require additional remediation. However, the Board said the seller could obtain an NFA with restrictions without additional environmental investigations.

In 2008, AES submitted a Revised Workplan for Soil and Groundwater Assessment to obtain a letter from the Board indicating that the property was suitable for redevelopment. ASE investigated two additional former UST areas that ASE had not aware of when it conducted its 2006 remedial work but had learned about from its review of the Board’s files. ASE also collected samples from four areas where stained soil was observed during a site visit or had historically been used to store equipment and vehicles.  ASE detected TPH-D, TPH-G and TPH-MO that did not exceed the ESLs. ASE also issued a Soil and Groundwater Assessment for  an adjacent five-acre parcel where three gasoline USTs had been removed from the site in 1987 and closure had been granted by the Contra Costa County Environmental Health Department and RWQCB in April 1995. ASE did not detect any petroleum hydrocarbons in the soil or groundwater and VOCs in the groundwater were detected below the ESLs. ASE recommended that the RWQCB prepare a no further action (NFA) letter for this parcel. The report contained a section title “Report Limitations”. This section stated that “This report does not fully characterize the site for contamination resulting from unknown sources or for parameters not analyzed by the laboratory.”

Also in 2008, Lowe’s retained ASE to perform a pre-acquisition phase 1 environmental site assessment (ESA) contemporaneous with the sub-surface investigation. Lowe’s selected ASE in part because the firm had performed a number of investigations and implemented remedial measures under the under the supervision of the Board during the preceding decade for the owner/seller of the property.

The ASE report had some curious language and suffered from the use of inconsistent terminology. In the “Findings” section, ASE concluded that the former USTs and surficial staining identified in 2004 were HRECs because of the prior remedial activities. ASE also said that the surface staining from improper handling of hazardous materials and the areas where equipment or vehicle storage each “would be considered a environmental conditions.” (The term “environmental condition” is undefined and not a term recognized by ASTM E1527-05. It is unclear if this was a typo and ASE meant to identify these conditions as RECs).

Then the report went on to say that the areas of heavy surface staining and equipment/vehicle storage were not considered “recognized environmental conditions that would that negatively impact the site” because sampling did not exceed the ESLs. The use of the phrase “that would negatively impact the site” seems to create ambiguity. Was ASE saying there are no RECs or that there are RECs that will not result in material impacts to the site? If the latter, why identify the release as a REC and not a de minimis condition (e.g., one that would not result in enforcement or cleanup obligations if brought to the attention of regulators).

ASE identified the areas where poor management of waste oils and chemicals as de minimis conditions because of the sampling.

The “Findings” section concluded with a box with bold type that seemed to contradict the aforementioned statements. The bold text stated “No recognized environmental conditions, historic environmental conditions or de minimis conditions were discovered in the course of this phase 1Environmental Site Assessment, with regard to the subject property that warrant further assessment activities.

The “Opinion” section went on to state that “Although historical and recognized environmental conditions exist at the subject site, in our opinion, regulatory agency prepared closure letters and recent (2004, 2006 and 2008) assessment and remedial activities performed at the site render a conclusion that these afore-mentioned conditions no longer negatively impact the subject site and do not warrant any further assessment activities.”

The “Conclusions” section stated that “Based on the above-referenced information, there does not appear to be any current or former site conditions that warrant any further assessment.” This section ended with the following statement “ As discussed in Section 8.1 and 8.3, this assessment has identified historic recognized environmental conditions and de minimis conditions, which as detailed in sections 8.0 and 9.0, are not considered to negatively impact the property or warrant any further assessment activities. This assessment has revealed no evidence of evidence of recognized environmental conditions except for those conditions specifically detailed in Section 8.2; however, in our opinion, each of the recognized environmental conditions identified in Section 8.2 have been fully assessed and are not considered to negatively impact the property or warrant any further assessment activities.

Finally, in the “Recommendations” section, ASE recommended that the junk yard area where there was poor management of waste oils and chemicals be re-inspected after the vehicles were gone and that the drums and buckets containing liquid be immediately removed. ASE also recommended that stained soil be scraped and separately managed from non-stained soils.

