NEW LAW PROMOTES REDEVELOPMENT OF OLD COMMERCIAL AND INDUSTRIAL PROPERTIES GRANTS FOR ASSESSMENT AND REMEDIATION

On January 11 President Bush signed into law the “Brownfields Revitalization and Environmental Restoration Act of 2001”. The Brownfields legislation as it is known is designed to foster the redevelopment of old unused or abandoned properties, mostly in urban areas, into viable and productive facilities or greenways to be used for public enjoyment and recreation.

The law authorizes the United States Environmental Protection Agency (EPA) to award grants to states to establish programs designed to respond to releases of hazardous substances. In addition to establishing response programs, these grants can also be used as loans for the remediation of Brownfield sites. In order to establish these programs, Congress has appropriated $50 million each year for the next five years. Congress also has authorized EPA to give grants to states, local governments and government sponsored agencies to inventory, characterize and assess Brownfield sites. Up to $350,000 per site is available for this. In addition, loans up to $1 million per site are available for actual remediation activities. Additional grants may be awarded in
subsequent years.

Liability Protection
The new law also gives liability protection to prospective purchasers as well as adjacent and innocent landowners. Under the old Superfund law, a person buying property could be found responsible and held liable for the cleanup of environmental contamination originating prior to the property being purchased or, in some cases, if the contamination originated beyond the property boundary. These cleanups have cost unsuspecting buyers and developers millions of dollars.

Because of this, prospective purchasers and land developers shied away from old properties and tended to look for undeveloped parcels for constructing new commercial and industrial facilities. The result was that properties in highly desirable established industrial locations contained old buildings and factories, which were either abandoned or not utilized to their full potential.

Under the new Brownfields law, if sites with contamination are cleaned up according to a state or local response program, EPA cannot impose the Superfund Law to recover additional response costs or impose additional liabilities on the new owner or developer.

Another provision of the new law is that a prospective purchaser of property who did not cause the pollution on the property and was not aware of it “shall not be liable”. There are certain requirements that must be met to qualify for this exemption. Perhaps the most important of these is the Buyer must conduct a “Phase I” Investigation of the property to determine the previous ownership and uses of the property and the potential for past contamination.

The standards and procedures for this investigation are to be specified by EPA within two years. In the meantime, the procedures contained in the American Society for Testing Materials (ASTM) Standard E1527-97 or “Standard Practice for Environmental Site Assessment: Phase I Environmental Site Assessment Process” will be considered adequate to obtain the liability exemption.

The new law also exempts from Superfund liability, purchasers of property contiguous to a contaminated site. The new owner must meet certain conditions such as cooperating with those conducting a cleanup. Here also, the purchaser must conduct a Phase I environmental site assessment to qualify for the liability exemption. In this case, even if contamination is found, the liability exemption is still applicable but remedial efforts may be prudent before making improvements to the site.

These changes in the law make an environmental assessment prior to the purchase of property absolutely necessary. If a subject property is suspected of being contaminated, an assessment of the scope of a response program to bring the property within acceptable state and local requirements should be prepared. This assessment can be evaluated against the assigned property value to determine the potential for a viable real estate transaction. If the project is economically viable, the developer can proceed without the fear of additional costs being imposed under Federal Superfund Law.

C2 REM has assisted many clients in all phases of the assessment, remediation and
development process. If you would like more information regarding the information
contained in this review or about C2 REM, please call us at 949-261-8098 or visit our
website at www.c2rem.com.