NY State Court Upholds Denial of BCP Application

One of the important changes of the 2015 BCP amendments was that Class 2 sites on the State Registry of Inactive Hazardous Waste Disposal Sites (the state superfund list) as well as RCRA sites may now be eligible for the BCP if the applicant is a volunteer and the NYSDEC has determined no financially viable party is available. Unfortunately, sites subject to enforcement actions continue to remain ineligible for the BCP.

The NYSDEC has interpreted this prohibition to apply to former manufactured gas plant (MGP) sites that are subject to multi-site orders on consent that several utilities previously entered into with NYSDEC. The remedial programs at these multi-site MGPs have slogged along since the utilities have little incentive to aggressively remediate these sites. Many of the sites where cleanups have been completed have long-term institutional and engineering controls because the contaminants lie beneath existing commercial structures. NYSDEC has taken the position that so long as sites are subject to site management plans (SMPs), the sites are still subject to an enforcement order and therefore not eligible for the BCP.

A New York state court recently a denial of a BCP application for a site that was subject to a multi-site MGP order on consent in In the Matter of the Application of Wythe Berry LLC, 2015 N.Y. Misc. LEXIS 3855 (Sup. Ct-Kings Cty. 10/26/15). In this case, Brooklyn Union Gas operated a manufactured gas plant (MGP) holder station known as Wythe Holder Station from 1909 to approximately 1965 when the gas holders and all the related equipment was dismantled. The Wythe Holder Station was sold off in pieces and by 2014 it was developed with one- and two-story brick or concrete warehouses as well as a paved parking lot.

Meanwhile, National Grid (NG) as a successor to BUG entered into a multi-site Order on Consent and Administrative Settlement (NG Order) with NYSDEC in February 2007 where it agreed to investigate and, if necessary, remediate the numerous MGP sites subject to NG Consent Order. NG submitted a Site Characterization (SC) Report for the Wythe Holder Station site in September 2012. The purpose of the SC was to determine the presence of holder structures, identify soil or groundwater impacts associated with former holder station operations and assess the potential human and ecological exposure pathways from these contaminants of potential concern. The SC report found residual impacts in the soils and groundwater but that exposure was limited because of the existence of structures and pavement across the site.

NYSDEC approved the SC report in August 2013 and requested NG to prepare an Interim Site Management Plan (ISMP) for managing MGP-related contamination that might be encountered during any development of the Site. The ISMP provided for institutional controls, an Excavation Work Plan (EWP) that would have to be implemented for any future redevelopment, a 60-day advance notice of any work as well as pre- and post-redevelopment monitoring to assess groundwater contamination.

Around the same time, Wythe Berry LLC (Wythe) became interested in purchasing the site to develop it into a mixed use project that would include a hotel, retail space, and a community space. In January 2014, Wythe participated in a BCP pre-application meeting where NYSDEC informed Wythe that the Site was likely ineligible for the BCP because the Site was already subject to the NG Order. Undeterred, Wythe subsequently submitted a BCP application.  While a decision on the BCP application was pending, NG submitted the draft ISMP to DEC providing, inter alia, that the petitioner would assume responsibility for the bulk of the investigation and remediation of the MGP site. The draft ISMP indicated that NG would reimburse the property owner for its incremental costs related to meeting the ISMP requirements (e.g., disposal of MGP‐impacted materials).

In February 2014, NYSDEC denied Wythe’s application on the grounds that the was subject to an ongoing enforcement action because of the existence of the Consent Order. Moreover, the NYSDEC indicated that NG was prepared to complete any remediation required as part of the proposed redevelopment of the site. As a result, the NYSDEC said public interest would not be served by granting the application.

Wythe commenced an Article 78 proceeding, arguing that the NG Order is not an “on-going state or federal environmental enforcement action” as contemplated by ECL § 27-1405(2)(e) and that DEC’s invocation of the “public interest” exclusion under ECL § 27-1409 was unreasonable.

In a well-reasoned brief, Wythe argued that the NG Order should not be construed as an ongoing enforcement action. The petitioner pointed out that the plain language of ECL Section 27-1405(2)(e) identifying the types of orders that would exclude sites from BCP eligibility was expressly limited to orders issued under the state Oil Spill Act, the Petroleum Bulk Storage Act and a “catch-all” provision for sites “subject to any other on-going state or federal environmental enforcement action related to the contamination which is at or emanating from the site subject to the present application”.