The Board issued a letter in May 2008 confirming that the property was suitable for redevelopment and that the environmental assessments completed to date were sufficient to allow the Board to issue a No Further Action (NFA) if five identified requirements were met, including additional sampling of the eastern 5-acres, abandonment of the on-site well, recording of a deed restriction and implementation of a “Risk Management Plan to properly deal with unanticipated soil, soil gas, and groundwater issues that may arise during future construction activities. In accordance with the Board’s request, ASE conducted additional soil and groundwater sampling that did not identify any contaminants above the commercial/industrial ESLs and prepared a Soil and Groundwater Plan (SGMP) which was approved in May 2009.

Between June and August 2009, contaminated soils were encountered during grading operations for the building foundation, excavation of a temporary stormwater retention basis and construction of a bio-swale. An estimated 18,500 tons of soil were disposed off-site and moderately-contaminated soils were reused beneath parking and driveway areas on the western half of the property, and beneath the concrete pad of the building

Lowe’s provided a Notice of Loss/Notice of Claim to its carrier, Chartis Specialty Insurance Company (f/k/a American International Specialty Lines Insurance Company). Chartis paid $1,050,103 to or on behalf of Lowe’s for the cleanup costs and then filed its lawsuit.

This case illustrates the challenges of redeveloping brownfield sites or those that have historic light industrial use. Phase 2 investigations are not comprehensive site investigations and it is not unusual for previously unknown contamination to be uncovered during demolition or construction activities. Insurers who write environmental insurance policies are certainly aware that unknown contamination is often encountered when developing industrial sites. Indeed, the frequency and magnitude of unexpected cleanup costs is a reason that insurers largely stopped writing cost cap insurance.

It may be that the plaintiffs will be able to uncover evidence of negligence on the part of ASE during discovery. However, given the numerous investigations and extensive oversight by regulators, it does seem that plaintiffs are embarked on a Quixotic mission. If there was negligence in this case, it seems it was committed by the insurer/plaintiff. The correspondence between ASE and the Board clearly reflect the concerns of the regulator about potential unknown sources of contamination in areas of the property that had not been fully characterized. These materials were readily available for review by the plaintiff’s underwriters. Thus, this lawsuit seems more a case of buyer’s regret on the part of the plaintiff for not having done more thorough due diligence or perhaps ignoring the risks to chase premium dollars during a credit bubble than the negligent performance on the part of the defendant.

Cal Appeals Ct Revives VI Toxic Tort Case

Thursday, October 3rd, 2013

In the latest installment of the saga involving the infamous Ujima Village Apartment complex that was abandoned because of vapor intrusion from a former petroleum storage facility, a California appeals court ruled in Doris Alexander v. ExxonMobil, 2013 Cal. App. LEXIS 768 (Ct. App.-2nd Dist. 9/24/13) that a trial court improperly dismissed a group of plaintiffs on the grounds that their claims were barred by the statute of limitations.

We previously discussed an earlier ruling in this litigation involving a negligence claim brought by the Ujima Village residents against an environmental consultant for failing to identify health risks associated with the former oil storage facility that had operated at the property from 1924 to 1968. Because the plaintiffs did not have any contractual relationship with the consultant and were not the intended beneficiaries of the environmental report, the court said that the consultant did not have a duty to the residents that could have been breached. A detailed discussion of the facts in this case and the ruling in favor of the consultant is available here.

Over 700 plaintiffs filed a complaint in 2010 for injuries resulting from their exposure to the petroleum contamination. The complaint was amended several times to include new parties. The defendants sought to dismiss the complaint (a “demurrer” in California pleading parlance) on statute of limitations grounds. The defendants contended that the plaintiffs knew or should have known of their claims at least by 2007 which more than two years before the first suit was first filed in April of 2010.

The trial court tentatively agreed with the defendants but gave the plaintiffs an opportunity to offer proof of their claims in the form of written statements known as “Cottle” declarations in California. The defendants then repeated their motion to dismiss, pointing to the following statements in the complaint:

  • residents were aware that the complex was located a on a former oil tank farm and that repeated  environmental investigations had been performed between 1992 and 2009;
  • the government agencies held several meetings with residents in 2007 to discuss the reasons for the proposed closure of the complex;
  • the Housing Authority sent a letter to residents on May 1, 2007 that referenced “environmental concerns”, and
  • An Ujima resident expressed health concerns to the Housing Authority in 2007 regarding the contamination.

