SCHNAPF ENVIRONMENTAL  REPORT

A Monthly Newsletter Covering Recent Environmental Developments and Caselaw

August/September 1999								Vol. 1, Issue 7

	The Schnapf Environmental Report is a newsletter which provides updates on regulatory developments and highlights significant federal and state environmental law decisions cases affecting corporate and real estate transactions, and brownfield redevelopment. 

In this issue, we review a number of interesting cases involving lenders. Despite the passage of federal and state lender liability laws, banks continue to find themselves parties to lawsuits involving environmental contamination. We also discuss a number of new brownfield financing initiatives which local communities can use to investigate and remediate contaminated properties.  

	The newsletter is published free of charge by the Schnapf Environmental Law Center which provides regulatory guidance, legal research and writing resources, litigation support and assistance with environmental issues associated with corporate, financing and real estate transactions for businesses and law firms. 

The Schnapf Environmental Report is published on a bi-monthly basis. More detailed information on the topics covered by the newsletter is available at our web site: http//: www.environmental-law.net. Back issues of the newsletter are also available from our website. 

We also offer environmental law seminars which are taught by Larry Schnapf who is an adjunct professor of environmental law at New York Law School. The seminar focuses on the environmental issues associated with business transactions. The seminar can be conducted at your office or at periodic department meetings that you might organize over the course of the year. The seminar is eligible to be approved by the Continuing Legal Education Board as an Accredited Mandatory Continuing Legal Education (“MCLE”) Program so that attendees would receive credits towards the New York State MCLE requirements. If you are interested in this seminar, please contact Larry Schnapf at LSchnapf@environmental-law.net or call him at (212) 996-5395.

Finally, if you would be interested in being added to our subscription list for our quarterly New York Brownfields Report, please let us know at LSchnapf@environmental-law.net. The New York Brownfield Report analyzes the agreement issued by the New York Department of Environmental Protection under its voluntary cleanup program and also discusses major policy changes for the program.  

