Feature Article

Building on Brownfields

Pearl Court housing complex under construction on a brownfield site in Portland, Oregon.

Source: Prendergast
An important strategy for protecting prime agricultural land, open space, and woodlands against the forces of sprawl is to build within existing urban areas and on previously disturbed sites. Unfortunately, many such sites suffer the scars of heavy use in a time when environmental controls were unknown or unheeded. Their soil and groundwater may be contaminated with toxic heavy metals or petrochemicals. Adding to the complications of cleaning up such sites is the burden of financial liability for the whole mess, which can fall on any owner, regardless of their role in causing the problem.

These sites have come to be known as “brownfields,” and their predicament has generated a flurry of initiatives offering assistance and support to those who would seek to reclaim them. Some fear that these solutions may further undermine human health and environmental safety by easing the requirements for their cleanup. The issues involved are not simple, but there has been tremendous progress from the not-so-distant past when any potentially contaminated site was taboo to developers.

What Are Brownfields?

The U.S. Environmental Protection Agency (EPA) defines brownfields as “abandoned, idled, or under-used industrial and commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination.” Both actual contamination and fear of liability for possible contamination have proven, in some cases, equally effective at dampening interest in such sites. As many as 650,000 sites pepper the country, according to one estimate by the U.S. Government Accounting Office. These sites are more concentrated in the older industrial areas of the Northeast and Midwest, but they exist throughout the country. Even when they don’t pose a direct health or environmental threat, they often remain eyesores, reducing the livability and economic potential of surrounding neighborhoods.

While polluter liability for contamination would seem a relatively straightforward issue, brownfields became embroiled in a legal morass thanks to a well-meaning attempt to solve a high-profile environmental problem. After environmental nightmares like Love Canal jolted the public consciousness into awareness of issues such as contaminated soil or groundwater, Congress enacted legislation known as “Superfund.” This 1980 law was intended to ensure action on the most severely contaminated sites by making anyone with current or past ownership of a property potentially liable for its cleanup. The legal clause “strict, joint and several liability” was used to ensure that any one party could be made responsible for the whole mess.

It was unclear exactly which sites might be contaminated enough to make it onto the Superfund National Priorities List, so an unintended effect of this law was to scare off anyone considering the purchase of old industrial properties. Since the liability could also extend to an owner’s financial backers, lending institutions also refused to get involved with such properties. The situation got worse throughout the 1980s as several court cases reinforced the worst fears of developers and their banks.

According to the EPA’s definition, contaminated sites still in active use are not considered brownfields even though many of the same liability and environmental cleanup complications apply. Also, most programs relating to brownfields exclude sites on the Superfund list, or sites with problems associated with leaking underground storage tanks, because these are covered by other specific initiatives and regulations.

Help with Brownfields

The unintended negative effects of the Superfund Law have been ameliorated through more recent legislation, regulations, and incentive programs. Since the early 1990s, various states and cities have implemented legislation and programs to encourage reuse of brownfields. In 1995 the federal EPA introduced it own program with a range of measures aimed at reducing the liability and stigma associated with many sites, and providing grants for pilot brownfield restoration projects. These efforts have expanded and evolved over the last few years, to the point where now nearly every state has specific programs or guidelines in place to promote brownfield redevelopment, and some municipalities are actively involved as well. While the threat of liability remains a factor, anyone considering buying or building on a brownfield site now has a wealth of resources to explore that can offer legal protection and assistance with cleanup.

Brownfield redevelopment laws, programs, and initiatives address issues that fall into three general categories: liability protection, financial support or incentives, and more flexible cleanup requirements. In some instances, a city or state will simply take ownership of an abandoned site, finance and manage the cleanup, and then recoup some of its costs from the sale and subsequent tax revenues generated. More commonly, however, regulators attempt to work with private developers on site reclamation and reuse.

Protection from Liability

Because the most obvious condition driving developers away from brownfields is the threat of open-ended liability for the actions of past owners, many brownfield development initiatives start with clarifying and mitigating that liability. The issue of lender liability has now been effectively addressed by a clause added to a fiscal year 1997 appropriations bill, according to Charles Bartsch, Senior Policy Analyst with the Northeast-Midwest Institute (a nonprofit group addressing issues of older industrial areas). “Technically it solved the problem, but many lenders don’t understand what it did and are still avoiding brownfields,” Bartsch says. Other issues are being addressed in many different ways at all levels of government and by the private sector—a few of the most common means are described here.

State and local governments have worked with the federal EPA on voluntary cleanup programs, which encourage owners of a site who may not be responsible for the original contamination to carry out specified cleanup activities in exchange for a commitment from regulators that they will not be held liable for further cleanup requirements. One way such commitments are conveyed is in the form of “No Further Action” or “No Further Remediation” letters.