The government defendants said these facts unequivocally demonstrated that Plaintiffs had been apprised of the environmental conditions at the site, and were on inquiry notice of any potential claims. Exxon argued it was “inconceivable” that Plaintiffs could have lived at the complex and not realized that the testing occurred. Exxon also argued that any resident who had received a copy of the May 1, 2007 letter or attended any meeting referencing environmental remediation was, at that point, necessarily on notice of their claims.

The trial court ruled plaintiffs knew or should have known of the environmental contamination in 2007, and that, as a matter of law, such knowledge was sufficient to trigger their statute of limitations period under the state “discovery rule.” The judge dismissed the claims of approximately 100 residents with prejudice but allowed other plaintiffs to file an amended complaint.  The court also dismissed 15 plaintiffs’ claims against the County for failing to file a timely government claim letter as mandated by state law.

On appeal, the residents argued there was a question of fact if the information they possessed in 2007 would have caused a reasonably prudent person to suspect that the contamination posed a risk to their health, thereby triggering their duty to investigate and the statute of limitations. The defendants responded that once the residents were formally advised of the environmental contamination in 2007, they had a duty as a matter of law to begin investigating their claims and would have discovered their claims more than two years before they filed suit.

The court found that the allegations and Cottle declarations did not lead to a single conclusion that the 2007 notices should have caused the plaintiffs to suspect the contamination  posed a risk to their health. The court noted that the May 2007 Housing Authority letter merely referenced “environmental concerns” as one of several reasons why the complex was to be closed. Moreover, the court said that the letter did not explain the nature of the unspecified “environmental concerns” or provide any additional facts about the issue. Furthermore, the court observed that portions of the letter warned residents that they might lose their rights to federal relocation assistance if they moved from complex before receiving a formal notice of eligibility and stated in bold, underlined print that residents should not move from the premises until receiving such a notice. As a result, the court concluded a trier of fact might legitimately infer that a letter from a government entity telling residents to stay in their homes until further notice was not, standing alone, sufficient to raise a suspicion that unspecified “environmental concerns” posed a risk to their health or safety.

Similarly, the court found that more than one legitimate inference can be drawn from the fact that appellants’ attended the 2007 community meeting where which they were notified of the contamination. The said that the defendants did not dispute that the speakers at these meetings, which included representatives from state housing authorities, told residents the contamination posed no risk to their health. Thus, the court said it could not, as a matter of law, hold that individuals who attended the meeting should have suspected that the contaminants were capable of causing personal injuries. Had the residents been notified in 2007 that the contamination could potentially pose a risk to their health, or that authorities were still investigating that possibility, the court said it was possible closer question.

Thus, the court held that the trial judge erred in rejecting residents’ claim of delayed discovery based solely on the fact that they received notice of the contamination in 2007. The court said that the defendants might uncover evidence during discovery some or all of the appellants actually suspected the contamination was capable of causing them personal harm, or otherwise possessed additional information that put them on inquiry notice of such facts in 2007.

As an interesting aside, a Regional Water Board sent a letter to the county health department in November 2011 if a health assessment had been performed or if one was contemplated. The letter explained that the Regional Boards “do not have the legal jurisdiction to address possible health impacts associated with past activities at the Site.”

In some respects, the Ujima Village Apartments litigation is similar to another California case, Avila v. Willits Envtl. Remediation Trust, 633 F.3d 828 (9th Cir. 2011). There, the Court of Appeals for the Ninth Circuit reversed a trial court ruling that found plaintiffs could not invoke the delayed discovery rule because of news stories in the local media. The court allowed a sub-set of plaintiffs to continue to pursue their lawsuit though most of those plaintiffs were unable to prove their case.

Finally, Ujima Village is one of three high profile cases involving vapor intrusion from a former petroleum storage terminal or refinery. The two others are the Carousel neighborhood in Carson, California (click here for figure showing subdivision and former terminal) and Roxana, Illinois (click here for a figure depicting plume). There was also a regional plume associated with a former refinery in Brooklyn, New York (see map). Remember these cases the next time someone says that vapor intrusion is not a concern for petroleum contamination.