DUE DILIGENCE/LENDER LIABILITY/REPORTING ISSUES

Bank Enters Into $300,000 Settlement With EPA 

The Asset Conservation, Lender Liability, and Deposit Insurance Act of 1996 expanded the scope of the CERCLA secured creditor’s exemption. Despite this added protection, banks continue to find themselves embroiled in environmental litigation. Recently, NationsBank agreed to pay EPA $300,000 to settle a cost recovery action that had been filed in connection with actions that NationsBank had taken during the liquidation of a borrower’s assets. 
	In the spring of 1989, NationsBank extended a $4.75 million loan facility to Clearwater Finishing Inc. (the “Company”) secured by a mortgage on the property and liens on the personal property of the Company. Within a year, the Company was in a workout and the bank held weekly meetings with the Company while also providing guidance to help the Company maximize its collections, shipping of goods and collection of accounts. These efforts prove fruitless and in the summer of 1990, the Company filed a Chapter 11 reorganization. When the plant closed for the July 4th holiday, the Bank refused to release funds from the revolving account to pay the employee wages. Unable to pay its employees and facing bomb threats from the angry workers, the Company and the Bank reached an agreement whereby the Bank would pay half of the workers’ salaries if the Company sought financing from another bank or allowed the Bank to liquidate its collateral located at the facility.
	The Company then hired a management company to wind up its operations. The firm hired a skeleton staff to complete operations, run utilities and secure the facility. The Bank agreed to pay the salaries of these employees out of the proceeds of account collections and liquidation of the collateral. The management firm made weekly report to the Bank.  
	After operations were permanently discontinued, a small staff of workers were retained to maintain utilities and security to protect the collateral remaining on the property. The Bank continued to pay these workers salaries, approved the collection and settlement of all accounts, authorized transfer of any materials and received daily reports.    
	 In December 1990, the bankruptcy court approved the bank’s motion for relief from the automatic stay for the purpose of liquidating the remaining assets, including “perishable” chemicals which were to be sold  “as soon as possible.” The Bank then hired a liquidation company to conduct the sale of the collateral. 
	By the spring of 1991, only 28% of the value of the assets had been sold. The President of the Company then made arrangements to sell the remaining chemicals and dyes to another company under his control for the purpose of reprocessing and selling the chemicals to third parties. After the President and employees had loaded the chemicals onto a truck, the Bank refused to authorize the sale and insisted that the chemicals be placed back into the facility. 
	In the fall of 1991, the liquidation company advised the Bank that the remaining chemicals and dyes no longer had any value. The Bank informed the President of the company that it would no longer provide heat, maintenance or security for the facility. The chemicals remained at the property during the next two years. During the winter, the chemicals froze which caused some drums to burst. Other drums gradually deteriorated and released their contents within the facility.
	The President sued the Bank for allowing the collateral to waste in 1992. The parties reached a settlement in 1993 in which the Bank agreed to complete liquidation of the assets in exchange for releasing the President from personal liability under his guarantee. 
	During the process of removing equipment from the facility, the liquidation company caused asbestos and chemicals to be released. In addition, the liquidation company created holes in the plant which exposed many drums to inclement weather and caused further releases of hazardous wastes. 
	The EPA then conducted an emergency response action and incurred $1.2 million to remove 2700 drums containing spent dyes and other chemicals, 27 aboveground storage tanks holding acids, solvents and caustics, an underground storage tank, smaller containers and asbestos. The agency then brought a cost recovery action against the Bank alleging that it was an operator of the facility. The Bank claimed that it fell within the secured creditor’s exemption but the EPA claimed the Bank was not eligible for the exemption because the Bank’ had allowed perishable chemicals to become hazardous wastes and therefore had not acted in a commercially reasonable manner. The agency relied on UCC article 2 caselaw to determine what actions were deemed to be “commercially reasonable” and constituted “ wasting” of collateral. 
Commentary: This case once again illustrates the dangers that banks face when they try to sell collateral after a borrower has defaulted on a loan. Even when a bank does not take title to property, the act of possessing or exercising control over inventory at a borrower’s facility can expose a lender to possible liability as an operator. Lenders have often argued that they have simply relinquished possession of unsold inventory back to their borrowers. However, EPA has consistently taken the position that such action constitutes abandonment of hazardous wastes when the borrower is insolvent and creates generator liability for the lender. The interesting angle in this case was that the EPA used UCC law to argue that the bank did not act in a commercially reasonable manner and thus did not qualify for the secured creditor exemption.   

Circuit Court Allows CERCLA Contribution Action to Proceed Against Fiduciary Bank
   
	The 1996 CERCLA lender liability amendments also expressly extended the secured creditor’s exemption to financial institutions acting as fiduciaries. Under the amendments, a fiduciary who could be construed as a CERCLA owner can only be liable to the extent of the assets held in a fiduciary capacity and may not be personally liable. However, there is a negligence exception which provides that the limitation on fiduciary liability will not apply if the fiduciary negligently caused or contributed to the release or threatened release of a hazardous substance. Relying on this negligence exception, the Court of Appeals for the 11th Circuit reversed a district court ruling in In Canadyne-Georgia Corporation v. NationsBank and allowed the plaintiff’s contribution claim to proceed against the bank.    
	In this case, a pesticide manufacturer had been owned by a general partnership. More than 50% of the limited partnership interests was held by inter vivos trusts established for the benefit of the general partner’s daughters. A predecessor to NationsBank had been appointed as a co-trustee of the daughters’ trusts in 1942. After the owner/general partner died in 1945, the bank became trustee of the trust which included the general partnership interest. In 1977, the pesticide business was sold to the plaintiff who, in turn, sold the business in 1984. Between 1990 to 1995, the plaintiff was issued orders to remediate contamination at the pesticide plant and to pay for the relocation of residents living near the site. 
	The plaintiff then filed a suit to recover its response costs under CERCLA, the Georgia superfund law and common law. The plaintiff alleged that the bank served as trustee during the time that hazardous substances had been released at the site. The district court dismissed the plaintiff’s complaint on the grounds that the bank was not a liable person under both CERCLA and the state superfund law. However, the 11th Circuit said that at the time the bank was serving as trustee, individual partners held title to real property. While the bank technically held the general partnership interest in trust, state law provided that the bank had legal title to and therefore owned the general partnership interest.  Therefore, the court said that the bank held title to whatever property the general partnership owned which in this case was the contaminated plant. 
	The court then turned its attention to the CERCLA fiduciary exemption would preclude an action against the bank which held title only by virtue of its status as a trustee. Since the complaint alleged that the bank had negligently caused the release of hazardous substances, the court found that the complaint satisfied the very low threshold that is required for surviving motions to dismiss and allowed the action to go forward. In so holding, the court made it clear that it was not suggesting that the bank was liable under CERCLA. The court added that the bank would be free to bring a motion for summary judgement once limited discovery had been conducted on whether the bank was negligent and whether its negligence had caused or contributed to the release. 	
Commentary: This case shows how easy it may be for a plaintiff to keep a bank in a CERCLA case. While the bank may ultimately prevail in this case, it will be forced to incur litigation costs to demonstrate that it is entitled to the fiduciary exemption.. Moreover, because the state superfund law has a different test for determining fiduciary liability, the bank may also have to defend the state superfund claim even if it survives the CERCLA claim.  The trust and estate departments of financial institutions should review the standards for fiduciary liability in states where they administer estates that contain operating businesses.

