New Law May Unlock Potential of Brownfields

• By Ronald M. Thom
• Aug 01, 2001

The U.S. Congress is working on a new law that promises to recycle polluted land, renew inner cities, add tax revenues, create jobs, remove environmental risks and reduce demand for building on fresh land. The proposed law is known as Brownfields Revitalization and Environmental Restoration Act of 2001 and is designated as Senate Bill 350.

The U.S. Senate, in April 2001, passed the bill 99-0. President George W. Bush wants brownfields cleaned up. He has said he will sign the bill into law. U.S. House committees are now looking at the bill. As of press time, the House has not set a timetable for passage of the bill. However, bipartisan support plus the blessings of industry, local government and environmental groups makes enactment of this law very likely during this session of Congress.

The U.S. Environmental Protection Agency (EPA) defines brownfields as abandoned, idle or vacant industrial and commercial sites where redevelopment or reuse is complicated by real or perceived environmental contamination. The United States is estimated to have between 450,000 and 600,000 brownfields sites, typically in poor areas. Brownfields can be small gas stations or giant factory sites.

For the private sector, brownfields are chances for savvy investors, developers and entrepreneurs to buy commercial or industrial properties at below-market prices, clean them up at lower cost, obtain financial, regulatory and technical assistance for the projects and make handsome profits. State and local governments often give a variety of economic incentives to those who redevelop brownfields, including grants, tax exemptions or abatements, low-interest loans, waiver of impact and permit fees, faster development approvals and marketing and promotional assistance.

The potential public benefits of brownfields redevelopment are huge. For example, it could restore dormant land to city tax rolls and create jobs. An April 1999 U.S. Conference of Mayors survey of 155 cities estimated the total added tax revenues at between $955 million and $2.7 billion per year. In the same survey, 168 cities estimated that more than 675,000 jobs could be created if their brownfields were redeveloped.

Despite its enormous potential, many believe that brownfields redevelopment is not growing fast enough. This is because existing law causes discomfort for developers and lenders who might otherwise be willing and able to buy a brownfield site and build something new on it.

Brownfields are generally not eligible for cleanup funding under the federal Superfund program because they are usually not polluted enough to pose a significant public health risk. On the other hand, the federal Superfund law does nothing to protect investors who want to put a brownfield site to productive use.The federal Superfund law is formally known as the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended by the Superfund Amendments Reform Act of 1984 (collectively referred to as CERCLA), 42 United States Code (USC) § 9601 et seq.

Instead, the Superfund law makes the current owner or operator of polluted land liable for cleanup of the pollution regardless of when the land was polluted, where the pollution came from, who caused the pollution and how bad the pollution may actually be. Many states have good brownfields programs. But compliance with state law does not protect an owner or operator from federal enforcement or liability. Thus, developers and lenders may stay away from brownfields sites because federal law puts them at risk of paying for costly cleanups.

The new brownfields bill making its way through Congress more than doubles the amount of money available to help state and local governments assess and clean up brownfield sites. It also limits federal involvement in voluntary cleanups approved by state authorities. Perhaps the biggest change is that the bill creates two new exemptions from federal Superfund liability.

One of the barriers to brownfields redevelopment is the fear of federal enforcement action against property that has been cleaned up in accordance with state law. In other words, if a developer buys a brownfield site and cleans it up to the satisfaction of state regulators, there is still, under current law, a chance that the federal government could later say more cleanup is needed in order to meet stricter federal standards.

The new brownfields bill basically precludes federal enforcement if a state-supervised cleanup is ongoing or has been completed. There are four exceptions to this rule. The federal government can step in only: (1) at the state's request; (2) if pollution migrates across a state line or onto federal property; (3) if EPA finds there is an imminent and substantial danger to public health, even after considering what the state has done; and (4) new pollution is found that is a public heath or environmental risk. Even in these limited circumstances, EPA would have to notify the state 48 hours in advance to find out if the state will take care of the problem.

The Superfund strict liability scheme is widely regarded as blocking the way to redevelopment of brownfields. The brownfields bill adds two new liability exemptions to the Superfund law and clarifies a third.

