PrintShare


Publications

New York Brownfields Update

Client Advisory

August 27, 2010

The New York State Department of Environment Conservation (“DEC”) has issued two documents this summer that should have a substantial impact on contaminated properties in the State, particularly in New York City.

New York City Local Brownfield Program MOA

DEC and the New York City Mayor’s Office of Environmental Remediation (“OER”) have finalized a memorandum of understanding (“MOA”) that sets forth procedures for the City to implement its newly established “New York City Local Brownfield Program.”[1]   The New York City Council established the local brownfield program in 2009 to facilitate remediation and redevelopment of lightly contaminated sites in the City that are not eligible for the State’s Brownfield Cleanup Program (“BCP”). Although the BCP offers strong State liability protection and substantial tax credits, DEC has traditionally denied admission to lightly contaminated sites or sites contaminated only with “historic fill.” 

The City's local brownfield program had been, however, in regulatory limbo because enrollees could not be certain to what extent DEC would “release” City program participants from State liability. The recently signed MOA answers the question, and it is now up to lenders, developers and investors to assess whether the release goes far enough.

Under the MOA, successful participation in the City’s brownfield program will earn the following “release” from future State liability: 

Generally, NYSDEC agrees that a site is of no further interest and it does not plan or anticipate taking administrative or judicial enforcement action seeking to require a removal or remedial action under CERLCA, 42 U.S.C. §9601 et seq. or the ECL at a site addressed by this Agreement while (1) the site remains in compliance with the [local program] and the terms of any local brownfield cleanup agreement with OER, or (2) when a site investigation or remediation has been completed in accordance with the [local program] and if the site is the subject of a notice of completion.

Nothing herein limits NYSDEC’s authority to take action where it deems appropriate.

While this release is obviously limited and leaves much to DEC’s discretion in terms of re-opening a cleanup that has received a OER certificate of completion, it is consistent with the “release” given to participants in DEC’s now-defunct Voluntary Cleanup Program.

Given that eligible sites must have limited contamination to begin with, it is unlikely that DEC will have the time or inclination to aggressively re-open a city-program remediation for minor infractions. Additionally, although the liability release in no way binds the New York State Attorney General, it is very unlikely that the AG would pursue enforcement without the support of DEC. [2] 

Besides the inherent limitation on the State liability “release” provided under the MOA, there are two other potential risks for applicants to the local brownfield program.

  • A participant does not obtain a release until it completes the local program. While the term “completed” is not defined, it presumably means when the remedial actions have been approved by OER as evidenced by a “certificate of completion.” However, many remedial programs require continued oversight and maintenance, which can extend from 5 to 30 years after issuance of the certificate of completion. If required O & M is discontinued DEC would (justifiably) have the option to hold the participant liable for resulting remedial costs.
  • OER must also promptly report to DEC any “suspected inactive hazardous waste disposal sites” identified by OER as part of its local brownfield program. This is likely to discourage some property owners from coming forward to take part in the City program. 

Under other portions of the MOA, DEC is delegating much of the technical review and oversight responsibilities to OER, which has technical staff dedicated to the local brownfields program.[3] OER will take the lead to shepherd cleanup projects through a City-led fast track review and remediation process and provide technical assistance. OER is, however, required to observe elements of the statewide BCP regulations, including DEC’s regulatory procedures for selecting remedies and achieving cleanup standards appropriate for the properties’ intended uses.[4]

Despite the limitations on the local brownfield program and the MOA, the program is likely to fill a void in the City for developers (and lenders) who are eager for some governmental sign-off on remediation but cannot gain admittance to the BCP.

State Brownfield Cleanup Program Guidance

DEC has issued a new, streamlined guidance document for the BCP, “DER-32, Brownfield Cleanup Program Applications and Agreements.” This guidance supplements the outdated BCP Guide from 2004 and 2005 and includes updated BCP agreement and application forms. 

DEC issued the new guidance following two major changes to the BCP. First, 2008 legislative amendments to the BCP statute sharply limit applicants’ ability to earn tax credits for site development costs that far exceed site remediation costs.[5] Second, in 2010 the Court of Appeals ruled that the agency had exceeded its authority by applying nonstatutory criteria in making BCP application decisions.[6] These two developments are something of a wash, possibly easing entry for many sites into the BCP but making the tax consequences less attractive for developers and thus less dire for the State.

The guidance essentially lays out DEC’s increased demands for information, most likely a fall-out from the Court of Appeals decision, mentioned above, which identified a “low eligibility threshold” for the BCP. Key components of the guidance include the following:

  • Applicants must provide increased information on the program uses of the site. If the proposed land-use does not comply with existing zoning, the applicant must make a heightened showing of (a) a plan to obtain a zoning change or (b) a remedy that is more protective than existing zoning would require.
  • Applicants are encouraged to coordinate any necessary land-use changes with the environmental impact review process under the State Environmental Quality Review Act (“SEQRA”).[7]
  • Applicants must provide more site information to allow DEC to determine whether the site truly qualifies as a brownfield.
  • Even if a non-responsible party is added to the application (i.e., a “volunteer”), DEC will still treat the application as if it were coming from the potentially responsible party (i.e., a “participant”) who played a role in the contamination. (The BCP imposes heightened obligations on participants.)

***

These developments, including the new guidance, court decision and tax credit amendments may add some certainty to the BCP application process, so that more applicants are granted admission to the program but the financial consequences for the cash-strapped State of New York are less severe.[8] Conversely, for those properties in New York City that are still not eligible for the BCP or do not need the State tax credits, the New York City Local Brownfield Program will add a viable option.  


Questions regarding this advisory should be addressed to Victor J. Gallo (212-238-8771, gallo@clm.com) or Christopher Rizzo (212-238-8677, rizzo@clm.com).


 

Endnotes

[1]  New York City Brownfield and Community Revitalization Act, Int. 0021-2006. Regulations for the new law are codified as a new Chapter 14 to Title 43 of the Rules of the City of New York. The State’s 2003 Brownfield Cleanup Program is codified at N.Y. Envtl. Conserv. Law § 27-1401 et seq.   New York City and the NYS Department of Environmental Conservation signed the MOA regarding the local program on August 5, 2010.

[2]  The AG may, however, have an obligation to recover costs if monies had been expended from the State’s Spill Compensation fund in connection with the site. Additionally, the release does not purport to resolve federal liability under the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601 to 9675.

[3]  DEC is authorized to delegate certain functions to local governments to enhance environmental protection. See Envtl. Conserv. L.  § 3-0301(3)(p).

[4]  See 6 NYCRR §§ 375-1 and 375-3. See also DER-15 Presumptive/Proven Remedial Technologies (February 27, 2007).

[5]  Carter Ledyard & Milburn LLP published a client advisory on the tax credit amendments on July 7, 2008, “New York Moves Forward with Three Important Environmental Initiatives on Climate Change, Property Taxes and Brownfields.” Tax credits include 22-50% of remediation expenses, depending on the location of the property and level of clean-up achieved.

[6]  Lighthouse Pointe Prop. Assocs. v. New York State Dep't of Entl. Conservation, 14 N.Y.3d 161, 924 N.E.2d 801, 897 N.Y.S.2d 693 (2010).

[7]  The BCP itself is not subject to SEQRA, but related governmental approvals may be.

[8]  Since the program’s inception in 2004, the DEC has received 459 applications and approved 320. The agency has issued certificates of completion, which are the triggers for obtaining tax credits, for just 68 sites. These figures are provided by DEC and are current as of March 31, 2010. 



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.
© Copyright 2010

Related practice area:


© Copyright 2017 Carter Ledyard & Milburn LLP