25 ELR 10337 | Environmental Law Reporter | copyright © 1995 | All rights reserved
The Brownfields Phenomenon: An Analysis of Environmental, Economic, and Community ConcernsE. Lynn Grayson and Stephen A.K. Palmer
Editors' Summary: Redeveloping abandoned urban hazardous waste sites, or brownfields, can significantly benefit developers, local communities, and the environment. Developers can purchase brownfields inexpensively, and subsequent redevelopment brings jobs to local communities and economic growth to inner cities, while allowing virgin land to remain pristine. Yet barriers to redevelopment, such as the probability of legal liability, uncertainty regarding cleanup standards, and lenders' unwillingness to finance contaminated property, can make redevelopment extremely risky and difficult. This Article explains the nature of the brownfields problem and provides an overview of the historic, social, economic, and environmental issues that impact brownfield redevelopment. It next addresses current federal, state, and local initiatives to remedy problems associated with brownfields, and presents case studies that illustrate how brownfields may be redeveloped successfully. The Article concludes with recommendations essential to addressing and overcoming barriers to brownfields redevelopment.
Ms. Grayson is a partner with the Environmental Law Group at Jenner & Block in Chicago, Illinois. Before joining Jenner & Block, Ms. Grayson was Chief Legal Counsel for the Illinois Emergency Services and Disaster Agency and the State Emergency Response Commission, wherein she managed environmental enforcement programs. She has served as an Assistant Attorney General for the state of Illinois in the Environmental Control Division. Ms. Grayson's expertise includes defending enforcement actions, particularly in the areas of chemical and nuclear safety, emergency response, and air. Ms. Grayson is a frequent speaker at environmental conferences and has published numerous articles concerning environmental law and health- and safety-related issues. Ms. Grayson received her J.D. from Indiana University School of Law and her undergraduate degree from Franklin College. Mr. Palmer is an associate in the Environmental Law Group at Jenner & Block. Mr. Palmer's experience includes cost recovery litigation under CERCLA and RCRA, and regulatory compliance and counseling with respect to the Clean Air Act, the FWPCA, TSCA, and the Illinois Environmental Protection Act. Mr. Palmer received his J.D., magna cum laude, from the Boston University School of Law in 1990, where he was the Articles Editor of the Boston University Law Review. He joined Jenner & Block in 1993 after practicing at another Chicago law firm. Before entering law school, Mr. Palmer was a process engineer in the environmental consulting field and an environmental compliance officer in private industry.
[25 ELR 10337]
Unheard of only a few years ago, the term "brownfield" is now known to virtually all within the environmental, business, and government sectors.1 The environmental liabilities that plague prior, present, and prospective owners of contaminated property take prominence in evaluating how best to redevelop industrialized sites that for a multitude of historical, social, and economic reasons are now vacant and abandoned. At the same time, the sincere desire to revitalize our inner cities — the areas most often burdened by the presence of brownfields — is increasing the importance of developing meaningful brownfields initiatives. Thus, addressing the problems of brownfields provides a unique opportunity for business, government, and community leaders to foster economic growth in depressed areas while improving the quality of the local environment.
Overview of Brownfields Issues
Over the last 20 years, U.S. industry and commerce has increasingly tended to move away from the cities and into the suburbs. An obvious consequence of this relocation is that the cities have lost jobs and tax revenues. Another consequence is that the redevelopment of newly vacated industrial and commercial sites, slow even in the best of times, has not kept pace with their abandonment.
Real estate developers cite potential liability for environmental contamination as a major impediment to redeveloping these vacant or abandoned sites.2 Owners of contaminated [25 ELR 10338] properties can be held liable for cleanup even if they did not cause the pollution. In addition, coming into compliance with environmental regulations adds time and cost to a redevelopment project. These environmental costs can increase the total cost of redeveloping contaminated property until it outweighs the potential benefits, forcing the developer to seek out properties that do not have real or potential environmental problems. The result is greater urban sprawl, increased energy use for transportation, escalating industrialization of virgin land (greenfield sites), and continued loss of the urban economic base.3
The brownfields problem is believed to be pervasive and significant. Some experts estimate that more than 500,000 sites nationwide show evidence of at least some contamination.4 Although estimates regarding the total cost of cleaning up these sites vary, the General Accounting Office has indicated that the price tag for cleaning up U.S. brownfield sites may be as high as $ 650 billion.5
Legal and Regulatory Framework for, and Barriers to, Brownfield Redevelopment
From a market perspective, anything that makes a brownfield property less competitive with a greenfield property, such as added time, cost, or uncertainty, can be considered a "barrier" to redevelopment. The most frequently cited environmental barrier to brownfield redevelopment is the risk to current property owners of liability for contamination that prior owners caused. Other barriers include the uncertainty associated with unknown contamination and the lending community's increasing unwillingness to finance mortgages on brownfield sites.
