At the beginning of this year, when I originally agreed to write this article for the New York State Bar Association, I thought that surely by early May, 2002, with the passage of a new federal brownfields law, ⁽¹⁾ there would be a clear indication whether passage of a comprehensive environmental reform bill in New York was likely or unlikely this session. However, at the time of this writing (week of April 29-May 3, 2002), there is danger the State Legislature will finish the 2002 session at the end of June without passing a comprehensive bill to reform the State's environmental remediation programs - the State Superfund program, Voluntary Cleanup Program and Oil Spills Program.

New York's legislators, who are in regular session from January to June working on legislation and the State's budget, are likely to fully or partially refinance the State's Superfund program, but the broader issue of brownfields ⁽²⁾

may never be addressed. To the extent this article has an underlying theme, it is that Superfund should not be refinanced without a statutory fix to the brownfield problem facing our State. New York is the only remaining former industrialized state without a statutory brownfield program, and one of only two states in the country without a formalized comprehensive brownfield program. ⁽³⁾

Why would it be so terrible for the legislature to proceed with the refinancing of Superfund, which has been bankrupt for more than one year, and is clearly in need of refinancing, without addressing brownfields this year? Because the critical need to refinance the Superfund program is the type of crisis significant enough to prompt the need for comprehensive reform. If Superfund is refinanced this year without a fix to the State's brownfield problem, it is not clear what will prompt the Legislature to pick up the brownfield issue either later in this session, or next year.

This is not meant to suggest that the brownfields issue facing our State is any less of a crisis than Superfund. Some would argue that it is more of a crisis. State Superfund sites are identified contaminated sites, which are already under the New York State Department of Environmental Conservation's (NYSDEC) enforcement authority, and typically are at some stage of investigation or remediation. Brownfields sites may not yet been identified by a State agency. Often, these sites are owned by someone who might suspect their site is contaminated, but right now is hiding in the tall grass because they have little incentive to come forward to voluntarily identify and cleanup their site or market it for sale. If they do try to sell the site, the buyer will seek to perform standard environmental due diligence in the form of a site assessment, which may kill the deal.

While the existing non-statutory Voluntary Cleanup Program has been useful, in certain circumstances is very similar to the Superfund Program. ⁽⁴⁾ Brownfield sites directly impact our communities and impede our State's economic development. Brownfields are the sites that give our cities the appearance of decay, preventing new growth inside our urban centers and pushing the minimal growth that does occur to greenfields. So brownfields present as much of a crisis as Superfund sites, since there are more of them, and they are generally closer to home.

This article will begin with a summary of the current status of negotiations on a comprehensive reform bill. For sake of comparison, the article will continue by highlighting the statutory programs in our neighboring states, which in some cases, are on their second and third rounds of legislative amendments. The article will end with a description of the five critical elements necessary for a successful brownfields program for New York. It is this author's opinion the 2002 legislative session should not end without a new law, which at a minimum, includes these five essential elements.

I. What is Happening this Year and Where Are We Going?

In January 2002, anyone and everyone interested in the Superfund/brownfield policy debate in Albany was saying this would be "the year" for comprehensive reform. The 2001 legislative session, which never officially ended, produced a number of comprehensive reform bills ⁽⁵⁾ , some sponsored in only one house and others in both houses. The concepts contained in these bills could be the basis to forge a compromise position.

In addition, several significant events took place the early part of this year, including the passage of the new federal Brownfields Revitalization and Environmental Restoration Act on January 11, 2002. In the midst of a war on terrorism, the issue of brownfields was considered such an important economic development issue for the country that the President asked Congress to negotiate final legislation on the issue, and they complied. Certainly, if Congress could do it, the New York State Legislature should be able to as well.