Bank Auctioneer May Be Liable for Misrepresentation 

	Many states have statutes which require owners of property to disclose existence of contamination to prospective purchasers. While these laws do not generally apply to agents of the sellers, they can be liable under certain circumstances for fraudulent or negligent misrepresentation. 
	For example, in Ramsden v. Farm Credit Services, the Wisconsin Court of Appeals allowed a claim for misrepresentation to proceed against auctioneer of contaminated farm land. In that case, the plaintiffs were the high bidder on a dairy farm sold at public auction. The prior owners of the farm had complained to their lender, Agribank, that their cattle were sick and dying.. After the prior owners defaulted, Agribank took title and learned that an underground storage tank containing gasoline had been leaking. Tom Hass who was an employee of Agribank notified the state environmental agency who, in turn, ordered Agribank to remove the tank and remediate the contamination. Agribank removed the tank but did not address the soil or groundwater contamination. 
	Hass conducted the auction for Agribank. During the auction, he told the plaintiffs that Agribank was responsible for the remediating any contamination, that the land was suitable for use as a farm and that there was plenty of clean water available for the cattle. He did not mention that the groundwater was contaminated nor that cattle had died. Soon after purchasing the farm, the plaintiffs lost 186 cows and the one of the plaintiffs became sick. The plaintiffs took water samples to a local university which determined that the water was contaminated with benzene and that the cows had died from benzene poisoning. 
In reversing the dismissal of the complaint by a trial court, the Court of Appeals said that while an agent did not have an initial duty to disclose knowledge of the property to the plaintiffs because such a disclosure would have been contrary to the interests of its principal, once the agent did make factual statements he had a duty to make truthful statements. Once the agent has chosen to speak, the court said the agent may not omit material facts relevant to the condition of the property that the agent has talked about and which omissions would foreseeably influence the potential purchaser’s decision to purchase. 

