September/October 1995
A number of states have implemented voluntary cleanup programs to promote the redevelopment of contaminated urban industrial sites, or “Brownfields.” Here’s a look at a variety of these programs, with an eye to how they could help scrap recyclers.
By R. Michael Sweeney
R. Michael Sweeney, LL.M., is an attorney in Washington, D.C., specializing in environmental law, with a focus on solid and hazardous waste remediation, as well as air and water regulatory issues. For the past year, he has also served as a research associate for ISRI. Previously, he was in practice, specializing in all aspects of environmental law.
For years, environmental liability laws on the state and federal levels have often inhibited voluntary cleanup of contaminated property. As a result, hundreds and hundreds of acres of otherwise prime industrial property sits idle today—victims of the disincentives to clean up land inherent in many of those environmental statutes.
The situation is set to change, however, thanks to voluntary cleanup programs that encourage private parties to redevelop and reuse contaminated urban industrial sites—called "brownfields"—by minimizing environmental liability. In some instances, they also offer economic incentives to clean up. The purpose of these programs is to bring about urban industrial redevelopment while ensuring environmental protection.
The U.S. EPA has launched a federal brownfield restoration project, but it's the states that have really been at the forefront in this legislative issue. In fact, as of mid- 1995, 20 states—or 40 percent—had enacted substantive brownfield restoration and voluntary cleanup laws, while a handful of others were considering passing similar measures. (For a list of these states, see the box on page 98.)
While these various state programs differ, they have many similarities. Most, for instance, generally allow cleanups with minimal regulatory oversight, exempt cleanup "volunteers" from environmental enforcement actions through written assurances from the state, and hold volunteers harmless for unanticipated cleanup work in the future. Equally important, most state programs provide liability protection to lenders that accept industrial property as security for commercial financing and protect trustees from assuming liability when forced to administer impaired estates. Another common feature—unfortunately—is that all of today's state voluntary cleanup programs, except Minnesota 's, are only open to parties not responsible for a site's contamination.
Despite this and other limitations, recyclers can potentially benefit from state voluntary cleanup programs as both buyers and sellers of contaminated industrial property.
Ohio Sets the Standard
Ohio 's Voluntary Action Program, enacted June 29, 1994 , is arguably the best of the existing state programs. Among its features, this detailed law allows private parties to voluntarily clean up property contaminated by hazardous substances and/or petroleum to standards appropriate to the actual use of the property (that is, industrial, commercial, or residential), minimizes lender liability related to contaminated property, privatizes cleanup activities, consolidates the permitting process for remediation projects, and offers a variety of incentives to volunteers.
Perhaps the most appealing feature of the Ohio program, however, is that it is completely confidential. Legally, the program is initiated the moment a volunteer contacts a certified environmental professional regarding the remediation of impaired property, and the entire process remains confidential until the professional submits required documentation to the Ohio EPA. No other state program ensures such strict confidentiality. Instead, most require volunteers to first contact the state about their cleanup proposal, negotiate a remediation plan, and undergo a public comment period.
On the limiting side, the Ohio program is not open to properties listed on the U.S. EPA's National Priorities List of Superfund sites or those subject to closure requirements under Ohio or federal solid or hazardous waste laws. Sites subject to Ohio 's underground storage tank law and regulations, and those against which the Ohio EPA has initiated an environmental enforcement action are also barred from participation. In addition, under the one-year interim program that kicked off the Ohio program beginning Sept. 28, 1994 , properties with groundwater contamination are ineligible for voluntary cleanup. The final program, however, which will replace the interim program upon adoption by the Ohio EPA, will cover such properties.
Provided the property is eligible, the Ohio program stipulates that as a first step, volunteers must conduct what's known as a phase I environmental site assessment in accordance with specified standards. This initial assessment is primarily a document review and includes an analysis of a property's history of environmental compliance, chain of title, previous assessments, and any aerial photographs taken of the site. If the phase I assessment indicates that contamination may or does exist, then volunteers must perform a phase II assessment, which includes, among other procedures, sampling of contaminated media and implementation of quality assurance procedures.
With this data in hand, cleanup can begin. The program dictates that carcinogenic hazardous substances must be cleaned up to the point where no more than one person in 10,000 would be at risk of developing cancer after a lifetime of exposure to the hazardous contaminant. Petroleum contamination, meanwhile, must be cleaned up to standards set by the Ohio Bureau of Underground Storage Tank Regulations.
