Recent Projects Indicate Oppertunities for Redevelopment of Brownfields

by Burr & Forman

Our firm has recently represented clients in two projects associated with brownfields that may signal an increased willingness on the part of regulatory authorities to facilitate redevelopment of contaminated properties.  As individuals and companies around the nation began to reassess the impacts of sprawl, the ability to redevelop brownfield properties provides an opportunity to make these properties productive to the benefit of the new owner directly and the community generally.

One project involved the redevelopment of a portion of an abandoned automobile manufacturing site.  This former General Motors property had been placed in a trust along with other properties as a part of the bankruptcy proceeding that restructured GM.  The properties were reassessed and generally cleaned up using funds from a trust and are now being made available for evaluation by prospective purchasers.  Most of the properties have existing infrastructure and access and, from an environmental perspective, many have been remediated  to industrial use standards. More to the point, regulatory officials seem inclined to actively encourage and facilitate redevelopment, in part by providing prospective purchasers with assurances that they will not be liable for existing contamination.  Many of these properties are being remediated under an EPA lead, and EPA can be moved to act promptly on requests from prospective purchasers for assurances about the limitation of liability.  Thus, after some negotiation, we were able to obtain a “comfort letter” from the EPA Regional Office that focused on the particular property in question and provided the type of assurance generally now allowed under the Bona Fide Prospective Purchaser Status set out in the Federal Superfund (“Comprehensive Environmental Response Compensation and Liability Act”).  The process can move fairly quickly with concerted effort, and we were able to obtain both an initial letter and a follow-up clarification in a matter of days.  The attention such requests receive demonstrates the apparent willingness of the Agency to facilitate redevelopment, which, in turn, not only facilitates the initial decision about acquisition, it also speeds development schedules if acquisition is pursued.

Another example involves actions by state agencies regarding the redevelopment of properties that may be affected by RCRA (hazardous waste) permits and investigations.  Increasingly, as properties regulated by RCRA requirements begin to change hands, one issue that could impede redevelopment is the applicability of RCRA to entire properties if there are RCRA permitted units such as landfills on any portion of the property.   The effect of this has tended to inhibit redevelopment of portions of such properties under state brownfields programs because many of them are, by statute, not applicable to sites that are subject to RCRA permits or ongoing remediation activity.

However, as demonstrated by a recent project we assisted with, state agencies are willing to revisit this policy and have, in particular situations, allowed such sites to be divided in a manner that separates the areas specifically subject to RCRA permits or related activity from the remaining portion to the property.  In our case, that remaining portion of the property was then able to be qualified under the state brownfields program thereby providing a prospective purchaser the benefit of statutory limitations on liability for existing contamination.  We have been directly involved in one such project, and others are under consideration.  I would emphasize that this approach is in an early phase, and there remains some disagreement among regulators about some important details.  While the states have led the effort, EPA has tended toward the position that any portion of a property regulated under RCRA must remain within that regulatory sphere, and thus could not be segregated for the benefit of redevelopment under a brownfields program.  Nonetheless, EPA has not moved to prevent such interpretations at the State level.

While the regulatory setting seems to be evolving, including some continuing discussions between EPA and the states, these examples are encouraging for the prospect of redeveloping brownfields and will, hopefully, give renewed vigor to such efforts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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