Negligent Misrepresentation Claim Allowed to Proceed Against Bank 

Can a bank be liable to a borrower when the real estate appraisal fails to discover environmental contamination? In Seats vs. Hoover, a Pennsylvania state court allows a purchaser of contaminated land to maintain a claim for negligent misrepresentation against the bank when the bank failed to advise the plaintiff that real estate appraisal did not address environmental conditions.
In this case, the plaintiff’s purchase agreement contained a contingency clause for environmental hazards. The loan application materials provided by the bank contained a statement that when the bank obtained information about environmental conditions from a broker, appraiser, seller or other party to a loan transaction, the information would be provided to the borrower. The statement also indicated that the bank would comply with any state or local reporting requirements. 
The bank retained an appraiser but did not provide the appraiser with a copy of the contract with the environmental contingency clause. The appraisal did not observe any adverse conditions. However, the appraiser’s report contained a attachment which indicated that the appraiser did not have any information about hidden or unapparent conditions including the presence of hazardous or toxic substances and that because it was not an environmental expert, the report could not be considered an environmental assessment of the property. The bank approved the loan but did not provide the borrower with a copy of the disclaimer attachment. After the plaintiff began construction of her house and a drinking water well, she learned that the groundwater beneath her property was contaminated from an adjacent landfill. The plaintiff then sued the bank claiming she had relied on the appraiser’s conclusion that there were no environmental hazards. 
On the claim that the bank negligently inspected the property, the court said the bank owed no duty to inspect the property. However, on the negligent misrepresentation claim, the court said there was a genuine issue of material facts and denied the bank’s motion for summary judgement. The court said that to bring a negligent misrepresentation claim, a plaintiff must establish that there was a misrepresentation of a material fact, that the defendant knew or should have known about the misrepresentation, the misrepresentation was made to induce the plaintiff, the plaintiff justifiably relied on the misrepresentation and the injury resulted from the misrepresentation.  The court said that there was a material question whether the bank should have known that the appraiser’s report might be erroneous and that the bank may have given the appraisal to the plaintiff without the attachment as an inducement to close the loan.      
Commentary:  Lenders who do not require a borrower to perform environmental due diligence prior to acquiring a property that will be used as collateral for a loan should consider providing borrowers with a written disclosure that the waiver of the environmental due diligence requirement or the purchase of an environmental insurance policy does not constitute a finding by the bank that there are no environmental concerns associated with the property. Otherwise, some unsophisticated borrowers who end up facing substantial cleanup costs may argue that they were led to believe by their bank that there were no serious environmental problems associated with the property. Indeed, two years ago in Mattingly v. First Bank of Lincoln, the Montana Supreme Court reversed a summary judgement ruling in favor of a bank and allowed the borrower to proceed with negligent misrepresentation and constructive fraud claims against its former lender because there was a question of material fact whether the bank had created a false impression about the environmental conditions of the property. Readers can obtain more information on this decision and other lender liability cases from our “Lender Liability” page of our website

CERCLA Secured Creditor Exemption Applies to Industrial Development Agency  

	Industrial Development Agencies (IDA) can play important roles in brownfield redevelopment. IDAs can issue bonds that can be used to purchase contaminated property and then lease the property to developers or businesses. However, IDAs are often reluctant to take title to property because they are concerned that they could become liable for the cleanup of the sites. 
	A federal district recently ruled in Monarch Tile Inc v. Florence that the CERCLA secured creditor exemption applied to an Alabama city that obtained title to contaminated property as part of a statewide industrial development program. The defendant issued an industrial revenue bond to purchase the property and pledged to apply rents and income generated from the property to pay the principal and interest on the bond. The city then leased the property to the plaintiff. After the plaintiff took possession of the site, it learned the site was contaminated with metals and was forced to remediate the site. The plaintiff then sought to recover its cleanup costs from the defendant. In dismissing the plaintiff’s motion for summary judgement, the court rejected the argument that because the loan payments went to the bondholders, the city was not acting to protect its security interest. While the city did take title to enhance economic development, the court said the city retained title to protect its obligations under the bond and therefore fell within the CERCLA secured creditor’s exemption.  

AIR POLLUTION DEVELOPMENTS

Contractor Liable for Asbestos Violations 

EPA is continuing to vigorously enforce its asbestos regulations that have been issued under the Clean Air Act. The asbestos rules establish notification requirements and procedures that had to be followed when performing renovation or demolition of buildings having asbestos-containing materials (“ACM”). These ACM regulations were extensively revised in 1990. Owners and operators of buildings (e.g., building managers, contractors, etc.) must comply with the ACM rules when more than 260 linear feet or 160 square feet of friable ACM is to be disturbed during construction activities.
Recently, an asbestos removal contractor pleaded guilty to violating the ACM regulations and agreed to pay $1 million in fines. In addition, the president of the company also agreed to pay a fine of $20,000 and faces a prison term of up to one year. The company president admitted that she had received information that workers were not adequately wetting asbestos at ACM removal projects located at an apartment complex, a school and a demolished hotel.  
Commentary:   During the past year, criminal enforcement actions have not only been brought against asbestos removal contractors but also the building owners or managers who have hired the contractors. It is important that building owners hire reputable and licensed ACM contractors to minimize the possibility of criminal violations of the ACM rules.