Participants must use certified environmental professionals and laboratories to verify the proper completion of remediation work and determine that the site is cleaned up to acceptable standards. (To be certified, these professionals must have at least five years of experience investigating and remediating hazardous substances and three years of experience directly supervising remediation projects.)
Upon completion of remediation activities, the certified professionals submit no further action (NFA) letters to the state—essentially attesting that the remediation was completed to applicable standards—and, if the cleanup results are approved by the Ohio EPA, volunteers then receive a covenant not to sue from the state.
By granting a covenant not to sue, the state is promising not to institute civil or administrative actions against volunteers in consideration for the proper and timely completion of the voluntary cleanup program. It should be noted, however, that while covenants not to sue protect volunteers, future purchasers, successors, and assigns from civil liability for future additional cleanup work as well as state civil actions, they do not rule out federal or third-party actions. Furthermore, such covenants are conditioned upon the continued use of the land for the purpose specified in the NFA letter. They must also be recorded with the county and are attached to the land records to ensure the property continues to be used in a manner consistent with the use specified in the covenant.
Once the final program takes effect, Ohio 's voluntary cleanup rules will set out more details to guide participants. In fact, the final program will address numeric cleanup standards to meet U.S. EPA performance standards, specify procedures for performing phase I and II environmental site assessments, list criteria for addressing groundwater contamination—including provisions for public participation—and provide information regarding the required content of NFA letters in order to receive a covenant not to sue.
Though compliance with the Ohio Voluntary Action Program may appear burdensome, the program's thoroughness is precisely its strength. Each requirement incrementally quantifies the risks associated with redeveloping or reusing brownfields and, by doing so, diminishes the uncertainty about and potential for environmental liability to sellers, prospective purchasers, and lenders. Any remaining risk of liability can then be negotiated away by these parties.
Furthermore, as with most state programs, Ohio's provides incentives to encourage parties to undertake voluntary cleanups of brownfields, including the following:
- low-interest loans from the Ohio Department of Development, Water Pollution Control Loan Fund, and Water Development Authority;
- a 10-year tax abatement on the increase in value of remediated land, with provisions allowing local abatement on real and personal property taxes for development projects for up to 10 years;
- liability protection for the state, local governments, and contractors involved in voluntary cleanup projects, as well as lenders, trustees, and fiduciaries holding property to protect a security interest;
- consolidated standards permit agreements; and
- an allowance for cleanup volunteers to recover remedial costs from parties that caused the pollution (except for natural gas and petroleum cleanups).
The Best of the Rest
While many of the other existing state voluntary cleanup programs have features in common with the Ohio program, they also have a few notable differences. Here are highlights from eight other major state programs.
Pennsylvania. Pennsylvania's Land Recycling and Environmental Remediation Standards Act, arguably as thorough and progressive as Ohio's program, provides for the recycling of existing industrial and commercial sites, further defines the cleanup liability of new industries and tenants, and establishes a framework for setting environmental remediation standards.
Among its features, the program offers incentives to encourage responsible parties to voluntarily develop and implement cleanup plans without the use of taxpayer funds or the need for adversarial enforcement actions. In this area, the program has created a voluntary cleanup loan fund and an industrial land recycling fund to aid industrial site remediation.
Pennsylvania's program allows volunteers to select and attain compliance with one or more cleanup standards, including background, statewide health-based, site-specific, or a combination of these. Those that satisfy program requirements are protected from future environmental enforcement actions, additional cleanup of contaminants, citizen suits, and other contribution actions. And these liability protection provisions extend to current and future owners of contaminated industrial property, developers, successors, and assigns of any party to which liability could apply, as well as public utilities performing activities on contaminated sites.
The program also stipulates that the state may, at its discretion, petition the U.S. EPA to refrain from initiating civil and administrative enforcement proceedings against volunteers that meet program requirements.
Minnesota. The grandfather of all state voluntary cleanup legislation is the 1992 Land Recycling Act (LRA), which serves as an amendment to the Minnesota Environmental Response and Liability Act (MERLA) and has been credited with spurring the remediation of 550 brownfield sites in the state.
