891 Twenty First Annual Advanced ALI-ABA Course of Study The Impact of Environmental Law on Real Estate Transactions: Brownfields and Beyond October 2-3, 2008 Boston, Massachusetts Brownfields Redevelopment Initiatives: Federal and Selected State Programs By David B. Farer Farer Fersko, P.A. Westfield, New Jersey Copyright 2008 David B. Farer. The author gratefully acknowledges the assistance of Abigail M. Jones and Maureen Benson in the update and preparation of these materials.
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893 Current as of August 15, 2008 Introduction BROWNFIELDS REDEVELOPMENT INITIATIVES: FEDERAL AND SELECTED STATE DEVELOPMENTS David B. Farer, Esq. Farer Fersko Westfield, New Jersey "Brownfields" are defined generally as abandoned, idle or underutilized industrial or commercial properties, mostly in urban areas, where expansion or redevelopment is hindered due to the existence or suspicion of historical environmental contamination. Various policies, regulations and laws have been evolving since the early 1990s, at both federal and state levels, to address the concerns of those seeking to invest in, finance and undertake such redevelopment projects, and to foster the recycling of older industrial sites rather than development of unsullied "greenfields." This amalgam of programs, legislation and initiatives has accelerated under the general rubric of "Brownfields Redevelopment." The federal government, and a majority of states, have assembled Brownfields programs. These materials address the federal initiatives, and those of seven representative states: California, Massachusetts, New Jersey, New York, Oregon, Pennsylvania and Texas. I. Federal Brownfields Initiatives A. 2002 Superfund Law Amendments Until 2002, all of the components of the federal Brownfields program other than the Taxpayer Relief Act (see below) were based only on limited regulatory and policy initiatives, because Congress had failed to enact Superfund legislation that either authorized Brownfields incentives or provided the types of CERCLA liability protections critical to the success of many established state programs, several of which are summarized below. Congress finally acted to address certain key Brownfield concepts in Title II of H.R. 2869, the Small Business Liability Relief and Brownfields Revitalization Act, signed into law on January 11, 2002 and enacted as Public Law 107-118. Copyright 2008 by David B. Farer. The author gratefully acknowledges the assistance of Abigail M. Jones and Maureen Benson in the update and preparation of these materials. 1
894 The Brownfields component of the 2002 legislation: a. codified EPA's existing Brownfield program by authorizing "revitalization funding" for grants and loans (see section B below), b. articulated a new exemption from CERCLA liability for contiguous property owners whose neighbors cause pollution that travels onto their properties (see section H below), c. established another new exception from liability for the so-called "Bona Fide Prospective Purchaser" ("BFP") who knowingly acquires contaminated property but who complies with certain requirements (see section D below), d. created a new "windfall lien" that EPA may assert against a BFP where the government has incurred uncollected response costs (see section D below), e. further defined the extent of due diligence that a buyer must undertake in order to be entitled to the CERCLA "innocent purchaser" defense (see section C below), and f. requires that where so requested by a state, EPA is to generally refrain from adding a property to the list of federal Superfund sites (known as the National Priority List or "NPL") where a party is voluntarily pursuing cleanup of the site under a state voluntary cleanup program. B. Brownfields Economic Redevelopment Initiatives On an annual basis EPA awards a variety of project-specific grants and loans to encourage businesses and localities to redevelop brownfields, including assessment and cleanup grants, revolving loan fund grants, and job training programs. Assessment grants are awarded primarily to municipalities to inventory and characterize brownfields sites and to test cleanup and redevelopment models. The grants are typically up to $200,000, but up to $350,000 may be requested. The two-year projects are to identify creative and costeffective means to clean up contaminated properties and restore them to productive use. Since the inception of the program, the EPA has awarded approximately 1,255 assessment grants for a total of over $298 million. Cleanup grants of up to $200,000, over two years, are also available to eligible local governmental authorities seeking to clean up brownfield sites. No single entity may apply for cleanup grants at more than five sites. Cleanup grants are conditioned upon the grantee sharing twenty 2
