Following is an article from Law360 that I have posted with permission from the publisher because it also discusses some of the ideas that I have been circulating about reforming the CERCLA disclosure obligations, AAI and other issues.

Larry

By Jesse Greenspan

Law360, New York (February 22, 2010) -- After some good years, brownfields redevelopment has taken an even bigger hit than other types of real estate development and fallen off drastically, prompting calls for reform.

Until recently, brownfields redevelopment was going strong, boosted by demographic shifts and the fact that developers and lenders had grown used to the regulatory process, according to Evans Paull, principal at Redevelopment Economics, a consulting firm that specializes in brownfields and sustainable urban redevelopment.

But not many cleanups are happening now that the market is slumping, experts said.

“This is probably the first year since the first brownfields programs were rolled out that we've created more brownfields than we've cleaned up,” said Larry Schnapf, an environmental lawyer with his own practice who also teaches at New York Law School.

David J. Freeman, chair of the New York environmental practice group at Paul Hastings Janofsky & Walker LLP, said that because property values had gone down, developers could get deals without having to buy contaminated sites. Financing also isn't readily available, and many states have cut back on incentives due to the budgetary crisis, he said.

“Re-use of land is one of the most environmentally conscientious things one can do,” Freeman said.

However, brownfields require substantial investment up-front for such things as site testing and remediation, according to Paull.

“A lot of brownfields projects are big, change-of-use-type projects,” he said. “It's oftentimes pretty significant industrial parcels that are being redeveloped for nonindustrial use.”

The U.S. Environmental Protection Agency estimates that there are more than 450,000 brownfields — sites where redevelopment has been complicated by the presence or potential presence of hazardous pollution — around the country. Their cleanup and reconstruction can help boost local tax bases and job growth and ease pressure to develop open land, according to the EPA.

Legislation reauthorizing the brownfields program, which was launched in 1995 and has since awarded hundreds of millions of dollars in assessment grants, revolving loan fund grants and cleanup grants, is expected to be introduced soon.

Another bill, a proposed amendment to the Comprehensive Environmental Response, Compensation and Liability Act, was introduced in August 2009 by Rep. Louise Slaughter, D-N.Y. If passed, entities deemed eligible under CERCLA's provisions — including local governments, nonprofits and others — could seek up to $500,000 per site to prepare abandoned waterfront industrial zones for redevelopment, according to the bill.

There is also some talk that brownfields elements could be included in a jobs bill or that they could be tied to renewable energy, according to Paull.

However, Schnapf said it was apparent that no new environmental legislation would come out of Congress this year, and that it was up to the EPA to make changes.

He recommended tweaking CERCLA so more companies would be forced to disclose historic contamination that they discover. Along those lines, he expressed support for strong penalties for nondisclosure.

Schnapf also said the EPA should make sure every state brownfields program had minimum standards so that “we don't have a race to the bottom,” adding that there should be financial assurance for all post-remedial obligations exceeding two years.

In addition, banks that sell securitized loans should perhaps not be entitled to protection under the secured creditor exemption of CERCLA, according to Schnapf.

“The brownfields movement relied on the marketplace to clean up sites,” he said. “Because the marketplace is broken, most of those cleanups are not going to take place unless they're forced to take place.

“I think we're going to have turn back toward the center with a little more enforcement ... to clean up these sites,” Schnapf added.

Schnapf said he would propose certain changes at an EPA listening session on March 17. However, it would not be a good idea to go back to the “command and control” era of the 1980s, when real estate companies and banks feared they would be held liable for the cleanup of any contaminated properties they controlled, so they became more apt to develop greenfields, he said.

CERCLA “basically drove all of the investment to the suburbs because the regulatory approach was too slow, too unpredictable, too attorney-intensive,” Paull said.

With so many properties that had been stigmatized, the EPA decided in 1995 to come out with its brownfields program. Seven years later, Congress passed the so-called brownfields amendments to CERCLA, which created a new landowner liability protection for bona fide prospective purchasers.

Meanwhile, states began implementing their own brownfields programs, which included such things as income tax credits, bond issues and state-facilitated tax increment financing.

“The incentives are intended to offset some of those extra costs that one could incur in assessing or ultimately cleaning up a brownfield,” said Pamela D. Marks, a principal at the law firm Beveridge & Diamond PC. “So it levels the playing field and creates some balance.”

Marks said, however, that it would be helpful for states to streamline environmental assessments and cleanups.

“Having some sense of certainty early on in the development process can help decision-making,” Marks said.

Paull also said he felt that brownfields programs could use some fine-tuning, such as more funding, broader site eligibility, and ways to lighten the load for state and local governments that acquire contaminated properties.

The U.S. Conference of Mayors and certain nonprofits, including one that employs Paull as a senior policy analyst, have made similar recommendations.

Brownfields redevelopment will not stay down forever, attorneys said.

“I expect over the long term it will come back because land is still ... they're not making any more of it, and some of these properties are well-located,” Freeman said. “We just need a good economy and financing and some modest incentives to get those properties back to a situation where developing them is attractive.”

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