The LRA attempts to facilitate the transfer and development of contaminated industrial sites by providing incentives as well as resources and technical assistance to cleanup volunteers. The act also provides liability protection for volunteers that undertake and complete cleanups in accordance with an approved voluntary cleanup plan and that are not otherwise responsible for release under MERLA
Of greatest note, the Minnesota program is the only one that allows responsible parties to conduct cleanups and gain liability protection for themselves as well as other associated parties not otherwise liable for the release, including lenders, developers, prospective purchasers, and municipalities. The LRA provides five types of written assurances guaranteeing liability protection for volunteers: technical assistance approval letters, no-action letters, off-site source determination letters, certificates of completion, and no-association-determination letters.
Specific LRA requirements mandate the submission of a voluntary response plan and a report describing the results of an investigation of releases and threatened releases at the site.
Participants successfully meeting LRA requirements receive a no-action letter stating that the Minnesota Pollution Control Agency shall refrain from referring releases to CERCLIS—the U.S. EPA’s Superfund site tracking system—and preparing a hazard ranking system score. Notably, the U.S. EPA has reportedly never listed or taken action against a brownfield site for which the state filed a petition under its voluntary cleanup program.
Colorado. The Colorado program has three specific goals: eliminate impediments affecting the sale or redevelopment of brownfields, encourage prompt cleanup activities, and minimize administrative red tape.
Brownfields listed on the National Priorities List, those subject to state or federal corrective action, and those subject to a consent order issued by the Colorado Water Quality Control Division are ineligible for the state’s voluntary cleanup program, as are hazardous waste transfer, storage, and/or disposal facilities.
Under the program, volunteers must submit an environmental site assessment prepared by qualified environmental professionals, a remediation plan proposal, and remedial alternatives. In all cases, the cleanup must remediate contamination to state standards, which are tied to the current rent and proposed uses of the site and designed to safeguard human health and the environment.
Then, once a qualified environmental professional indicates that contaminants at a site do not exceed applicable standards, volunteers receive no-action determinations from the state.
Unlike other state programs, once a participant in the Colorado program completes its voluntary cleanup activities, the state is required by statute, under what's called a "nondiscretionary duty," to petition the U.S. EPA to refrain from initiating any federal action against the remediated property. Although the EPA is not legally bound to obey a state petition, volunteers can use the mere submission of such a petition as a defense or evidence of mitigating circumstances to a subsequent federal enforcement action.
Indiana. The Indiana voluntary cleanup program requires participants to notify the state and submit work plans for the investigation and remediation of impaired property. Remedial activity cannot begin with without prior state review and approval.
Indiana offers volunteers three tiers of cleanup standards. Tier one covers back- ground contamination—normally occurring pollution in the ambient environment—and is generally recognized as a very strict standard. Tier two encompasses health-based standards, which vary depending on whether the property is being remediated for nonresidential uses. And tier three concerns site-specific risk assessment procedures. This tier gives volunteers the flexibility to clean up a site to standards that take into account the future use of the site and the potential effect of its contamination on humans and the environment.
Together, these three tiers allow volunteers to select a risk level that is comfortable for them and compatible with the intended use of the property. As a general rule, the more extensive the voluntary cleanup work, the more protection volunteers receive from future liability. Conversely, a more limited cleanup results in less protection.
Similar to many state programs, Indiana volunteers must reimburse the state for oversight costs associated with voluntary cleanups. Also similar to other programs, with the exception of Ohio , the Indiana program contains a public participation requirement. This means voluntary remedial work plans must be submitted for public review, comment, and, if necessary, hearings. While this requirement may appear to be a deterrent to undertaking a voluntary cleanup, volunteers can use the process to positively portray how the community will benefit from their efforts. For instance, they can publicize the environmental protection aspect of their cleanup efforts, as well as note that their cleanup project will not use taxpayer funds and that the remediated site will most likely create new jobs for the community.
Upon the satisfactory completion of cleanup activities, Indiana volunteers receive a certificate of completion from the state, and the governor’s office subsequently issues a covenant not to sue based on contamination redressed by the cleanup plan. Such covenants are recorded in the chain of title and run with the land, making them applicable to both current and future owners of brownfield sites.
Texas. Texas ’s recently enacted voluntary cleanup legislation allows for qualified remediation plans to be fast-tracked for expedited review and approval. Volunteers and the state then enter into an agreement that contains both a remedial work schedule and a clause precluding environmental enforcement actions while cleanup activities are being conducted in good faith.