Environmental Regulatory Barriers
Of the several federal and state environmental statutes that affect the redevelopment of brownfield sites, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or Superfund) is the most significant.6 Enacted in the wake of Love Canal, CERCLA governs the cleanup of abandoned hazardous waste disposal facilities.7 Unlike other major environmental laws, such as the Resource Conservation and Recovery Act,8 CERCLA did not create a regulatory program. Rather, it provided authority and allocated responsibility for cleanup of contaminated soil, surface water, and groundwater.9
Under CERCLA, the U.S. Environmental Protection Agency (EPA) may order the parties deemed to be responsible for contamination at a site to pay for its remediation.10 Alternatively, CERCLA permits EPA to undertake remediation itself, finance the cleanup through Superfund, and recover the cost from the responsible parties in a subsequent lawsuit.11
To facilitate recovery, CERCLA specifies the parties that may be held liable for cleanup costs and removes some of the common-law obstacles to establishing liability for harm arising from the disposal of hazardous substances.12 Courts have interpreted CERCLA broadly to impose strict, joint and several liability for releases of hazardous substances.13 Liability is strict in that it exists without regard to fault.14 Joint and several liability means that each of the responsible parties at a CERCLA site is liable for the entire cost of the cleanup, as long as the harm each party caused is indivisible from harm that other responsible parties caused, which is routinely the case with commingled hazardous waste streams.15 Moreover, EPA may choose to sue and to recover all of its cleanup costs from any one of the liable parties. The targeted party then may seek contribution from other responsible parties.16 The nature of this liability structure has resulted in the frequent observation that the only thing fair about Superfund is that it is unfair to everybody.
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Even if a brownfield owner or operator is not liable under CERCLA, it may be liable under state or local law.17 States are primarily responsible for the bulk of environmental enforcement activities, including site detection and federal notification. Many states also have their own site priority lists, cleanup funds, and site remediation standards independent of EPA's.18
Liability Issues and Related Uncertainty Associated With Cleanup
 Cleanup Standards. One of the principal issues associated with the remediation of a brownfield site is the question "how clean is clean?" Numerical standards for the cleanup of contaminated soils and groundwater tend to vary greatly.19 Moreover, in many cases no standards exist and regulatory authorities must determine relevant cleanup criteria through a site-specific risk assessment.20 Risk assessment procedures, however, vary from agency to agency and from state to state. The variation in numerical standards and risk assessment procedures can result in uncertainty regarding how the relevant agency will assess a potentially contaminated site and what cleanup standards it will impose. To the extent that developers cannot accurately ascertain cleanup standards, they likewise cannot fairly estimate costs associated with remediation, thereby creating even greater uncertainty.
Further, what is considered clean today may not be considered clean tomorrow. Since the early 1970s, legislators and regulators have enacted new environmental laws and imposed new standards, only to change them in light of new technologies and increased knowledge. Many developers fear that future changes in environmental laws or improvements in technology may force more stringent, costly revisions to remediation plans after they are underway, or even well after work is complete.
 Length of Cleanup. Completing an environmental assessment and remediation plan can be a lengthy process. Agency staff, if involved, may delay signing off on these plans, further postponing completion of the process. Other timing problems can occur if adequate agency staff are unavailable to review plans or if consistent cleanup standards are not in place. A variety of circumstances can cause these delays, including lack of communication, lack of information or documents, poor weather conditions, or slow turn-around of lab samples. Interaction with government regulators often can increase delays further, burdening developers committed to closing-related schedules.
Delays are costly. They undermine the profitability of a project by extending completion deadlines and increasing overall project expenses. Moreover, uncertainty as to how long it will take to complete a remediation process that the developer can avoid altogether by using a greenfield site hampers strategic planning.
 Concern About Future Environmental Liability. Another barrier to redevelopment of urban sites is the lack of protection against future environmental liability after remediation is complete. At present, many states lack voluntary cleanup programs or state superfund laws authorizing the relevant agencies to grant covenants not to sue or certificates of release to private parties that conduct cleanups.21 Even if a state were to grant such protections, they would only be good against the issuing state agency or regulatory authority. Federal law provides no protection should EPA or a third party choose to file a CERCLA cost recovery action. Even though EPA has the legal authority to enter into prospective purchaser agreements granting the protections needed, it has done so only in a few cases where EPA-established criteria were met.22
Even if the foregoing liability issues can be resolved, environmentally squeamish lending institutions pose an even greater hurdle for a potential brownfield developer. Lenders are changing their practices regarding projects that involve potential environmental liability. Some lenders, particularly small ones, are sharply curtailing lending for commercial or industrial facilities that might be contaminated.23 This reduction in lending can manifest itself either through lenders' increased scrutiny of industrial re-use projects or even avoidance of doing business with certain types of companies or properties carrying environmental risks. This latter practice is termed "brownlining."24
Risk averse by nature, lenders appear to be demonstrating increasingly greater anxiety over potential CERCLA liability, even where that liability has not materialized and is unlikely to do so. Lenders thus want to avoid defaults, because otherwise they may become responsible for expensive [25 ELR 10340] remediations.25 As a result, lenders may limit loans to only those companies that have substantial assets. This practice would be disastrous for smaller enterprises, especially startup companies, that want to use the land and buildings they are financing as the loan collateral. Lenders are also reducing their lending for environmentally burdened property because, even where liability is unlikely, they don't want to be left holding title to worthless collateral. If the land or buildings have questionable value as a result of existing environmental contamination, the loan may be more difficult or even impossible to obtain.26
Potential lender liability also increases transaction costs. Lenders now require extensive environmental testing and cleanup to protect against liability and to ensure the value of the property as collateral. For an industrial property, a simple environmental assessment can cost anywhere from $ 1,000 to $ 10,000, and a detailed site investigation with soil and groundwater sampling can easily cost $ 50,000 or more.27 Brownfield sites thus have the potential to create greater upfront transaction costs than greenfield sites.28 All other things being equal, the increased cost associated with the environmental assessment of a brownfield site may be sufficient to cause potential purchasers to forgo redeveloping such properties.
