Seeing Green in Brownfields

November/December 2014

A brownfield property can provide the perfect infrastructure and location for a scrapyard, as well as economic incentives, but a purchase requires careful investigation of site conditions.

By Kenneth A. Hooker

It’s not always easy to find a suitable site for a scrapyard. You want a convenient location, ideally one that offers access via multiple modes of transportation. You want sufficient space to serve both current and future needs. You want to be close enough to population centers to find customers and employees, but not so close that you draw NIMBY opposition.

Several scrapyard owners have found sites that meet all these criteria in brownfields, which the U.S. Environmental Protection Agency (Washington, D.C.) defines as property for which “the expansion, redevelopment, or reuse … may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” Abandoned or underused industrial areas that fit that description exist in cities and towns across the country, and municipal or regional economic development authorities usually are eager to see them returned to productive use.

According to a July/August 1995 Scrap article on brownfields, the federal government developed its Brownfields Economic Redevelopment Project in August 1994 to encourage the reuse of contaminated sites and prevent the unnecessary development of virgin land resources. To make these sites more attractive, state and local brownfield programs offer some variation of this deal to potential sellers and buyers (so long as they were not the polluters): If you’ll voluntarily clean up the property’s contamination and continuously monitor site conditions, we’ll provide economic incentives, some future environmental liability protection, and relaxed oversight of the remediation process. The details vary from program to program, and the cleanup and monitoring requirements are specific to each site. But brownfields redevelopment programs have been expanded and refined in recent years, and scrapyard owners have been among those reaping the benefits. Those who have moved, expanded, or established a scrap facility on a brownfield site recommend assessing the risks carefully and seeking expert advice to ensure a positive outcome.

Brownfield Benefits

Brownfield sites can offer many advantages for scrap recyclers, says Tom McKittrick, principal of Forsite Development (Charlotte, N.C.), which is redeveloping a more than 600-acre site in Charlotte as an “eco-industrial park” for green businesses. Called ReVenture Park, the project recently received an Excellence in Site Reuse Award from the EPA. McKittrick has been working with brownfield sites for about 10 years and is firmly convinced of their value.

“The EPA estimates that there are more than 15 million acres of contaminated land in the U.S., and much of it is on former industrial sites,” he says. “Many of these offer perfect platforms on which to build recycling businesses. For one thing, they usually have considerable existing infrastructure—existing buildings, on-site power generation facilities, central steam plants, wastewater treatment, rail lines, etc.—and much of that infrastructure can be utilized in recycling operations. Former plant sites are typically fenced off and already have buffer lands around them. They come in all shapes and sizes, of course, but there are many sites that would lend themselves well to recycling operations and, with the benefit of a brownfield agreement, would be a great home.”

Brownfield redevelopment has become more attractive and less daunting in recent years, as procedures have become better established and more safeguards have been put in place, adds Charlie Bartsch, an EPA senior adviser for economic development. “Back when this was just getting started, people were much less familiar with how the process worked and understood much less about how to work through liability issues and achieve regulatory relief,” he explains. “What we’ve seen happen over the past 15 years has been a much more focused, deliberate, and proactive approach.”

More specifically, he says, “lenders and developers now understand more about how cleanup standards can be applied to meet new or next-use needs and how institutional controls can be applied to make properties more viable for reuse. Cleanup standards vary depending on the proposed reuse, so scrapyards may require a lower level of cleanup than a housing development, or a school, or some other, possibly more sensitive, reuse.”

Another change in recent years, Bartsch says, is that “site owners now take their properties through a voluntary cleanup process just to get some sort of closure on it. Programs and terminology vary … but most states will issue a document called something like a ‘no further action’ letter, certifying that the owners have done what they need to do according to state standards. And that’s the assurance a new owner is looking for. The voluntary cleanup programs have made site owners more willing to put properties on the market because they know there’s a process for reaching closure,” which didn’t necessarily exist 15 years ago, when these programs got off the ground, he says.

If you’re interested in exploring brownfield redevelopment possibilities, Bartsch recommends visiting the EPA’s brownfields website (www.epa.gov/brownfields), which gives information on technical assistance programs and offers lots of examples, state by state and region by region. The U.S. Economic Development Administration and Small Business Administration (both in Washington, D.C.) offer resources as well. And talk to your local development agency about available sites that would meet your needs, he says. Some local governments have their own incentive programs, such as expedited permitting, to encourage redevelopment.

Assessing Conditions and Limiting Liability

Environmental liability might be the biggest concern of those considering a brownfield purchase. Most companies are—understandably—unwilling to assume liability for contamination a previous occupant caused. Even though states have procedures to limit the liability of companies that move onto brownfield sites, a thorough investigation of existing environmental conditions is an important part of the site-acquisition process.