A party considering purchase of a brownfield site might seek a “Prospective Purchaser Agreement,” which guarantees that the purchaser and subsequent owners will not be held liable for contamination from past activities. One of the first uses of this agreement in Oregon was the Pearl Court housing development (see Pearl Court Provides Affordable City Housing). According to developer Ed McNamara, it took some work to convince the various parties to accept this new approach, but “once we finally got the attorneys to realize what they had with the agreement, they were delighted.”

A relatively new means of dealing with environmental liability is to purchase environmental liability insurance. Although such policies are apparently quite popular, they are so new that there is no track record on payment of claims. From the broader perspective of environmental protection and care, these policies are somewhat counterproductive because they address claims from third parties but are rendered void if the policy holder voluntarily investigates the site and discovers a problem, according to environmental engineer Fred Boelter, Chairman of Boelter & Yates, Inc. “These insurance policies create an incentive not to look,” he says.

Financial Support and Incentives

Once home to a coal-powered electrical plant and more recently a junkyard, this 3.5-acre site in Kalamazoo, Michigan contained low levels of heavy metal and hydrocarbon contamination. The city financed site cleanup and sold an acre to MacKenzies' bakery.

Source: Marasco Newton Group
In many cases, financial incentives for development of brownfields go hand-in-hand with other efforts to revitalize inner cities. There are a few areas, however, in which the environmental contamination problems require specific approaches. First among these is the problem of who pays for the initial assessment.

Since the value of a potentially contaminated site is subject to enormous variability depending on the severity of the problem, investing in such an assessment involves more risk than many developers care to assume. While $20,000 or $30,000 for an investigation may not seem like a lot for a site potentially worth several million dollars, it is often too much to throw at a site that could be worth nothing until it is cleaned up. In the words of Bartsch: “The most problematic money to get is the money needed for initial site assessment.” Since 1995 the U.S. EPA has directed tens of millions of dollars into pilot projects across the country, and much of that money has gone to paying for such assessments on abandoned lots that civic leaders hope to reclaim and sell or lease to developers.

In addition to federal grants, many communities have raised money for brownfield cleanup by posting bonds to be repaid by the increased tax revenues that are expected from the reclaimed sites. Such “tax increment financing” became popular after some cities were forced to reduce property taxes on lots that had lost much of their commercial value due to the discovery of contamination problems.

Flexible Requirements for Cleanup

The EPA’s original Superfund legislation dictated total cleanup of a site to its pristine state or to ambient background levels. The assumption behind this requirement is that we don’t know how the site might be used in the future, so it should be clean enough for any use, including day-care or school settings where children might literally eat the soil. Cleaning up contaminated soil often involves removing it to a landfill or hazardous waste facility (depending on its contamination level) and replacing it with clean soil from elsewhere. Groundwater problems are dealt with by pumping out the water, removing the contaminants, and returning the water to the ground—a process that can take months or years to complete. The cost of implementing such cleanups commonly reaches $5 to $10 million for one- to two-acre (about 0.2 to 0.8 ha) sites—far more than the site is usually worth. Such expensive cleanup operations are usually only undertaken by public agencies or by a liable party that is forced into it by the courts.

In the context of these expensive stalemates, the concept of Risk-based Corrective Action (RBCA—pronounced “Rebecca”) emerged. According to Boelter, RBCA is based on the premise that toxic substances only pose a threat if a person or sensitive environment is exposed to them. For industrial use it may not be necessary to achieve the same level of cleanliness as would be needed on a residential site, for example. In addition, existing barriers such as a building or parking lot can be seen as protection against exposure to contaminated soil. With this approach, any source of contamination or toxic plume that might still be spreading would have to be removed, but stable soil with no route for exposure could be left in place. It may also be necessary to install an active soil-gas remediation system to prevent soil gases from getting into buildings (see EBN Vol. 7, No. 7).

The financial implications of such an approach are dramatic. On one industrial site in Chicago the cleanup estimate dropped from $7 million to $250,000 because an existing building, and the contaminated soil it covers, could be left in place. This reduced cleanup was conditional, however, because when the building does come down, the soil will have to be treated. It was estimated that this would happen in 10 years, and the present value of that future cost, or $800,000, was added to the total eventual cleanup costs. The site, which would have been worth $2.5 million clean, was then sold for $1.5 million after deducting the buyer’s cleanup liability. Boelter argues that without RBCA many contaminated sites would continue to be a threat to health and safety because they would remain entirely untreated. “In many instances the cost of cleaning up everything to pristine levels is so prohibitive that you would end up not cleaning it up at all,” he notes.

There is a potential weak link in RBCA, however. When less than total cleanup is endorsed as a solution based on current site conditions or the planned use of the site, those conditions must remain in place for the cleanup to remain valid. The conditions are usually documented through deed restrictions or covenants governing the use of the site. What remains unknown, according to Boelter, is how well those covenants will be enforced 10 or 20 years from now, when the use of a site changes.

