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Programs to Remediate and Develop Brownfields

August 5, 2003

Recent developments in federal and state law, as well as creative transactional lawyering, have made it possible for Brownfields to be developed in such a way as to protect the parties from onerous potential liabilities.

The Brownfields Revitalization Act, referred to above, amended CERCLA by providing significant liability protection for Brownfield developers, including prospective purchasers, innocent landowners, and owners of contiguous properties. In the new law’s most significant change to the system of joint, several, strict, and retroactive liability, it exempts bona fide prospective purchasers of contaminated properties, provided that such purchaser “does not impede the performance of a response action or natural resource restoration.” It also provides similar protections to qualified owners of properties contiguous to contaminated sites. The Act removes a party who qualifies as a “bona fide prospective purchaser” or as a “contiguous property owner” from CERCLA’s definition of a PRP. It also clarifies the existing “innocent landowner” defense in CERCLA to allow current owners to rely (pending publication by the U.S.E.P.A. of its own regulations) on site assessment standards published by the American Society of Testing of Materials (“ASTM”) to demonstrate their having made “appropriate inquiry” about the property before its purchase. Further, the Act provides that parties, even current owners, who do not qualify as “innocent,” but who clean up contaminated sites under state programs (as discussed below) generally need fear no further cleanup enforcement by the U.S.E.P.A. The Act also provides $200 million for states to develop and expand environmental cleanup programs. By mitigating the legal risks associated with Brownfields development, this law is intended to foster Brownfields redevelopment projects.

Further, more than 40 states have adopted, either by statute or administrative directive or regulation, programs for the voluntary remediation of Brownfield properties. These programs facilitate the sale and redevelopment of Brownfields by allowing cleanups based on site specific use and risk-based standards in lieu of an inflexible standard which may be technologically or financially infeasible. These programs also provide binding government approvals which allow parties in real estate and commercial transactions to quantify risk. In Pennsylvania, for example, buyers can receive from the Pennsylvania Department of Environmental Protection (DEP) covenants not to sue pending DEP’s approval of a seller’s cleanup action. Even in states without voluntary cleanup programs, Brownfields development and avoidance of liability associated with Brownfields may be achieved within the context of traditional transactions through the use of appropriate liability shifting, indemnification, and insurance mechanisms.

In the international arena countries all over the world have begun to take measures to recover from the ill-effects of unfettered industrialization and the consequences of war and civil strife. Vital programs for the redevelopment and reuse of Brownfield properties exist in Canada, the United Kingdom, Germany, the Czech Republic, and Lebanon, to mention only a few.
The largest of all areas of Brownfields activity may be the process established by statutes dealing with the United States government’s Base Realignment and Closure (“BRAC”) program. In order to soften the economic distress to local communities resulting from military base closures, Congress has created mechanisms to encourage the commercial reuse of such property. These bases have extensive infrastructure associated with them which present attractive redevelopment opportunities. Many BRAC properties, however, also come burdened with significant pollution from prior activities. Thus, “local reuse agencies” and developers need to ensure that the government retains the liability for cleanup and to draw a clear demarcation separating new activities at the site from pollution left over from the past. Moreover, while the exact cleanup requirements and mix of liability restrictions or incentives generally vary according to the unique facts of each base, developers will always seek the maximum availability of funds from the government to assist in the transition of a BRAC site to private sector ownership or operation.