In some cases, another potential barrier to brownfield development is local residents' fear regarding the effect of contaminated properties in their community on public health and safety. While communities generally encourage brownfield development, some local residents encourage brownfield development, some local residents fear that cleanup work will be minimal and that future industrial activity will exacerbate existing problems. As advocates of environmental justice suggest, urban comumunities do not want to achieve urban renewal and job creation at the expense of becoming environmental "second-class" citizens.29 Moreover, in some instances, community opposition to a project can result in further public hearing requirements as well as more critical review of zoning and tax assessment issues. Developers that have invested resources in redeveloping a brownfield must take care to maintain adequate lines of communication with community leaders to ensure that local dissatisfaction with the project does not result in additional layers of requirements that discourage development. Community involvement in brownfields initiatives is crucial so that local residents understand the environmental issues and the actions being taken to minimize or eliminate any potential risks.30
Initiatives and Case Studies
Federal Brownfield Initiatives
To resolve some of the issues that redeveloping brownfields poses, EPA has announced a number of brownfield initiatives. For example, EPA's Brownfields Action Agenda includes the funding of 50 economic redevelopment pilot projects for contaminated sites throughout the nation.31 EPA funds each pilot project with a $ 200,000 grant and has already given grants to eight cities to redevelop abandoned urban sites.32 EPA also contemplates relaxing guidelines on "prospective purchaser" agreements and issuing guidance on soil-screening criteria, municipalities' CERCLA liability for involuntary acquisition of contaminated properties, and lender liability.33
As part of the Agenda, EPA also will remove approximately 25,000 of the 38,000 sites that currently are listed on EPA's Comprehensive Environmental Response, Compensation, and Liability Information System (CERCLIS).34 EPA has already screened the sites that it will remove and labeled them as "no further remedial action planned." EPA believes that removing the sites will benefit potential investors because the sites will no longer carry the stigma of being on the CERCLIS list and subject to potential CERCLA liability.35
State and Local Brownfield Initiatives
Illinois. Illinois has held the way in enacting initiatives designed to simplify the sale of brownfields and other contaminated property.36 For example, Illinois recently amended the Illinois Environmental Protection Act to provide an "innocent purchaser defense" for purchasers of contaminated property that, before purchase, conduct "all appropriate inquiry" into a property's prior owners and uses and fail to discover contamination.37 The amendment defines "all appropriate inquiry" as the performance of a Phase I environmental [25 ELR 10341] assessment either before acquiring title or concurrent with the financing.38 The elements of a Phase I assessment are a visual site assessment and a review of pertinent government records, chain of title, aerial photographs, and environmental liens.39
Of course, if the purchaser discovers environmental contamination before the purchase, then the innocent purchaser defense is unavailable. To address this situation, Illinois amended the Act to allow the Illinois Environmental Protection Agency (IEPA) to release a prospective purchaser from liability of the purchaser enters into a review and evaluation-services agreement with the IEPA and then performs an agency-approved response action under the agreement.40
In addition to these state initiatives, the City of Chicago is developing its own brownfield redevelopment program. Under the program, which began in June 1994, Chicago has set aside a budget of $ 2 million for purchasing and cleaning contaminated industrial sites in the city. Once the sites are clean, Chicago will sell them for redevelopment.
Chicago has selected five sites for participation in the redevelopment program.41 It may also add two additional sites to complete the $ 2 million budget.42 Cleanup has begun and the sites will be redeveloped once the cleanup work is finished. The program also includes a public-out-reach component under which the redeveloper of a site must take steps to inform the public of the cleanup effort and answer any questions that the cleanup and redevelopment might present.
Ohio. Ohio's governor signs its brownfields law on June 29, 1994, and it became effective on September 28, 1994.43 The law's intended purposes are to establish a voluntary cleanup program for the remediation of contaminated property, create a right to contribution from potentially responsible parties (PRPs), and provide financial incentives for persons to undertake voluntary cleanup. Under the law, a landowner may voluntarily clean up contaminated property and receive from the Ohio Environmental Protection Agency a covenant not to take further legal action against the landowner for past violations of state environmental laws.