World Bank Investment Pool Will Provide Greenhouse Gas Emission Credits

In our February issue, we discussed that many companies are already taking actions to reduce their emissions of greenhouse gases before the international rules implementing the Kyoto Protocol for reducing greenhouse gases become effective at the end of the year 2000. The World Bank recently announced the formation of a fund that will be used to finance projects that will reduce greenhouse gas emissions developing countries and eastern Europe. Most of the projects are expected to come from changes to projects that are already in the loan approval process. For example, a project to build an electrical generating plant might qualify if it switches from fossil-fuel to a renewable form of energy generation such as wind, solar or hydropower.  
Companies that invest in the fund will be able to emission reduction credits . The amount of the credits will be based on the pro rata share of an investor’s contribution to the fund. The fund will begin to accept investment commitments in November and will close the fund when the signed commitments reach $150 million. The bank is hoping that the Prototype Carbon Fund will become operational on February 1, 2000.

WATER POLLUTION/ENDANGERED SPECIES 

Number of Wetlands Permits Has Increased

	According to an organization of current and former federal employees, the Army Corps of Engineers is issuing more wetlands permits and denying less applications than ever before. The group said that the Corps issued over 64,000 wetlands permits in 1998 which is twice the number issued in 1992. Moreover, the group said that the percentage of application denials fell from a high of 10.8 percent in 1993 to just 3.2 percent in 1998. The group also claimed that the Corp is also issuing a greater number of nationwide permits and referring less cases for enforcement. These claims follow reports that more than 2300 acres of wetlands have been lost to development in Virginia since the invalidation of the Tulloch rule (discussed in our April report) and another 6,000 acres are expected to be drained and developed next year. 
	The agency has replied that the total number of denials has stayed consistent over the years and that the percentage of denials has dropped because developers are either addressing wetland issues more adequately in their proposals or avoiding areas containing wetlands. The Corps also claims it is referring more cases for enforcement to the EPA than in the past. 

Denial of Permit Does Not Entitle Developer to Compensation 

	In our March issue, we reported on how expanded use of the Clean Water Act to protect habitats could seriously impact development projects. A recent decision of the Court of Appeals for the Fourth Circuit illustrated the reach of the Clean Water Act. In Good vs. U.S. Fed. Cir., the court ruled that a developer who could not obtain a wetlands permit to develop land in the Florida Keys was not entitled to compensation under the Fifth Amendment to the U.S. The court said that the developer lacked reasonable investment-based expectations both at the time he purchased the property and when he initiated development activity because of existing development restrictions. The Army Corps of Engineers denied the permit application to protect the habitat of a marsh rabbit and the silver rice rat which have been listed as endangered species. The developer argued that the Endangered Species Act had not been in existence when he purchased the property so his expectations should have been considered reasonable when the development was proposed. However, the court said that the developer knew of the existence of an overall regulatory regime to protect sensitive ecosystems and thus he should not have been surprised when his application to develop in such an area was denied.

Agricultural Company Forced to Remove Fill Material   

	One of the remedies available to the EPA or Corps when wetlands are improperly filled is the issuance of an order requiring the developer to remove the fill material and to restore the wetlands. Sometimes, the agencies have forced developers to dismantle structures built of former wetlands. The agencies may also require the developers to perform wetlands mitigation which involves the creation of new wetlands to replace those that were destroyed. 
	EPA’s California office recently ordered a farming company to remove fill material from 79 acres of wetlands on a farm it owned and to restore another 79 acres of degraded wetlands located elsewhere in Santa Barbara county. The farming company had purchased 262 acres of land in 1998, cleared the land and then used bulldozed to dump fill material into federally-protected wetlands located on the property. Because the clearing and fill activities had destroyed the habitat of a frog that had been listed as an endangered species, the EPA said the actions constituted an illegal “taking” under the Endangered Species Act.