Possibly an even more significant event at the beginning of this year was the change in leadership in the State Assembly's Environmental Conservation Committee. Assemblyman Richard Brodsky (D-Westchester) was promoted to the Assembly Corporation's Committee, and Assemblyman Thomas DiNapoli (D-Great Neck, Long Island) became the Chairman of the Environmental Conservation Committee. Assemblyman Brodsky for years was the chief opponent in the Assembly to any comprehensive reform legislation. Assembly Brodsky's bill (A.9265-A) last year finally recognized that liability relief and an expedited process were necessary for a successful brownfield program. However, he remained vehemently opposed to any proposal that would alter the state's current regulatory cleanup goals, which require parties to attempt to achieve "pre-disposal conditions," ⁽⁶⁾

The combination of a new "EnCon" chair, and new federal law led many in Albany to believe 2002 would surely be the year for comprehensive reform of the State's remedial programs. 

But January, February and March 2002 came and went. The Governor reintroduced his budget bill without a single word change, despite extensive criticism of the bill, even by the Senate. NYSDEC's position on the new federal law also began to evolve with a "business as usual" approach. NYSDEC indicated it would not change anything in its current policy program despite a complete federal law policy shift away from the Superfund enforcement model to a state voluntary cleanup program model enhanced by federal financial incentives. 

In the interim, NYSDEC admits that it has been applying the Governor's bill as if it is a statutorily enacted program. As a result, there seems to be a bit more stability and consistency to the various state remedial programs than several years ago, but the Governor's bill is not yet the law of the state.
As environmental attorneys, we have been practicing "environmental law" in a vacuum, not knowing from day to day what the State's remedial programs will bring. NYSDEC staff are regulators without regulations. The State Legislature and the Governor must enact a law so that we may once again practice our environmental law profession with confidence that we are providing advice based on statute, not mere policy. A significant mass of support seems to exist for permanent statutory change. So where are we at this moment?

A. What's Happening in the Assembly?

Two weeks ago, the NYS Assembly passed a Superfund-only refinancing bill (A.11048). The bill establishes a new bond act to fund the Superfund program at the level of $200 million per year for 10 years. This is a significant increase over the budget proposed in Governor's bill for the program. According to a report prepared by The Business Council, ⁽⁷⁾ this budget would present the largest state Superfund budget in the country at a time when the private sector is taking over cleanups through voluntary cleanup programs in most states, thereby reducing the need for public expenditures under state Superfund programs.

The real problem with the bill is not that a proposal to refinance Superfund has been put forward, but that there is not a word on brownfields! The overall strategy of the Assembly ⁽⁸⁾ over the last seven years has been to separate the Superfund refinancing issue from brownfields. But, as noted above, if the Assembly is successful in bifurcating brownfields and Superfund over the next two months, it is quite possible that it will not be possible to get the critical mass support necessary for comprehensive brownfields reform next year.

B. What's Happening in the Senate?

Brownfield advocates are hoping the Senate can carry the day on brownfields. The Senate appears outwardly disappointed the DiNapoli bill, which represents the Assembly's latest position, lacked a brownfields piece. The Senate seems to understand the importance of the issue for economic development, and some Senate members appear to feel very strongly that Superfund should not be refinanced without comprehensive reform. Whether the Senate will hold firmly to their current position that Superfund should not be refinanced without a comprehensive reform bill is anyone's guess. Those of us who care deeply about the issue certainly hope they will stick to their position, because one issue drives the other if they are not bifurcated. 

The Senate is also in the best current position to craft the necessary compromise bill. The Senate may not like this position, but one of the branches needs to take the leadership role on this issue, or the session will end without reform. 

C. What's Happening in the Governor's Office?

The Governor's bill has not changed in three years, but thinking on brownfields has significantly advanced during this time. States that have previously passed laws similar to the Governor's proposal are in the amendment stage because the programs needed necessary legislative fixes. At this late stage of the game, we need to look at our neighboring states, build off their successes and learn from their failures. The Governor has apparently not made any changes because he does not want to negotiate against his own bill. That is understandable. But if one comes to the negotiating table with a non-negotiable position, there is no room for compromise and negotiations fail.

D. What is the Status of "Three-Way" Negotiations Between the Assembly, Senate & Governor's Office?

In general, when the Assembly, the Senate and the Governor's office are ready to sit down to discuss a new legislative program, "three-way" negotiation meetings are held at the request of the Governor, and sometimes at the request of one of the houses. Three-ways did begin on a comprehensive bill last summer, and there have been several since, but the Assembly, Senate and Governor's office have allegedly come to the meetings promoting only their own bills and positions, not prepared to role up their sleeves to really begin the hard job of coming up with one bill all three branches can live with. 