As the cornerstone to its brownfield strategy, the law creates a class of private "certified professionals" who have the authority to issue "no further action" letters.44 These letters state that the property in question meets the applicable standards and that no further cleanup measures are necessary.45 The law also establishes appropriate generic numeric cleanup standards that depend on the future use of the property.46 Finally, the law provides for the issuance of covenants not to use that run with the land and protect the landowner from any further state liability for environmental cleanups.47
Ohio's brownfields law also approves the establishment of a state-sponsored loan program available to those wishing to undertake a voluntary cleanup action that will create "new jobs . . . and improve the economic welfare of the people of the state."48 To qualify for a loan, applicants must show that the project is economically sound, the applicant cannot finance the project through ordinary financial channels on comparable terms, the loan will not exceed 75 percent of the project's cost, and the loan is adequately secured by a mortgage, lien, assignment, or pledge.49
Wisconsin. Wisconsin also has taken legislative steps to ease concerns over potential liability associated with brownfield redevelopment. For example, a recent amendment to Wisconsin's environmental liability statute limits the liability of prospective purchasers of contaminated property and is intended to promote the re-use of potentially contaminated industrial sites.50 In order to meet the amendment's requirements, the prospective purchaser must first show that the release of hazardous substances took place before the purchaser acquired the property.51 The purchaser then must conduct a state-approved environmental investigation.52 Next, the purchaser must clean the property or minimize the harmful effects from any contamination in accordance with state regulations or any agreement between the state and the purchaser describing the level of remediation required.53
If the prospective purchaser satisfactorily performs the remediation, the state will provide a certificate indicating that the purchaser has restored the property and minimized the harmful effects from the release.54 The purchaser must still maintain and monitor the property according to state rules and cannot engage in any activities inconsistent with maintaining the property in its restored condition.55 If the purchaser complies with all of the above conditions, it is [25 ELR 10342] exempt from any liability or remediation obligations that new statutes, rules, or regulations might impose. If the purchaser fully complies with the cleanup contract or rules, the exemption from liability continues even if the cleanup failed to restore the environment or the extent of the contamination is greater than originally anticipated.56
The prospective purchaser exemption also applies to all successors and assigns who comply with the maintenance and activity limitations.57 When a purchaser buys from a municipality under specified circumstances, the exemption also limits the purchaser's responsibility for cleanup costs.58 In such cases, the purchaser's liability is limited to 125 percent of the anticipated cleanup costs at the time parties agreed on the remediation plan.59
Individual Case Studies
Wichita, Kansas. In August 1990, the Kansas Department of Health and the Environment, acting with EPA, informed the City of Wichita that an area of groundwater contamination existed beneath the center of the city about 4 miles long and 1.5 miles wide.60 The affected area included over 500 businesses.61
Lending institutions soon brownlined the contaminated areas.62 None were willing to risk further investment without some mechanism in place to limit their liability.63 To resolve this issue, Wichita set up two methods for financing the cleanup: Tax increment financing (TIF) and the legal pursuit of identified polluters.64 The TIF plan called for a reduction in property values that would reflect more accurately the market value of the property after the discovery of the contamination. After Wichita assumed liability for cleanup, property values and economic activity were expected to increase to prediscovery values, thereby establishing the tax differential and creating a fund to finance a portion of the costs.65
The second method for paying for cleanup costs included the identification and legal pursuit of PRPs.66 A large manufacturer helped this process greatly when it accepted responsibility for much of the contamination and reached an agreement with Wichita on appropriate compensation.67
Uniroyal Tire Factory, Commerce, California. In 1978, Uniroyal Tire Company closed down a 34-acre factory complex in the city of Commerce, California.68 The site lay unused until 1984, when the city, through the Commerce Redevelopment Agency (CRA), purchased the property for $ 14 million.69 The CRA intended to make the property the centerpiece of a community redevelopment program. In 1986, the CRA began to search for a developer that would redevelop the site, yet maintain as many of the site's historic structures as possible. In 1988, the CRA selected a developer. Plans called for the construction and leasing of a factory outlet mall, offices, and a hotel.70
A site investigation revealed that over the years, diesel fuel and solvents from underground storage tanks had leaked into the surrounding soils and potentially contaminated the groundwater.71 Other potentially hazardous substances at the site included asbestos, naphthalene in storage tanks, lead in process wastes, organic solvents in railroad unloading areas, polychlorinated biphenyls (PCBs) in electrical equipment, and trichloroethane in outdoor pits. Under an agreement with the developer, the city accepted responsibility for remediation of the past contamination.72
Working closely with Los Angeles County regulatory agencies, the city removed the asbestos, PCBs, and other surface contaminants. The city also removed the leaking underground storage tanks and remediated the contaminated soil. Groundwater wells revealed no contamination.73
The CRA has spent $ 23 million on the redevelopment project.74 Of that amount, approximately $ 3 million went to the investigation and remediation of contaminated soils and administrative costs. The city filed suits in both federal and state courts to recover some of the remediation costs from the former owners. The parties settled both suits out of court for undisclosed sums in 1991.75
It is estimated that the redevelopment project will produce about $ 592 million in lease income for the city over the first 65 years, in addition to $ 7.7 million in property taxes that the city plans to use for other development activities.76 When all components of the complex are completed in 1997, approximately 2,000 people will work at the complex in various capacities.77
Recommendations for a Successful Brownfields Program
Decreased Transaction Costs
The most significant barrier to the redevelopment of brownfield sites is costs. While certain costs are associated with [25 ELR 10343] every real estate and commercial transaction, increased costs relating to site investigation and possible cleanup often burden deals involving contaminated properties. These increased transaction costs, coupled with the likelihood of other expenses relating to environmental liabilities and other associated uncertainties may make the redevelopment project a virtual economic impossibility.