Specialized professional guidance through this process is essential, say scrapyard owners who have negotiated it successfully. Environmental engineering consultants can review test data and other information the seller provides and specify whether you need further testing to fill in any gaps. Mike Coenen, an associate engineer with one such firm, GeoDesign (Portland, Ore.), says the services his firm provides vary from project to project. “We try to make sure the prospective buyer knows what conditions exist on the site. Sometimes we’ll request that the seller get certain tests done, and sometimes we’ll do the testing ourselves. Depending on what we find, we might advise our client against proceeding with a purchase until particular cleanup work is done.”

Most real estate transactions require legal assistance, but when considering a brownfield site, a specialist in environmental law is essential, brownfield buyers say. John Spinrad, a partner in Arnall Golden Gregory (Atlanta), who has advised Pull-A-Part (Atlanta) and other clients on brownfield acquisitions, describes a typical brownfield investigation: “As part of due diligence, you want to look at a number of things: Has the property been assessed? If remediation is required, has it been done and has it been done well? You want to look for any data gaps in the due diligence you’ve been given. In our work with Pull-A-Part, the company has entered the projects at different stages. Sometimes you’re looking at something that’s been tied up neatly with a bow [in terms of remediation], and other times you’re looking at a work in progress. So part of my job and the job of the environmental consultant is to find out what’s known about a piece of property, whether we know enough to make a decent decision, what we have to do to make sure that it’s safe for reuse, and [ensure] that the risk to our client is minimized.”

Although the legal and regulatory due diligence varies from property to property, Spinrad says, ideally the property will have a “no further action” determination in writing, a commitment from the government to not sue for further remediation, or a limitation on further liability. In the very best cases, the buyer will have limited liability in claims made by the state or by any third party, he adds.

Below, four scrap companies that operate on one or more brownfield sites describe the appeal of these sites and the requirements of their purchase or rental agreements. All say they are happy with their decisions, but they also offer cautions to others considering such a move.

A Winning Approach to Water

With the industrial nature and long history of the scrap industry, most will not be surprised to learn that some brownfield sites once housed other scrap facilities. That’s the case at Garden Street Iron & Metal (Fort Myers, Fla.), a recycler of ferrous, nonferrous, paper, and plastic scrap at several locations in southwest Florida. Its original site, on Metro Parkway in Fort Myers, had been a scrapyard that required remediation due to PCB contamination. Garden Street president Rob Weber says he worked with EPA Region 4 officials for several years to remediate that property.

After Garden Street had been operating there for 18 years, an adjacent property became available, and Weber says he became interested in acquiring it for his planned shredding operation. “That property had previously housed a lumber pressure-treating company. Its process used a chemical [chromiated copper arsenate] containing arsenic, and there was arsenic contaminating the groundwater,” Weber explains. “I went to the local Department of Environmental Protection and asked about buying the property. They initially discouraged me, but eventually [they] agreed to work with me on it.”

Weber proposed a novel approach to the site’s problem: “I told DEP we wanted to put an auto shredder on the new site and use the contaminated water to cool it—the water would basically burn off as steam—and asked if that would be an acceptable use.” The DEP investigated the feasibility and potential effect of the scheme, determined that it would likely be a safe and effective remediation method, and then helped him get approval to proceed.

Today, Weber says, “there’s a 140,000-gallon concrete vault that we pump the water out of [which we] use to cool our shredder. Over the past seven years of operating this equipment, we’ve brought the arsenic levels down by 99.9 percent. We have monitoring wells around the site, so we get samples tested regularly. We used to have to get testing done quarterly, but now the levels are down so much that we only need to get tested twice a year.”

With that brownfield success, the company is expanding further to a site with different, but similar, contamination problems, Weber says. “Right now we’re acquiring an additional 16 acres, also adjacent to our property, which used to be a fertilizer plant. We’re planning to use the same process with the chemically contaminated groundwater on that site, running it through our shredder to prevent it from migrating into an adjacent drainage canal.”

Location, Location, Location

Pull-A-Part, a growing chain of self-service auto dismantling facilities, now operates 30 locations in 13 states. The company buys used cars, removes all contaminants, and then displays them on stands for customers who buy and remove the parts they want themselves. The properties average 15 to 25 acres each, and several of them are on brownfield sites. Company leaders base the decision of whether to purchase a brownfield largely on the availability of land, says Executive Vice President Steve Levetan.

“Finding a piece of property that’s large enough for our operation, in an urban area, and zoned correctly, is not a simple thing,” he says. “Very often, when we find such a property where we’d want to locate, it’s a brownfield. Our very first site in the Atlanta area had previously been a salvage yard that required some cleanup, so that was also our first brownfield. Our newest operation, set to open early in 2015, is in the Pittsburgh area, on the site of a former General Motors stamping plant.” Overall, Levetan says, about a half-dozen of Pull-A-Part’s facilities are on brownfields acquired through state programs; “others were former industrial sites that required some cleanup work but weren’t officially designated brownfields. We look at such sites as a sort of ultimate recycling project, taking on properties that may not have been suitable for other uses for years.”

