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Rochester Developer Successful in Challenge to DEC’s Denial of Admission into Brownfields Program

Client Advisory

January 11, 2008
by Ethan I. Strell and Michael Davis

In Lighthouse Pointe Property Assoc. v. DEC, No. 07/9731 (Sup. Ct. Monroe Cty., Dec. 20, 2007), a Rochester court held that the decision of the Department of Environmental Conservation (DEC) to deny a developer admission into the New York State Brownfield Cleanup Program (BCP) was arbitrary and capricious because the site contained a number of contaminants exceeding DEC’s cleanup standards. This is the first case setting aside a denial by DEC of entry into the program; as discussed below, two downstate judges (in New York and Suffolk Counties) upheld denials by DEC in 2006.[1]

The developer in Lighthouse Pointe sought to develop land on the Genesee River near Lake Ontario in the Town of Irondequoit, land that had formerly been used as a solid waste landfill for the City of Rochester. Testing showed that the site contained a number of contaminants exceeding various standards. The developer applied for entry into the BCP, which DEC denied. The BCP can provide liability relief, tax incentives, and other significant benefits for property owners. 

Brownfields are defined as “any real property, the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant.” ECL § 27-1405(2). DEC’s regulations define a brownfield as having the following two elements: “(i) there must be confirmed contamination on the property or a reasonable basis to believe that contamination is likely to be present on the property; and (ii) there must be a reasonable basis to believe that the contamination or potential presence of contamination may be complicating the development, use or re-use of the property.”  6 NYCRR § 375-3.3. The statute also provides that DEC may deny a request for participation in the BCP if it determines that “the public interest would not be served by granting such a request,” and lists a number of nonexclusive factors that the DEC may consider. Those factors, however, all concern the worthiness of the applicant, not the site. ECL § 27-1407(9). The DEC has issued guidance on eligibility in its “Brownfield Cleanup Program Guide,” where it sets forth various factors it will consider in determining whether a site is contaminated and whether contamination complicates the redevelopment of a site. 

While DEC conceded the presence of contaminants on the Irondequoit site, it argued that the contamination was minimal and the only complication of development was the reluctance of investors to risk money in the project. The DEC did not believe an investor’s reluctance should be a factor in determining whether a project has become “complicated.” 

The court held that DEC’s decision was irrational, finding “no rational basis to conclude that the levels of contamination at this site were ‘minimal.’” The court based its decision principally on the fact that there were exceedances of DEC’s soil cleanup objectives, or SCOs, which are the maximum allowable levels of various contaminants after the completion of a cleanup. The developer’s data showed exceedances of the SCOs for benzene and arsenic, lead, mercury, and other metals. DEC argued that the SCOs served only as cleanup objectives, not as criteria for determining eligibility into the BCP. In an affidavit, a DEC official argued: 

To use SCOs as “screening criteria” for eligibility in a remedial program would produce absurd results. Soil samples from any parcel in any city in the State can reasonably be expected to produce multiple exceedances of SCOs for a number of contaminants that are virtually ubiquitous or very widespread in urban settings, and non-urban areas as well. This fact puts to rest petitioner’s contention that DEC’s establishment of SCOs binds it to accept properties showing exceedances into the BCP program.

The court strongly disagreed:

This argument flies in the face of logic. [DEC] would have the Court rule that the SCO’s should have no bearing whatsoever in determining whether a site is initially admitted into the BCP, yet these same standards should be the ultimate factor in determining whether an applicant receives a liability release after completion of remediation. The court can find no legal authority to support this position.

The court continued that since the SCOs were state-promulgated standards, they should be used as a benchmark, and that samples exceeding the SCOs “should be, by law, designated as contaminated.” Moreover, the court held that the plain language of the statute evidenced a low threshold for admittance into the BCP, requiring only the “potential presence” of a contaminant that “may complicate” development. The court noted that it did not hold that “DEC had no discretion to determine that SCO exceedances were so minimal and remote that contamination was doubtful, but having done so they were required to state the reasoning they employed in reaching such a decision.”

As noted above, two downstate courts came to a different conclusion, although those cases are distinguishable. Nevertheless, an appeals court will likely have to decide the limits of DEC’s discretion. In Jopal Enterprises, while the court upheld DEC’s discretion, it also found that there was “substantial evidence in the record to support [DEC’s] determination that the contamination… was minimal and did not complicate its redevelopment or reuse.” In 377 Greenwich, the lengthiest of the three decisions, the court held that the language of the statute and its legislative history gave DEC considerable discretion, and stated that the SCOs “are but one factor” that DEC considers. Importantly, however, the applicant in 377 Greenwich had remediated the site and had gone forward with other aspects of the redevelopment before the DEC had decided to deny entry, indicating that the redevelopment was not complicated by the presence of contaminants. 


Questions regarding this client advisory may be directed to Ethan I. Strell at (212-238-8632, strell@clm.com) or Michael C. Davis (202-623-5710, mdavis@clm.com).


Endnote


[1] 377 Greenwich LLC v. DEC, No. 101617/06 (N.Y. Cty., Nov. 15, 2006) and Jopal Enterprises LLC v. DEC, No. 00803-06 (Suffolk Cty., July 31, 2006). 



Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2017 Carter Ledyard & Milburn LLP.
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