A partnership between a developer and local community leaders that involves the appropriate environmental agency is the most effective means of reducing overall transaction costs. The parties can design a redevelopment project that offers the prospective purchaser the possibility for community-based incentives such as improved infrastructure plans and reduced tax assessments, as well as protections from the agency that could include a covenant not to sue or release and contribution guarantees. A preplanned redevelopment project package negotiated among the purchaser and community and agency officials can minimize the uncertainties associated with brownfield sites and, more importantly, allow the developer to ascertain with some degree of certainty the nature and amount of the transaction costs.
Prospective Purchaser Agreements
To provide and facilitate brownfield redevelopment projects, EPA must develop a policy whereby it can more easily enter into prospective purchaser agreements. Only through these agreements can purchasers obtain the protections needed to overcome CERCLA liability and related financial worries. Superfund reauthorization legislation is anticipated to ease the criteria by which EPA can provide assistance through prospective purchaser agreements.
Presently, prospective purchaser agreements require the prospective purchaser to perform limited remedial actions at the site (or make a cash payment), grant access to the appropriate environmental agencies, and cooperate with those agencies. In return, EPA typically grants the prospective purchaser a covenant not to sue, contribution protection (where available), and other protections tailored to the particular site in question.
Under current policy, EPA requires compliance with five criteria before entering into a prospective purchaser agreement. These criteria are that: (1) EPA anticipates an enforcement action at the site; (2) EPA will receive a substantial benefit not otherwise available (generally a lump sum cash payment in return for a release); (3) continued operation or new development at the site will not aggravate or contribute to existing contamination; (4) there is no risk to persons likely to be present at the site; and (5) the prospective purchaser is financially viable.78
Since 1989, when EPA first published its criteria for entering into prospective purchaser agreements, the Agency has only entered into approximately 16 such agreements.79 EPA entered into 7 of those agreements, however, within the last 18 months.80
Many state programs also include provisions allowing the responsible state agency to enter into prospective purchaser agreements. As under the Ohio program, state agencies will typically provide a release and a covenant not to sue to parties that are prepared to meet certain predefined criteria.81 Other states have followed Illinois' lead, and have been willing to issue letters saying that the state will not require any action at a site if the prospective purchaser undertakes predefined investigatory and/or remediation actions.82
While these programs are encouraging and help to ease some of the concerns associated with brownfields development, the releases and covenants not to sue typically issued under such programs often contain reservation of rights language concerning conditions at the site not known at the time of the agreement.83 Moreover, the releases only pertain to the particular federal or state statute under which the issuing agency grants them. They generally do not preclude actions under other federal or state laws.
Development of Risk-Based Cleanup Protocols That Are Linked to Future Land Use Scenarios
To facilitate the redevelopment of brownfields, regulatory authorities need to revise current cleanup standards and risk-based methodologies to take into consideration future uses of the property as well as the specific nature of the existing contamination. Most cleanup standards are based on a residential property methodology literally premised on the risks associated with small children consuming a certain quantity of the soils at the site. While residential property scenarios for remediation may be appropriate under certain circumstances, such cleanup objectives are unnecessary and unjustified in situations where brownfields will be redeveloped for further industrial uses, as is typically the case.
Federal, state, and local environmental agencies need to create remediation protocols that allow them greater flexibility in developing cleanup standards for brownfield sites. Regulatory authorities can design cleanup objectives that are protective of the environment and health-related concerns and, at the same time, provide remediation alternatives that are cost efficient and capable of timely completion. The focus of cleanup objectives for brownfield sites should be to protect local residents' health and safety and to minimize any continuing environmental impact of the contamination, particularly the potential for off-site migration.
The use of deed restrictions may be helpful to ensure that future site uses are consistent with cleanup objectives. If agencies crafting remediation plans take into account a future industrial use, a deed restriction can be recorded on the property to guarantee that site uses remain consistent with the cleanup performed.
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The redevelopment of brownfield sites should be a positive step toward addressing existing environmental conditions at these properties. By their very nature, brownfield sites are contaminated in some way and may become even more so unless targeted for possible redevelopment. To the extent that regulatory authorities apply costly, overly stringent cleanup standards to brownfield sites, developers will forego opportunities to develop brownfields in favor of greenfield or other properties where environmental remediation is not necessary. In these circumstances, the brownfield site remains contaminated and continues to burden the community, with no hope of being put to a more productive use.