Wythe argued that NYSDEC’s interpretation was inconsistent with an appellate court decision in Destiny USA Development LLC v. New York State Dept. of Env. Conservation, 63 A.D.3d 1568 (4th Dept. 2009). There, the court held that a voluntary cleanup agreement (VCA) was not an ‘enforcement action’ within the meaning of the BCP Section 27-1405[2](e) because it served to obviate the need for the DEC to achieve remediation through litigation. The petitioner then examined the similarities between the NG order and the Destiny VCA to support its view that the NG Order should not be considered an “enforcement action”.

Turning to the “public interest” grounds for denial, Wythe pointed out that none of the enumerated “public interest” factors applied to the facts of this case. Indeed, the petitioner suggested that it would not be in the public interest to deny the application because NG had not only failed to remediate the site in the four decades since operations had ceased but had taken another half dozen years since the NG Order was executed to provide NYSDEC with a SC report.

In response, the State argued that by listing orders for cleanup and then adding the catchall “any other enforcement action” (emphasis added), the Legislature considered cleanup orders to be enforcement actions. The State also distinguished the VCA from the NG Order, noting the NG Order obligated a party to perform some investigation and/or remediation, and requires a party to waive certain rights, such as a right to a hearing to proceed with a remediation and obtain a release of liability at the conclusion of the remedial process. Moreover, if NG terminated or violated the NG Order, NYSDEC would continue to pursue the enforcement action to ensure remediation of the property, including administrative enforcement and referral to the Attorney General for enforcement in court if necessary. Based on the clear and unambiguous “any other” language, the State insisted the NG order should be considered an “enforcement action” within the meaning of the Brownfield Act.

On the public interest argument, the State contended that allowing the site to enroll in the BCP would reward both the petitioner and the immediate prior owner for what the state characterized as unlawful and “inequitable conduct”. The State claimed that the property owner had thwarted and hindered NG from remediating the site in the hope of attracting a potential purchaser who would be willing to pay more for the property because of the availability of tax credits. Specifically, the State asserted that prior owner had denied NG to access the site to collect soil and groundwater sampling a few weeks before the petitioner submitted its application but had allowed the petitioner to collect samples in the same areas NG Grid was barred from accessing to support the BCP application.

In addition, the State alleged that the petitioner failed to provide a change in use notice to NYSDEC after it took title to the property ownership, conducted asbestos abatement and collected geo-tech soil borings without prior notice to NYSDEC, and not only had failed to submit a pre-excavation plan for NYSDEC approval but began excavating the site without informing NYSDEC and obtaining agency approval of plans for soil handling, dewatering, air monitoring, odor and dust control, and transportation and disposal of contaminated soils.

While Wythe removed 18,000 tons of contaminated soil and approximately 90,000 gallons of contaminated water, the NYSDEC asserted that the work failed to comply with NYSDEC procedures. Moreover, the State said numerous citizen complaints about odors had been lodged with New York City’s 311 hotline and several 911 calls while the work was being performed. Indeed, air monitoring data showed that levels of volatile organic compounds exceeded safe thresholds on many occasions.  The State alleged the NYSDEC inspected the site several times and tried to work with the petitioner to address the issues but that petitioner was uncooperative. As a result, the court was informed that the NYSDEC was pursuing an enforcement action against petitioner for numerous violations of the hazardous waste regulations.

Finally, the State argued the petition was moot because the petitioner had completed the remedy and the work had been done without NYSDEC oversight in violation of the Environmental Conservation Law and various NYSDEC regulations.

The court dodged the mootness and statutory interpretation arguments. Instead said NYSDEC’s denial of Wythe’s BCP application based “public interest” exclusion should be given judicial deference and was not arbitrary, capricious or an abuse of discretion. The court noted that NYSDEC and NG had already entered into an agreement that created a framework for investigating and remediating the property that made NG financially responsible for all remediation without providing any additional financial benefits to NG. Thus, the court concluded, NYSDEC reasonably determined that the public interest would not have been served by permitting Wythe to enter the BCP program and trigger unnecessary financial obligations that would not serve the economic well-being of the people of the state. Wythe Berry has appealed the decision.

We think NYSDEC’s policy is shortsighted. Where there is an innocent party be willing to remediate (or perform a more comprehensive cleanup) as part of a redevelopment of a contaminated site, it would seem to be in the public interest to allow these sites 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.