HAZARDOUS WASTES/USTs

Facility Owner Required to Post Financial Assurance 

	Owners and operators of treatment, storage or disposal facilities (TSDFs) are required to obtain permits and comply with a full range of regulatory obligations including establishing financial assurances to cover the costs of closing and decontaminating those facilities. Facilities that generate hazardous waste but do not store the wastes for more than 90 days are regulated as generators and not TSDFs. These facilities which are known as “generators” do not have to obtain permits nor comply with the financial assurance requirements. Recently, the Court of Appeals for the 10th Circuit recently ruled that a generator that has allowed hazardous wastes to be disposed or released at its facility can be required to comply with the TSDF financial assurance requirement.
Commentary: A number of states have failed to properly enforce the TSDF financial assurance requirements. As a result, many facilities have either not established the required financial mechanisms or have not set aside sufficient funds. When performing due diligence on TSDFs, purchasers should independently verify that facilities they are acquiring have satisfied the RCRA financial assurance requirements and not rely on the fact that a state environmental authority had not taken any enforcement actions.     
Business Owner Sentenced to 13 Year Prison Term

	The owner of a drum reconditioning business which illegally disposed several million gallons of hazardous wastes onto adjacent land and down a storm sewer was sentenced to 13 years in jail and fined $14,000. Company employees apparently concealed the illegal disposal by discharging the wastes after working hours and established a signal system for warning when environmental inspectors would arrive at the facility. The company also bribed local sanitation employees to allow hazardous sludges to be transported to the city solid waste incinerator. 
Commentary: Many businesses discharge wastewater into sewer systems. The local sewer authorities are responsible for establishing pre-treatment regulations for these discharges that could require companies to install expensive pollution control equipment. The local sewer authorities often do not effectively enforce these treatment rules. Purchasers of businesses that do discharge wastewater into sewer systems should independently verify that the discharges are allowable  and comply with local pre-treatment ordinances.          

Federal Appeals Court Rules that EPA May Not Overfile RCRA Enforcement Actions 
		
	EPA often delegates authority to administer and enforce the RCRA hazardous waste program to state environmental agencies. If EPA does not approve of a particular enforcement action taken by a state, the agency has insisted that it has the right to bring its own enforcement action in a procedure known as “overfiling”. However, the Court of Appeals for the Eighth Circuit recently ruled in Harmon Industries Inc. v. Browner that EPA may not duplicate the state enforcement action. 
In that case, the plaintiff voluntarily disclosed to the state of Missouri that solvent residues had been dumped for over ten years without management’s knowledge. The state environmental agency conducted an investigation and allowed the plaintiff to perform a voluntary cleanup without paying any penalty because the agency felt the past disposal practices did not pose a threat to human health or the environment. Before a state court could approve the consent order memorializing the voluntary cleanup agreement, EPA commenced its own enforcement action and sought over $2 million in penalties which an administrative law judge eventually reduced to $587,000. In upholding a federal district court ruling that EPA did not have authority to impose the civil penalties, the Eighth Circuit said that the overfiling not only violated principles of comity and federalism but was also barred by the doctrine of res judicata. The court said that if EPA was not pleased with the state action, EPA’s remedy was to withdraw its RCRA authorization. 
Commentary: This decision enhances the attractiveness of state self-reporting auditing policies which provide relief to companies that voluntarily disclose violations discovered during audits. Companies that disclose the existence of RCRA violations might be able to negotiate more favorable relief from the state agency than might be available under a federal enforcement proceeding. In addition, the decision may also provide incentives to companies facing a potential RCRA corrective action requirement to enter into voluntary cleanup agreements in states that allow the use of less expensive risk-based cleanups. For more information on the state auditing policies, readers should visit our “ Disclosure of Environmental Liabilities” page on our website. 
The decision may also help facilitate brownfield redevelopment. One of the concerns of developers and their lenders is the possibility of federal enforcement action since the brownfield or voluntary cleanup agreements only affect state enforcement actions. Since many brownfield sites are actually former RCRA-regulated facilities, this decision could provide a roadmap to help prospective developers minimize the possibility of federal enforcement. 