Public Sector Financial and Other Incentives
Public agencies may use a number of available public financing options to encourage brownfields development. The most basic form of brownfield assistance is a grant program, either alone or with matching funds. Grant programs can improve access to capital and reduce the cost of financing. Brownfield grant programs have low administrative costs, and agencies can often incorporate them into existing grant programs. Loan programs, which can include loan guarantees and interest subsidies as well as basic loans, are another established public-sector financing method. The sponsoring agency would make the loans for specific brownfield redevelopment projects and offer either no- or low-interest terms. As with the Ohio loan program, such funds should be limited to properties that traditional lending institutions would refuse for fear of environmental liability arising from the condition of the property. Otherwise, such loan programs compete with lenders and do not serve the purpose of developing impacted property.
The public sector can also help finance brownfield redevelopment through tax-abatement programs. These programs reduce or eliminate the potential taxes a developer owes or will owe, thereby increasing business cash flow. Tax advantages can be tied to specific industries, activities, or areas, and they impose a minimal administrative burden once the program is in place.
Local communities can also offer incentives that encourage brownfield redevelopment projects. These incentives may include new zoning, infrastructure improvement, in-kind services during site development work, and job training programs to help provide the new business with skilled workers. In addition, the importance of community goodwill and support in attracting businesses to an urban area cannot be underestimated.
A variety of brownfield initiatives are underway throughout the United States. Many federal, state, and local government entities have developed programs to address brownfield sites, and both large and small businesses have been key participants in model brownfield redevelopment projects and advisory groups. Community activists and environmentalists have also worked to ensure that local interests are taken into consideration. These groups have accomplished much work and have even more planned.
Brownfield redevelopment is essential to revitalizing inner cities, fostering economic growth in depressed areas, and improving the quality of the urban environment. Business, government (particularly environmental authorities), and community leaders have a unique opportunity to work together to achieve their common goals through successful brownfield redevelopment. They must forge a new alliance that will allow compromises in the best interests of all concerned if they are to overcome barriers to redevelopment and achieve long-term success.
1. The term "brownfield" is generally used to describe commercial or urban property that may require environmental cleanup before it can be redeveloped.
2. Environmental groups and affected citizens also are concerned about brownfields because efforts to reduce cleanup requirements may create second-class "industrial zones," where no meaningful attempt is made to restore the property to prerelease conditions.
3. Potential liability concerns also encourage current owners of brownfield properties to keep those properties off the market. For example, if an owner tests its property before sale and finds contamination, the owner may then have to report that contamination to state or federal officials. See, e.g., 42 U.S.C. § 9603(a), ELR STAT. CERCLA § 103(a) (requiring an owner or operator of contaminated property to notify EPA "as soon as he has knowledge of any release . . . of a hazardous substance"). Depending on the circumstances, the owner could then face joint and several liability for the entire cost of remediating the property. See id. § 9607(a)(1), ELR STAT. CERCLA § 107(a)(1). This encourages the owner to remove the property from the market, thereby avoiding a cleanup that selling the property to a well-informed buyer would most certainly necessitate.
4. CHARLES BARTSCH & ELIZABETH COLLATON, INDUSTRIAL SITE REUSE, CONTAMINATION, AND URBAN REDEVELOPMENT, COPING WITH THE CHALLENGES OF BROWNFIELDS (1994).
5. Casey Bukro, The Quagmire of Industrial Site Cleanups: Chicago Gets Serious About Bringing Back Its Brownfields, CHI. ENTER., Sept./Oct. 1994, at 2.
6. 42 U.S.C. §§ 9601-9675, ELR STAT. CERCLA §§ 101-405.
7. "The primary purpose of CERCLA is 'prompt cleanup of hazardous waste sites.'" Dickerson v. Administrator, 834 F.2d 974, 978, 18 ELR 20305, 20307 (11th Cir. 1987) (quoting Walls v. Waste Resource Corp., 761 F.2d 311, 318, 15 ELR 20438, 20441 (6th Cir. 1985)).
8. 42 U.S.C. §§ 6901-6992k, ELR STAT. RCRA §§ 1001-11012.
9. See United States v. Hooker Chem. & Plastics Corp., 680 F. Supp. 546, 548, 18 ELR 20580, 20580 (W.D.N.Y. 1988) (holding that CERCLA establishes three basic mechanisms to achieve its objectives: (1) it provides EPA with the necessary authority to respond to threats by hazardous substance sources; (2) it creates a fund to finance federal cleanup efforts; and (3) it establishes a liability scheme to ensure that those responsible for environmental contamination pay to clean it up).
10. See 42 U.S.C. § 9606, ELR STAT. CERCLA § 106.
11. Id. § 9607, ELR STAT. CERCLA § 107.
12. CERCLA defines four classes of persons that may be held liable for the cleanup of hazardous substances: (1) the current owners or operators of contaminated property; (2) the owners or operators of the property at the time it became contaminated; (3) persons who arrange for treatment or disposal of hazardous substances; and (4) certain transporters of hazardous substances. Id. § 9607(a)(1)-(4), ELR STAT. CERCLA § 107(a)(1)-(4).
