NYC Developers Need to Anticipate Possible Hazardous Waste Fees

Large swaths of New York City contain fill material that may contain constituents such as heavy metals. Other soils may contain VOCs, petroleum and lead paint from demolished buildings. As a result, brownfield projects in New York City 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. Indeed, 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.

The first type of fee is the New York State Hazardous Waste Program Fee (Program Fee). Under ECL Article 72, persons that generate 15 tons or more of hazardous waste in a calendar year must pay an annual fee to the New York State Department of Environmental Conservation (NYSDEC) that is based on the quantity of hazardous waste generated. ECL §72-0402. The fee rate is $130 per ton of hazardous waste generated but is capped at $800,000 for persons who generate 10,000 tons or more tons of hazardous waste in a year.

The second tax is known as the New York State Special Assessments on Hazardous Waste Generated (Special Assessment). While the Special Assessment is also based on the quantity of hazardous waste generated, the fee varies depending on how the waste is managed. For hazardous waste that is removed from the site of generation (e.g., development site) and disposed in a landfill, the Special Assessment is $27/ ton but is $16/ton when the hazardous waste is treated or disposed at a disposal facility that is not a landfill or incinerator. When the hazardous waste is removed from the site and incinerated at an off-site facility, the tax is calculated at $9/ton but drops to $2/ton when the hazardous waste is incinerated on site. The Special Assessment must be paid on a quarterly basis to  the New York State Department of Taxation and Finance.

ECL §72-0402 established a number of statutory exceptions to the Program Fee. A developer will not trigger the Program Fees liability if the hazardous waste is generated pursuant to an agreement or order with the NYSDEC under the state superfund program (ECL §27-1301 et seq.), the state brownfield program (ECL §27-1401 et seq), the state New York Navigation Law, the Environmental Restoration Program (ECL § 56-0503), and a state RCRA permit or corrective action order (ECL § 27-0901) or otherwise with the approval or the NYSDEC or in compliance with the NYSDEC regulations. The Special Assessment is not triggered for cleanups performed under the state superfund law (SSF), state brownfield cleanup program (BCP) or the Environmental Restoration Program (ERP).

Unfortunately, cleanups performed under the New York City Voluntary Cleanup Program or that are performed in accordance with a remediation plan approved by the New York City Department of Environmental Protection (NYCDEP) to satisfy mitigation requirements under the City Environmental Quality Review (CEQR) Act do not at this time qualify for the statutory exemption. The New York City Office of Environmental Remediation (OER) is seeking a legislative fix so that OER-supervised cleanups will be eligible for a statutory exemption.

Until Article 72 is amended or an administrative solution is achieved, developers working with OER or NYCDEP oversight should perform hazardous waste determinations as part of a phase 2 or remedial investigations. If it appears that the proposed activity will generate significant quantities of hazardous wastes, the developer should consider applying to the state Brownfield Cleanup Program (BCP). If the site is not eligible for the BCP because, for example, the only contamination at the site is due to the presence of fill material or groundwater has been impacted by an off-source source, the developer should consult with counsel to determine if it can or should try to enter into an order with NYSDEC to qualify for one of the statutorily provided exemptions. It is important for developers to plan before they commence earth-moving activities so they can avoid or minimize unanticipated significant Program Fees or Special Assessments.