Some environmentalists and community groups are also concerned that more flexible cleanup standards could increase the opportunities for good-old-boy agreements that benefit developers at the expense of environmental safety. “We’re concerned that, in the expediency to clean up and recapture sites, there not be a lot of deals made to do minimal cleanup and maximum development,” says Vernice Miller, Environmental Justice coordinator for the Natural Resources Defense Council. Miller argues that traditionally there has been little to no environmental oversight or enforcement in many inner-city areas. “That helps explain why there are so many [contaminated] sites where we live,” she notes.

As long as deed restrictions and covenants are honored in the future, the use of RBCA now may prove a good approach simply because technologies are changing so rapidly that cheaper and less expensive options will likely be available if further cleanup is needed later. Among the most promising evolving technologies is bioremediation, in which microbes or plants are used to break down or extract contaminants from the soil (see EBN Vol. 6, No. 8, p. 15). Bioremediation is already used extensively with hydrocarbon-contaminated soils, and research is progressing on other uses as well. One EPA pilot project in Trenton, New Jersey involves the use of mustard plants to extract lead from soil. If successful, bioremediation projects have a huge advantage over conventional approaches, in that they don’t require the storage and management (off-site) of large amounts of contaminated soil.

Non-Environmental Factors

Many federal and state brownfield redevelopment programs have been criticized for failing to involve local residents in development decisions affecting their communities. The EPA and other officials have responded to these criticisms by initiating nationwide dialogues around the issues of environmental justice and community vision. Fundamentally, however, many brownfield initiatives are based on the coordination of environmental enforcement between federal, state, and local governments. Whether or not local residents are being included in redevelopment decisions “depends on the relationship of local government with community based organizations,” according to Miller. She notes that the current administrations in New York and Detroit are not particularly open to community involvement, while “in Baltimore and Boston there is a whole different conversation going on.”

Many new factories will choose suburban greenfield locations to avoid constraints such as burdensome city bureaucracy, fear of inner-city crime, streets not designed for large trucks, and the lack of sites large enough for modern, horizontally flowing manufacturing operations. Boelter notes that, for cities that are in non-attainment areas for air quality standards, it can be difficult or impossible for a new factory to obtain the necessary air emission permits. As a result, many of the visions that civic leaders have presented of brownfields being restored to industrial and economic engines of prosperity are simply not viable, according to Boelter. “The idea that industrial sites can be returned to industrial use in cities is often a mistake,” he says. In many cases housing or light commercial development is a more appropriate and feasible use for these sites.

Part of an old railroad complex in Alexandria, Virginia, this site is being transformed into a commercial business area.

Photo: S. C. Delaney/EPA
Brownfield sites are sometimes grouped into three general categories, according to their potential for redevelopment. Sites in high-value locations are likely to be redeveloped by the private sector, with little support from government. Just a clarification of liabilities may be sufficient for developers to take on such properties. The more marginal sites are those that can benefit most from financial incentives and/or government participation in their cleanup. These are the sites in which real or perceived contamination might make the difference between restoration and ongoing neglect. Finally, there are sites that are not attractive to developers regardless of their environmental status. No programs addressing liability or financing will make these properties attractive until the other conditions affecting their value change.

Summary

Over the past two decades the specter of liability for high-priced cleanups that the Superfund law introduced has deterred many from reusing old industrial sites, but enough programs and initiatives are now in place to counter that deterrent. The high cost associated with both the cleanups and the liability for them may be helping to drive our economy towards what architect William McDonough has called the next industrial revolution, in which hazardous releases are eliminated because toxic ingredients are designed out of the system. And as we continue to deal with the messes of the past, new technologies are evolving to help us restore damaged sites in more elegant ways than merely stockpiling the tainted soil elsewhere.

Within the past three years the problems associated with suburban sprawl have gone from being a fringe environmental issue to a cause with broad awareness in the American public. Legal and financial pitfalls still abound, so brownfield sites should be approached with care and eyes wide open. But environmental problems are becoming less and less of an obstacle to brownfield redevelopment, while the environmental benefits of reusing these sites are becoming more and more obvious.

For more information:

 

U.S. Environmental Protection Agency

Office of Outreach & Special Projects

Mail Code 5101

401 M Street, SW

Washington, DC 20460

202/260-1233

www.epa.gov/brownfields/

Northeast–Midwest Institute

218 D Street SE

Washington, DC 20003

202/544-5200

www.nemw.orgThe Brownfields Report, biweekly newsletter edited by Peggy Roberson;

King Publishing Group, Washington, D.C.; 202/638-4260,

www.kingpublishing.com

Brownfields Redevelopment: Programs and Strategies for Rehabilitating Contaminated Real Estate by Mark S. Dennison, 1998, 407 pages; Government Institutes, Rockville, Md.

Risks and Rewards of Brownfield Redevelopment by James G. Wright, 1997, 32 pages:

Lincoln Institute of Land Policy

113 Brattle Street

Cambridge, MA 02138

800/526-3873

www.lincolninst.edu

 

Published March 1, 1999