Provides greater liability relief for prospective purchasers
and other innocent parties.
Clarifies and simplifies the regulatory environment in
order to attract urban redevelopment, minimize costs, and
reduce the time needed to complete projects.
Creates meaningful public sector financial incentives
(at the state and local level) that will leverage private
sector dollars.
Liability Relief
Existing laws governing environmentally impaired property cast
a wide liability net and have resulted in unpredictable cleanup
costs, thereby diminishing the value of brownfield redevelopment
projects. Federal, state, and local requirements place substantial
constraints on the assessment, management, cleanup, and redevelopment
of sites containing real or perceived contamination. Many of
these requirements include statutes and regulations that are
based on the concept of strict, joint and several, and retroactive
liability.
Federal Laws The law at the heart of the brownfields debate is the Superfund
law —the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (CERCLA) —and the equivalent
state statute passed in 1981. These laws in broad terms hold
site owners and operators liable for the cost of a cleanup,
regardless of whether or not they actually polluted the site.
This liability scheme has proved highly successful in some ways,
forcing responsible parties to acknowledge and pay for their
pollution. But a major side effect has been that real estate
transactions nationwide involving environmentally contaminated
sites (whether the contamination is real or perceived) have
virtually ground to a halt. While the U.S. EPA and many states,
including California, have enacted specific laws and policies
to reduce the threat of liability for prospective purchasers,
the overwhelming question remains: Are these assurances enough?
Or do federal and state liability laws require an overhaul?
On January 11, 2002, President Bush signed into law the Brownfields Reform and Small Business Liability Relief Act (the Brownfields Act or Amendments) that makes several significant amendments to CERCLA, including a new defense for purchasers of contaminated property: the bona fide purchaser defense (BFPP). This bona fide purchaser is exempt from full cleanup liability for preexisting contamination if they undertake hazard mitigation, comply with land use restrictions, and fully cooperate with parties conducting cleanup.
State Laws
Following the federal government's lead, the California state
legislature passed AB389 in the fall of 2004. AB389 establishes
a voluntary program through which bona fide purchasers (BFPs),
innocent landowners, and contiguous property owners may acquire
limited immunity from liability associated with urban brownfields.
The immunities attach when the BFP, innocent landowner, or contiguous
property owner enter into agreement with the oversight agency
(State Water Resources Control Board, a regional water board,
or the Department of Toxic Substances Control) and they remain
in place even if there are future releases caused by the landowner,
so long as certain conditions are met. In addition, the liability
protection provided after the completion of a cleanup (or issuance
of a no further action letter) is in writing and is transferable
to a future property owner.
Unfortunately, the AB389 program affords a much lower level
of liability protection than do the federal BFPP protections.
While the federal protections limit the obligation of new purchasers
of brownfields to source removal (i.e., soil contamination),
AB389 imposes full liability (including groundwater contamination)
on the innocent purchaser if a responsible party cannot be found.
In addition, unlike with the federal process, scope of work
is negotiated after the agreement is signed, resulting in a
high level of uncertainty in the duration and expense of remediation.
Confusing and Complicated Regulatory Environment
Parties interested in a site often need to work with multiple state and federal agencies, as well as local authorities, to obtain permits and zoning approvals. The patchwork regulatory framework for site cleanup in California has created over 100 local, state, and regional agencies which may serve as the regulatory agency responsible for overseeing environmental cleanup. California's framework of multiple agencies with overlapping jurisdictions has led to confusing and costly delays which can threaten the viability of a brownfield redevelopment project as a whole.
Memo of Agreement (MOA) Between DTSC and the Regional Water Boards
The administration recently made an effort to minimize the overlapping jurisdiction framework in California. Under the direction of former Cal/EPA secretary Terry Tamminen, the Cal/EPA drafted a Memorandum of Agreement (MOA) between the Department of Toxic Substances Control (DTSC), the State Water Resources Control Board (State Board) and the Regional Water Quality Control Boards (Regional Boards) to, according to Cal/EPA, "improve coordination between (the agencies)... to ensure effective and expeditious investigation and cleanup of brownfield sites in a manner that is protective of public health and safety and the environment."
The MOA provides a uniform procedure for agencies to assess environmental and health related issues at a brownfield site and then determine the appropriate lead agency for that site. It also establishes a "Formal Dispute Resolution Procedure" in the event that a lead agency cannot be determined.
Unfortunately, for most brownfield cleanups, the effect of the MOA may be very different from the intent. For example, the vast majority of brownfield cleanups are relatively straight forward with no inter-agency disputes, yet the MOA imposes its onerous and costly procedure on all brownfield sites, regardless of size or level of complexity. In addition, support agencies reserve the right to pursue independent regulatory action if they believe that their standards and requirements are not being met by the lead agency. The net effect of these provisions is that developers may be dissuaded from taking on the smaller sites that are already operating on the margins of economic feasibility.
Governor Schwarzenegger's California Performance Review (CPR), released in the fall of 2004, recommends that "The Governor should work with the Legislature to consolidate cleanup functions." CCLR believes that the state should take a comprehensive, deliberative, and informed approach to developing the best strategies for the aligning of the state's duplicative and overlapping agency authorities.
Funding
Costs associated with brownfield projects can be significant,
running 20 to 60%higher than comparable projects in greenfield
locations. Sometimes cleanup costs alone exceed a property's
market value. Developers must struggle with banks reluctant
to make loans on environmentally impaired (real or perceived)
property to cover site assessment and remediation work. To render
such deals viable, the public sector should step forward and
bridge the financing gaps. Unfortunately, many California cities
find themselves ill prepared to do so. This leaves the state
in a critically important position. The good news is that there
is strong bipartisan support for brownfield financing; the bad
news is there is not a readily identifiable, politically viable
source of money to fund brownfield activities.
While some progress has been made in redeveloping brownfield sites, public sector financing plays an important role in the equation. Managing risks, both real and perceived, is a central issue when remediating contaminated sites. Most brownfield cleanups are still funded through many of the traditional financing programs. For example, in an evaluation of 107 brownfield projects nationwide, the International Economic Development Council (formerly the Council for Urban Economic Development) determined that on average, 68% of the funding for brownfield remediation was derived solely from public sources and 22% came from private sector funds and 10% were remediated using both public and private sector funds. The study showed that potentially responsible parties (PRPs) provided limited support for remediation in comparison to public sources.
In California, several new and innovative programs for financing
brownfield redevelopment have recently been introduced. Unfortunately,
all of the new programs have come in the form of loans. For
brownfield sites that will become affordable housing developments,
public parks, or other non-economic uses, project proponents
will likely be unwilling to take on debt service to move a project
forward. Therefore, funds in the form of grants should be made
available for brownfield projects unable to generate the revenue
needed to repay loans.
California should look to other states for creative financing
tools and incentive programs. In the last several years, various
states have instituted aggressive brownfield redevelopment initiatives.
Six states leading the way are Maryland, Massachusetts, Michigan,
New Jersey, Pennsylvania, and Virginia. These states have been
successful at eliminating barriers to brownfield redevelopment
by providing significant financial incentives in the form of
grants, loans and tax credits, as well as enacting common sense
statutory reform to reduce or eliminate liability for developers
of environmentally impaired properties.