895 percent of the costs, which can be accomplished through contribution of money, labor, materials or services. So far, EPA has awarded 426 cleanup grants totaling $78.7 million. The Brownfields Revolving Loan Fund (RLF) allows communities to provide funds to public and private entities for Brownfields cleanups. Groups can apply for direct funds up to $1 million over five years. Sixty percent of the award must be used to capitalize a revolving loan. To date, the EPA has awarded 230 revolving loan fund grants for a total of approximately $217 million. In 2008, $74 million was awarded for a variety of grants and loans authorized by the 2002 Brownfields Revitalization Act. Grants were provided to 43 states, 2 U.S. territories and 2 tribal nations and included: a. 194 assessment grants: $38.7 million b. 108 cleanup grants: $19.6 million c. 12 revolving loan fund grants: $15.7 million Job training pilot programs are funded by grants of up to $200,000, over two years, to local government authorities and community organizations. The grants are used to teach environmental cleanup job skills to individuals living in low-income areas near brownfields sites. The goal is for those who complete the program to work for environmental firms or organizations. This year, the EPA awarded 13 grants, totaling $2.5 million, to communities in 10 states. Since 1998, the program has awarded over $23 million and approximately 4,000 people have completed the training. Under H.R. 2361, signed into law on August 2, 2005 as P.L. 109-54, Congress provided that fiscal year 2006 Brownfield grants and loans could be awarded to parties who would qualify as BFPs except that they had acquired contaminated property prior to enactment of the 2002 Superfund law amendments. Under H.R. 3, signed into law on August 10, 2005 as P.L. 109-59, Congress provided, as a general provision to brownfields revitalization funding, that brownfield grants and loans could be awarded to parties who would qualify as BFPs except that they had acquired contaminated property prior to enactment of the 2002 Superfund law amendments. On October 28, 2005, EPA issued a notice (70 Fed. Reg. 62108) that loan grantees under the RLF could use those funds to provide discounted loans to certain other qualified parties (including states, local authorities and 3
896 non-profits), as had been allowed under the Brownfield Cleanup Revolving Loan Fund (BCRLF) that pre-dated the 2002 Superfund law amendments. In addition, in December 2005, EPA announced that it would accept requests for Brownfield Revolving Loan Fund Grant supplemental funding (70 Fed. Reg. 72114). Eligible recipients must have: (1) made at least one loan or subgrant and significantly depleted existing loan or subgrant funds; (2) demonstrated the need for supplemental funding, including the numbers of sites and communities that may benefit from supplemental funding; (3) demonstrated the ability to administer and revolve the grant, and administer subgrants or loans; (4) demonstrated the ability to use the grant to address funding gaps for cleanup; and (5) community benefit from past and potential loans or subgrants. Since 2006, EPA has awarded 37 state and local governments supplemental grants, totaling over $12.7 million. Under CERCLA 128(a), added by the 2002 Superfund law amendments, Congress authorized an appropriation of $50 million to fund grants for state and tribal response programs. Since the inception of the program, EPA has awarded over $32 million in CERCLA 128(a) grants to more than 60 tribal nations. For example, in 2006, EPA announced two $300,000 grant opportunities for tribal nations, one to fund response programs focused on brownfields redevelopment, and one to fund assistance related to methamphetamine-contaminated brownfield sites. In April 2008, pursuant to the 2002 Small Business Liability Relief and Brownfields Revitalization Act, EPA released draft fiscal year 2009 Brownfields Assessment, Revolving Loan Fund and Cleanup Grant ( ARC ) Guidelines. Most notably, the changes in the ARC guidelines include: creating a separate guidance booklet for each grant type; creation of Assessment Coalitions which allow eligible entities of three or more to request up to $1 million for community-wide assessments; reorganization of the ranking criteria selections into four concise criteria; and new proposal requirements including completion of Phase II environmental assessment reports at time of Cleanup grant proposal submission, documentation of community notification and response to public comment for EPA Brownfields grant proposal submission, and inclusion of letters of support from all community-based organization identified in the proposal. The final draft guidelines are expected during Summer 2008. EPA also plans to issue an RFP for the 2009 competitive grants during Summer 2008. In May 2008, EPA announced the availability of a grant for financial assistance to support a non-federal entity to be the primary non-federal sponsor of three National Brownfields Conferences to be planned and 4