13. See, e.g., United States v. Rohm & Haas Co., 2 F.3d 1265, 23 ELR 21345 (2d Cir. 1993) (responsible parties can be held jointly and severally liable for the costs of remediating the entire site, unless they can prove apportionment is warranted); City of New York v. Chemical Waste Disposal Corp., 836 F. Supp. 968, 972, 24 ELR 20627, 20628 (E.D.N.Y. 1993) ("Where . . . the environmental harm is indivisible, CERCLA liability is joint and several.").
14. "[E]very court to consider this issue has concluded that . . . a party identified as responsible under Sec. 107(a) is strictly liable, regardless of fault, for response costs. . . ." United States v. Miami Drum Servs., Inc., 17 ELR 20539 (S.D. Fla. 1986).
15. "If there is a single harm that is theoretically or practically indivisible, each defendant is jointly and severally liable for the entire injury. However, if there are distinct harms that are capable of division, then the liability should be apportioned according to the contribution of each defendant." United States v. Stringfellow, 661 F. Supp. 1053, 1060, 17 ELR 21134, 21135 (C.D. Cal. 1987) (citing RESTATEMENT (SECOND) OF TORTS §§ 433A, 875, 881 (1976)).
16. 42 U.S.C. § 9613, ELR STAT. CERCLA § 113.
17. See, e.g., United States v. Hooker Chems. & Plastics Corp., 739 F. Supp. 125, 20 ELR 21346 (W.D.N.Y. 1990) (plaintiffs recovered under CERCLA for surface removal and under state law for a subsequent subsurface removal); Allied Corp. v. Frola, 730 F. Supp. 626, 20 ELR 21193 (D.N.J. 1990) (same).
18. For example, as of 1990, the state of Massachusetts had 15 sites on the national priorities list, had 383 sites on its state priority list, and an additional 1,486 on a hazardous site registry. See JAMES BOYD ET AL., THE IMPACT OF UNCERTAIN ENVIRONMENTAL LIABILITY ON INDUSTRIAL REAL ESTATE DEVELOPMENT: DEVELOPING A FRAMEWORK FOR ANALYSIS 17 n.19 (1994).
19. Currently, there are no national numerical standards for the cleanup of soil and groundwater contamination. Accordingly, the cleanup standards for any given site tend to vary depending on the site's geographic location. See, e.g., 42 U.S.C. § 9614(a), ELR STAT. CERCLA § 114(a) (expressly providing that CERCLA does not preclude states from imposing additional requirements (i.e., more stringent standards) with respect to the release of hazardous substances); id. § 9621(d)(2)(A)(ii), ELR STAT. CERCLA § 121(d)(2)(A)(ii) (incorporating all applicable or relevant and appropriate state environmental standards into federal CERCLA actions).
20. In general, each cleanup is viewed as a unique problem requiring a unique solution that depends on the responsible state and federal agencies employing a great deal of regulatory license in selecting a remedy. BOYD ET AL., supra note 18, at 21.
21. See infra for examples of state brownfield programs that include these types of protections.
22. See Howard M. Shanker & Laurent R. Hourcle, Prospective Purchaser Agreements, 25 ELR 10035 (Jan. 1995).
23. For example, a recent American Bar Association poll of small financial institutions (less than $ 250 million in assets) found that 43 percent had already stopped making loans to companies associated with environmental contamination, and that another 11 percent intended to reduce such lending. See CHARLES BARTSCH ET AL., NEW LIFE FOR OLD BUILDINGS: CONFRONTING ENVIRONMENTAL AND ECONOMIC ISSUES TO INDUSTRIAL REUSE 21 (1991).
24. Types of businesses that typically are the victims of brownlining include tool and die shops, semiconductor facilities, utilities, high technology metal fabricators, and bottling and canning facilities. Id.
25. See, e.g., United States v. Fleet Factors Corp., 901 F.2d 1550, 23 ELR 20953 (11th Cir. 1990) (extending potential CERCLA liability to financial institutions that have a "capacity" to influence hazardous waste disposal decisions), cert. denied, 498 U.S. 1046 (1991); United States v. Maryland Bank & Trust, 632 F. Supp. 573, 16 ELR 20557 (D. Md. 1986) (holding that a bank that foreclosed and then purchased a facility at the foreclosure sale is liable under CERCLA); In re Bergsoe Metal Corp., 910 F.2d 668, 20 ELR 21229 (9th Cir. 1990). See Edward B. Sears & Laurie P. Sears, Lender Liability Under CERCLA: Uncertain Times for Lenders, 24 ELR 10320 (June 1994).
26. Lenders also are concerned that even if the contaminated property retains some value above and beyond the lender's security interest, superlien laws in some states prioritize cleanup costs over mortgage loan security in bankruptcy proceedings. Such states currently include Connecticut, Massachusetts, New Jersey, and Tennessee. See David H. Topol, Hazardous Waste and Bankruptcy: Confronting the Unasked Question, 13 VA. ENVTL. L.J. 185, 224 n.189 (1994).