SUPERFUND/BROWNFIELDS

Former North Carolina Apple Farm Becomes Superfund Site

	 The EPA will be taking an emergency response action at a residential subdivision that was built on a former apple farm. Drinking water wells at the subdivision have been contaminated with pesticides that had been applied to the land. The EPA will remove contaminated soil and provide the residents with alternative drinking water supplies. However, since it will take years for the groundwater to be remediated, residents fear that their property values will be severely diminished by the pesticide contamination.   
Commentary: This is a reminder of the importance of doing due diligence on farmland. Many of the pesticides and other chemicals that were used in the past do not breakdown as quickly as those in use today. Also, farmers tended to apply pesticides in higher concentrations than currently used now. In addition, farmers sometimes generate extra income by allowing portions of their land to be treated with industrial or residential sludges that are not regulated as hazardous wastes but which may contain hazardous substances. While sludges that are applied to land generally must now be approved, this practice was not well regulated in the past. A developer who is considering purchasing farmland should inquire into the past uses of the land. As part of this effort, local officials who may be familiar with local land uses should be interviewed and aerial photography which could show disturbed or excavated soil that may be indicative of past landfilling activities. 

EPA Announces First Brownfield Revolving Loan Award

	During the past few years, the EPA has established a number of financial programs to help stimulate brownfield redevelopment. Under the Brownfield Assessment Demonstration Pilot (BADP) program. EPA has issued almost 300 BADP grants of $200,000 to communities which can be used to pay for the costs of investigating contamination at brownfield sites. The agency has also established the Targeted Brownfield Assessment program where the agency EPA provides funding and/or technical assistance to local governments with brownfield sites that have not been awarded BADP pilots. 

The EPA has also awarded 68 Brownfield Cleanup Revolving Loan Fund (BCRLF) program grants. These loans which are issued to communities that have receive BADP grants have averaged between $350,000 and $500,000. The BCRLF grants may be used to remediate site contamination. While the BCRLF may not be awarded to private developers, communities can issue loans to private parties who plan to cleanup and redevelop brownfields. Stamford, Connecticut recently became the first city to issue the first BCRLF to a private developer. The $250,000 loan was awarded to Southfield Associates, LLC which will use the money to cleanup and develop waterfront properties.
Commentary: A major disincentive for brownfield redevelopment is the time and cost to evaluate and remediate contaminated property. Local communities can use the BADP and BCRLF programs to help defray the these costs or make the funds available to private parties to encourage them to redevelop these properties. For more detailed information on the brownfield financing programs offered by federal and state agencies, please visit the “Brownfield” page of our web site.  

EPA Announces New Brownfield Financing Program 

	Under its new Superfund Redevelopment Initiative, the EPA has agreed to provide financial and technical assistance to communities to help them develop reuse plans for Superfund sites. As part of the program, the International City/County Management Association (ICMA) has created the Superfund Peer Match Program which will enable communities to share experiences with specific reuse or marketing problems associated with Superfund sites. The program will primarily focus on sites that are in the early stages of the Superfund cleanup process. Thus far, EPA has awarded ten grants of $100,000 each. 

Ban on Pre-enforcement Review Does Not Apply to Military Cleanup

	The Department of Defense (DOD) has been under pressure to complete cleanups at closed military bases so the facilities can be turned over to the local development agencies. One tool that the DOD has been using to expedite cleanups has been to use risk-based cleanups that rely on institutional controls to allow higher levels of residual contamination to remain in soil and groundwater. 
	Community groups concerned about the risk of exposure to the residual contaminants have tried to challenge the adequacy of the cleanups. However, many courts have blocked these efforts on the grounds that section 113(h) of CERCLA prohibits a court from reviewing the adequacy of a cleanup remedy until it is completed. However, the Court of Appeals for the Ninth Circuit recently ruled in Fort Ord Toxics Project Inc. v. California that this so-called ban on pre-enforcement review does not apply to remedial actions conducted by the DOD. 
Commentary: Institutional Controls play an important role in brownfield redevelopment. This case could provide community groups with another weapon to halt or stall a brownfield project involving a former federal facility. This case emphasizes the importance of working with community groups when contemplating a brownfield project. For more detailed information on the issues associated with institutional controls, please visit our “Brownfield” web page.

The information contained in this newsletter is not offered for the purposes of providing legal advice or establishing a client/attorney relationship. Environmental issues are highly complex and fact-specific and you should consult an environmental attorney for assistance with your environmental issues.

(c) Copyright 1999 Lawrence P. Schnapf