The New York State Brownfield Cleanup Program (BCP) may offer lucrative tax credits but to paraphrase the old John Houseman commercial, BCP applicants earn their tax credits the hard way. The BCP is demanding program with rigorous cleanup procedures, robust public participation and lots of documentation requirements.
The complexity of the BCP is further exacerbated by the fact that the tax credits are linked to the issuance of Certificates of Completion (COC). Applicants must obtain a COC by December 31st to be able to claim the site preparation tax credit in the following year. To help applicants obtain COCs, the New York State Department of Environmental Conservation (NYSDEC) conducts periodic calendar calls beginning in early spring with applicants who are seeking COCs by the end of the year. Despite these calendar calls, BCP applicants often find themselves in a stressful and frenetic year-end mad dash to ensure they have satisfied the NYSDEC documentation requirements.
Indeed, eight of the 23 projects that were scheduled to obtain COCs by the end of 2013 were unable to complete their paperwork in time and their COCs have been pushed back to 2014. This means the developers of those projects will not be able to claim their tax credits until 2015.
While some of the delays are associated with finalization of technical documents such as Site Management Plans (SMPs) and Final Engineering Reports (FERs), the more common recurring errors that delay NYSDEC approval usually involve legal documentation. Some of these errors are because clients do not inform their attorneys of changes in project structure with others related to counsel not being familiar with the legal documents required by NYSDEC. And yes, sometimes the delays have been because environmental lawyers tried to complete real estate documents that probably should have been prepared by real estate lawyers.
Some BCP projects have failed to achieve the track 1 unrestricted standards despite removing all of the contaminated soil because of residual groundwater contamination. To obtain a COC, at least one round of groundwater sampling must show a downward trend in contamination concentrations. A BCP project can obtain a conditional Track 1 when groundwater standards are not met or soil vapor mitigation is required. The COC will require an environment easement and SMP. If within five years, groundwater standards are achieved, any active remedial system can be suspended and the easement/SMP may be extinguished. However, if groundwater standards are not achieved, the cleanup would have to revert to track 2 or 4 which could result in recapture of excess tax credits based on track 1 cleanup. NYSDEC recommends BCP applicants should consider aggressive treatment after year 2 and no later than year 3 after the COC to avoid this potentially unpleasant outcome.
BCP applicants should not assume that problems will be resolved during finalization of the COC. Issues that are identified during the final review of the COC package will likely result in the COC being delayed until the next year.
These issues illustrate why it is important for developers considering applying for the NY BCP to select an experienced team of environmental professionals who are familiar with the BCP requirements, who can anticipate problems before they can delay a project and also know how to use opportunities in the BCP process to save time at every stage of the BCP. For a list of the brownfield projects we have worked on, click here