Upon the proper and timely conclusion of remedial activities, volunteers receive a certificate of completion from the state. Additionally, the state provides releases from liability for volunteers, new owners, and lenders.
Virginia. Virginia recently attended the state code covering the voluntary remediation of hazardous substances with the introduction of a program that allows parties that own, operate, or have a security interest in contaminated property, as well as those entering into a contact for the purchase of such property, to voluntarily clean up hazardous wastes, or petroleum released on the property.
This program permits the use of site-specific, risk-based standards no more stringent than applicable federal standards for soil, groundwater, and sediments. It also allows volunteers to remediate property to industrial, commercial, or residential cleanup standards based on the intended use of the site. In addition, the Virginia program stipulates that participants may use “reasonably available and effective technology,” to achieve applicable cleanup standards. Further, institutional and engineering controls are permitted as remedial measures, so long as they are protective of human health and the environment.
Other issues covered by the program include established procedures for expedited administrative processes, the issuance of certificates of completion, and the waiver or expedited issuance of any permits necessary to complete voluntary cleanup projects.
Volunteers that complete cleanups receive immunity from state environmental enforcement actions.
Illinois. The Illinois brownfield cleanup program follows the state’s superfund review and evaluation process for voluntary site investigation and cleanup plans. Once the nature and extent of contamination are determined, a remediation goal is set jointly by the Illinois EPA and the property owner. Site-specific voluntary cleanup goals may be achieved through the use of engineering controls, institutional controls, numeric cleanup standards, or future land use restrictions placed in the property’s chain of life.
Upon satisfactory completion of voluntary remedial activities, the Illinois EPA provides volunteers with a release from liability that is limited in scope to the remedial actions taken.
California. The California Voluntary Expedited Remedial Action Reform Act of 1994 is not quite like other voluntary cleanup laws, primarily because the state faces a problem that makes it different from all other states: It has long been an industrial state with a proclivity for natural disasters that tend to worsen industry-related environmental problems.
Although enacted to promote and encourage brownfield restoration, this program provides limited incentives to parties seeking to clean up, reuse, or redevelop brownfields. In fact, stripped down, the program resembles an expedited state superfund program that specifies criteria for the apportionment of liability among potentially responsible parties for response costs. On the positive side, the California program precludes state enforcement actions if program requirements are met and protects volunteers from contribution actions brought by third parties for cleanup costs. Program participants failing to meet program requirements, however, are liable for their portion of response costs and may be liable for treble damages.
Volunteers that enter the program are subject to state oversight through micro-management of remedial activities and must abide by certain land-use controls. Sites remediated under the program must include evidence of such in the property deed and other chain-of-title documents to provide notice to subsequent purchasers and users, but upon satisfactory completion of the program, participants are eligible to receive a covenant not to sue.
More on the Way?
As these programs indicate, a significant percentage of states are now using voluntary cleanup incentives to promote the redevelopment and reuse of brownfields, and more may do the same in the neat future. And following the states’ lead, the federal government is also promoting the issue as part of the current Superfund reform movement within the 104th Congress.
Though far from perfect, voluntary cleanup programs can be an option for scrap recyclers that own or wish to redevelop brownfield property. The benefits and opportunities of these programs vary considerably from state to state, however, so every recycler must look closely at his or her state program—if one is in place. Recyclers operating in states that have no voluntary cleanup program may consider lobbying their state legislators to create one.
In the future, perhaps these programs can bring about not only their stated goal of urban industrial redevelopment and environmental protection, but also a more-livable environmental liability scenario for all.
Editor’s note: Part One of this article, which addresses the details of the federal program and offers guidance on the steps a scrap firm might take if it’s interested in participating in a state or federal voluntary remediation program, was featured in the July/August 1995 issue. For more information on brownfield restoration and voluntary cleanup legislation, consult and article by R. Michael Sweeney in the September 1995 issue of the Environmental Lawyer, a publication of the American Bar Association. Further Inquiries on the topic can be directed to the author or J. Thomas Wolfe, ISRI’s counsel/managing director of government relations, at 202/662-8511.
A number of states have implemented voluntary cleanup programs to promote the redevelopment of contaminated urban industrial sites, or “Brownfields.” Here’s a look at a variety of these programs, with an eye to how they could help scrap recyclers.