The two new exemptions are for owners of land that is polluted by contaminants that have migrated from nearby property, and for prospective purchasers of property that is known to be polluted. The new bill also clarifies the definition of "all appropriate inquiry," a phrase used in the existing Superfund law to determine whether a buyer of polluted land can use the "innocent landowner" liability defense.

The fact that the pollution on an owner's land came from a nearby property, through no fault of the landowner, does not now free a current owner from strict liability. The new brownfields bill gives a liability exemption to owners of land that is "contiguous to or otherwise similarly situated with respect to" land not owned by that person and that is or may be contaminated by pollution that has migrated from the contiguous property.

To qualify for this exemption, a contiguous land owner must satisfy eight conditions: that he or she did not cause or contribute to the pollution, is not potentially liable or affiliated with any other person that is potentially liable for cleanup costs at a facility, took reasonable steps to stop or prevent pollution and fully cooperates with and gives access to those authorized to conduct cleanups.

The second liability exemption is for "bona fide prospective purchasers." To qualify for this exemption, the buyer must not have any other potential liability for pollution of the site. This would prevent, for example, a former owner who caused pollution from gaining an exemption from liability by later buying the property.

Numerous conditions must be satisfied for an owner to get a liability exemption as a "bona fide prospective purchaser." First, the owner must have bought the land after the bill becomes law. Second, the owner must not impede the response action or natural resource restoration. Additional conditions include that: (1) all pollution at the site occurred before purchase, (2) the person made "all appropriate inquiry" into the previous ownership and uses of the site," (3) the person exercised appropriate care as to pollution found at the facility, (4) the person cooperates with and gives access to those authorized to clean up the site, (5) the person does not impede any institutional control at the site and (6) the person is not potentially liable or affiliated with any other person that is potentially liable for response costs at a facility.

The current Superfund law permits a defense to a buyer who bought polluted land without knowing or having any reason to know it was polluted. The law states that a buyer does not know or have reason to know land is polluted if he or she made "all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice." Thus, if "all appropriate inquiry" did not reveal the pollution, the defense is available if pollution is found later. This has become known as the "innocent landowner" defense.

Because of the large amounts of money usually at stake, the issue of what constitutes "all appropriate inquiry" has been hotly litigated in countless Superfund cases. The new brownfields bill spells out the elements that constitute "all appropriate inquiry." The bill tells EPA to promulgate a regulation defining "all appropriate inquiry."

This definition must include the following elements: (1) the results of an inquiry by an environmental professional, (2) interviews with past and present owners, operators and occupants of the site, (3) reviews of historical sources, such as chain of title documents, (4) searches for recorded environmental cleanup liens, (5) reviews of government records, (6) visual inspection of the site, (7) specialized knowledge on the part of the defendant, (8) the relationship of the purchase price to the value of the property if uncontaminated, (9) commonly known or reasonably ascertainable information about the property and (10) the obviousness of the presence or likely presence of contamination at the property. These elements may seem familiar because they are based on the American Society for Testing and Materials (ASTM) standard for Phase 1 environmental site assessments.

The bill also makes clear that buyers of residential property (other than governments and commercial entities) need only meet relaxed standards for adequate inquiry. For such buyers, a facility inspection and title search that reveals no basis for further investigation are sufficient.

e-sources

• To follow the progress of the brownfields legislation through Congress, browse the Thomas Web site at thomas.loc.gov/ and search for the bill summary and status of S. 350.
• Introductory information, news and current events about brownfields can be found on the EPA's Web site at www.epa.gov/brownfields/.
• EPA also has a brownfields list server, where you can receive periodic announcements and press releases related to the Brownfields Initiative. For more information about subscribing to the list server, go to www.epa.gov/swerosps/bf/listserv.htm.
• Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or Superfund) -- www.usbr.gov/laws/cercla.html.

This article originally appeared in the August 2001 issue of Environmental Protection, Vol. 12, No. 8, p. 31.

This article originally appeared in the 08/01/2001 issue of Environmental Protection.