27. Jim D. Bower, The Challenges of Brownfields Development, 24th ANNUAL CONFERENCE ON ENVIRONMENTAL LAW (1995).
28. Id. at 4-5.
29. See generally Douglas A. McWilliams, Environmental Justice and Industrial Redevelopment: Economics and Equality in Urban Revitalization, 21 ECOLOGY L.Q. 705 (1994).
30. Id. at 772-75.
31. U.S. EPA, BROWNFIELDS ACTION AGENDA (1995).
32. Id. at 1.
33. Id. at 2-3.
34. Id. at 1.
40. See id. § 5/22/2b. The benefit of the "prospective purchaser" amendment is that it can provide a "clean bill of health" for contaminated property before purchase. A potential drawback is that the "clean bill of health" only covers contamination disclosed to the IEPA at the time it granted the release. Unknown contamination could be subject to future response actions (although the innocent purchaser defense may be available). In addition, the release only precludes actions brought under the Illinois Environmental Protection Act. Lawsuits under CERCLA or state common law would still be available. Finally, there is no guarantee that the IEPA will act in a timely manner, thus, critical deadlines could be missed as a result of uncontrollable agency delays.
41. The criteria for selecting these sites are that the environmental contamination must e easily identifiable; the sites must have fairly predictable cleanup costs; the sites must have a buyer who will use and develop the site, with a preference for those that will create jobs in the are; and ownership of the site must be determinable and other legal obstacles must be manageable.
42. Chicago also has applied for a $ 10 million grant from the U.S. Housing and Urban Development Department to remediate and redevelop additional sites during 1995. Ilinois: Chicago Group Pursues Redevelopment Policy for Abandoned, Contaminated Industrial Sites, 25 Env't Rep. (BNA) No. 34 at 1665 (Dec. 23, 1994).
43. OHIO REV. CODE ANN. § 3746.11(A) (Baldwin 1944 & Supp. 1995).
45. Id. § 3746.11(A).
46. Id. § 3476.04(B).
47. Id. § 3746.12(A).
48. Id. § 166.01(B) (definition of eligible project).
49. Id. § 166.97(A)(1)-(5).
50. WIS. STAT. ANN. § 144.765(2) (West 1989 & Supp. 1994) (exemption from liability).
51. Id. § 144.765(1)(c)(1) (definition of purchaser).
52. Id. § 144.765(2)(a)(1).
53. Id. § 144.765(2)(a)(2).
54. Id. § 144.765(2)(a)(3).
55. Id. § 144.765(2)(a)(4)-(5).
56. Id. § 144.765(2)(b)(1).
57. Id. § 144.765(3).
58. Id. § 144.765(4).
59. Id. § 144.765(4)(a)-(c).
60. Mark Glaser & Chris Cherches, Environmental Policy by Local Government: Addressing the Threat of Superfund, in BARTSCH ET AL., supra note 23, at 66.
62. Id. at 68.
64. The TIF process generally uses the anticipated growth in property tax revenues that a development project generates to finance the public-sector investment for that project. TIF thereby does not lower the amount of tax revenues collected, nor does it impose special assessments on the development project. See BARTSCH ET AL., supra note 23, at 52-53.
65. Id. at 69.
66. As both individual case studies evidence, the identification and pursuit of PRPs often plays an important role in the ability of local government to assume the potential liability associated with brownfield development.
67. BARTSCH ET AL., supra note 23 at 69.
68. Deborah Cooney ET AL., Northeast-Midwest Institute Revival of Contaminated Industrial Sites: Case Studies 25 (1992).
70. Id. at 26.
71. Id. at 26-27.
72. Id. at 27.
74. Id. at 28.
78. U.S. EPA, EPA Guidance on Landowner Liability Under Section 107(a)(1) and De Minimis Settlements Under Section 122(g)(1)(b) of CERCLA, and Settlements With Prospective Purchasers of Contaminated Property, 54 Fed. Reg. 34235 (June 6, 1989).
79. See Superfund: Purchaser Agreements, Supplemental Guidance Will Ease Polluted Property Sale, Official Says, 24 Env't Rep. (BNA) No. 33 at 1522 (Dec. 17, 1993)(according to an EPA attorney, EPA entered into only 11 prospective purchaser agreements between 1989 and 1993).
80. See, e.g., 60 Fed. Reg. 18424 (Apr. 11, 1995); 59 Fed. Reg. 60014 (Nov. 21, 1994); 59 Fed. Reg. 41443 (Aug. 12, 1994); 59 Fed. Reg. 34437 (July 5, 1994); 59 Fed. Reg. 28077 (May 31, 1994); 58 Fed. Reg. 64766 (Dec. 9, 1993); and 58 Fed. Reg. 64584 (Dec. 8, 1993).
81. see, e.g., OHIO REV. CODE ANN. § 3746.12(A) (Baldwin 1994 & Supp. 1995).
82. See, e.g., 415 ILL. COMP. STAT. ANN. 5/4(y).
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