To consider each purchase, Levetan says, “we put together an extensive team of experts—legal, engineering, and environmental—and I’d caution anyone considering a brownfield site to do the same. This is not something that we do, or anyone should do, lightly. We work with an established team, [but] since every state has different programs and different rules, we’ll often add local people familiar with local practices to the team.”

To date, Levetan says, the company has only taken ownership of sites after the completion of remediation. “In each case so far, we’ve been able to negotiate with the seller or former owner of the sites to have them complete the cleanup work and get the certifications we need to go ahead,” he says. “There have been times when we haven’t gone through with a purchase because there were more problems than we wanted to take on. Where we’ve completed a deal, they’ve all gone well, with no environmental or legal issues that arose later.”

Turning a Liability Into an Asset

Atlas Metal & Iron Corp. has been recycling metal scrap in Denver since 1956 and has longstanding ties to the community. When the area around its original property was being redeveloped in the early 2000s, the company was forced to move, but owner and president Mike Rosen was determined to not go far. He found a former scrapyard, listed as an EPA Superfund site, just a half mile away. Despite some reservations about taking on the troubled property, he says he has been happy with the outcome.

“The key to our pursuing the property was that it had much of the infrastructure we needed already in place,” he says. “It had the right zoning, it had the stormwater permit and the stormwater retention system, and it had a scale. There were some places that might have had a better pedigree, but they weren’t located in the central city, the way we wanted.” Further, city officials were interested in returning the land to productive use, he says. “The city was happy to keep a scrapyard business there.”

The EPA had already remediated the site via the Superfund program, Rosen says, but it required Atlas to agree to certain conditions on the purchase. “The agreements mainly dealt with future uses of the site, continued testing requirements, and the like,” he says. “If we were to sell the property in the future, and it was to be developed for anything other than a surface industrial use, there would have to be additional cleanup work done. EPA made agreements with the previous owners that certain contaminants could be left in place underneath foundations, as long as our use of the land wouldn’t disturb them.”

To get financing for the land purchase, Atlas had received a commitment from the EPA that it would work with the company to get the property delisted—removed from the list of Superfund sites. The agency estimated the process would take 18 months, but it ended up taking eight years, Rosen says. The delisting process was “very time-consuming,” he says, and it required patience and persistence to ensure the paperwork continued to move forward despite changes in the agency’s leadership and priorities.

“Working with a talented team of lawyers and consultants, we were able to take what could have been a long-term liability and turn it into a long-term asset,” Rosen says. “Our environmental consultants are still involved with the project, too. There are still some requirements we have to meet every year: We have to maintain
a concrete cap, we have to do groundwater testing, and we have to monitor air quality. But it’s worked out very well for us, and I wouldn’t change my decision if I had it to do over again.”

Economic Incentives

The Lincoln, Neb., scrapyard of Sadoff Iron & Metal Co. (Fond du Lac, Wis.) differs from the others described here in a couple of ways. First, it’s a leased facility, not a purchase. Second, it demonstrates some of the benefits of working with local development authorities, as the EPA’s Bartsch suggests.

“We opened our first facility in Lincoln 11 years ago at the Lincoln Air Park, an industrial development that is part of the Lincoln Airport,” says David Borsuk, Sadoff’s manager of industrial marketing and environmental affairs. “A few years ago, the Airport Authority said they wanted to redevelop the property we were on, so we started searching for a new site. Since we had developed a relationship with the Airport Authority, they suggested another property they owned, which many years before had been a fuel depot used by the Air Force.”

The site seemed promising, Borsuk says. “With 11 acres, it met our space needs. It had rail service right into the site, and it was zoned industrial.” Further, he says, “improvements could be financed by airport revenue bonds. So, financially, it was a good business strategy for us to develop the site. The revenue bonds were issued specifically to encourage and enable redevelopment of the brownfield site, and [they] essentially fronted us the money to improve the site, which we then could pay back over the long-term lease.”

Despite those substantial benefits, the company did its due diligence before taking the lease, Borsuk says. “We were able to answer any and all environmental questions by setting up a baseline assessment so we’d know what conditions existed on the site prior to our occupancy. That eased any concern we had about settling into a long-term scrap operation on a brownfield site. Then we built a concrete cap over the whole area, so whatever was there wouldn’t affect our operation” and the scrap processing facility would not affect the underlying site, he says.

“We didn’t have to do any remediation of the property,” Borsuk adds. “The previous testing and ongoing monitoring of the property has all been done under the auspices of the Airport Authority, which owns the land, and the Army Corps of Engineers. There’s a bright line indicating what we are and are not responsible for.” Sadoff moved its operations into the new Lincoln facility in August 2013, “and so far it’s exceeding all our projections,” he says.  

A brownfield property can provide the perfect infrastructure and location for a scrapyard, as well as economic incentives, but a purchase requires careful investigation of site conditions.