With so many bills still in play from last year, the next step could be to take all four 2001 comprehensive bills, ⁽⁹⁾ review some of our competitor states' statutory programs and the recent federal law, and begin to cobble together one bill everyone that could work for New York. 

II. Why Our Neighbors -- New Jersey, Connecticut, Massachusetts, Pennsylvania and Ohio - But Not New York?

The political processes in each of our neighboring, formerly industrialized states certainly did not result in overnight comprehensive brownfield reform legislation. It took these states, as well as 35 other states, approximately three legislative cycles to pass brownfields legislation. New York should look to its neighboring states, if not for legislative advice, simply to see what has been successful.

A. New Jersey Industrial Sites Recovery Act (1993; amended 1998) ⁽¹⁰⁾

New Jersey has decided to focused its statutory program on financial incentives, but provides an expedited process open to both responsible and non-responsible parties. Its 1993 program provided closure in the form of "no further action" letters ("NFA letters"). However, the program was amended in 1998, and now New Jersey issues covenants not to sue ("CNTS") to applicable subsequent owners. The technical aspects of the program require contaminant source removal and provides for three levels of cleanup for residual contamination based on use - unrestricted, limited restricted and restricted use.

New Jersey's $75 million low-interest loan/grant program provides private entities with loans and grants up to $1 million for remediation activities. Therefore, New Jersey has started to hand developers large checks after completing brownfield projects that could best be compared to a rebate. In general, New Jersey's brownfield marketing pitch is: cleanup and develop a brownfield site in New Jersey, and you will get money back from the state. At last year's brownfield conference in Chicago, a developer was handed a check for $1 million. This sends a clear message to the development community - this state wants developers to do projects on New Jersey brownfield sites.

The New Jersey program, which essentially includes all four essential elements of a good brownfields program, has been enough to spark significant brownfield redevelopment in the last several years. In 1999, after passage of the 1998 program enhancements, 2,341 voluntary cleanup agreements were signed, over 100 of which were with private developers. ⁽¹¹⁾ Developers are currently lined up on the brownfield shoreline of New Jersey staring at the Manhattan skyline. The Sunday New York Times on April 21, 2002 carried an article covering New Jersey brownfield projects. There was no mention of even one New York project or where New York stands on its brownfield reform efforts.

It is important to note that money is a real brownfield incentive. Money is the main component of the new federal law. ⁽¹²⁾ The federal government has been providing $200,000 grants to municipalities on a pilot basis for over the last five or so years to provide necessary start up money to identify sites, plan for redevelopment opportunities, and perform investigation activities. The success of this pilot program has led to sites being developed throughout the country. ⁽¹³⁾

B. Connecticut Voluntary Remediation Program (1992; revised 1995 and 1998), Massachusetts 1993 Voluntary Cleanup Program and 1998 Brownfields Act and Ohio Voluntary Action Program (1994) ⁽¹⁴⁾

Connecticut, Massachusetts and Ohio have taken a different approach, essentially privatizing their voluntary cleanup programs. When faced with a budget crisis, these states decided to empower the private sector to handle cleanup projects. In other words, oversight is sometimes retained by the respective state agencies when parties wish to receive CNTS, but sites are generally managed by private consultants, known as Licensed Site Professionals (LSPs). LSPs issue NFA letters rather than the respective state agencies. LSPs are consultants who must qualify for a license by meeting certain requirements. LSPs conduct the site investigation and remediation work, compare the final cleanup levels reached with the tables of standards that have been developed in each state, and when the levels are met, issue the NFA letters. Government audits occur on a certain percentage of the LSP projects as a monitoring tool.

New York environmental groups have been so against the concept of a privatized voluntary cleanup program in New York that it is unlikely the Connecticut, Massachusetts or Ohio programs will be used as models in this state. However, the Connecticut, Massachusetts and Ohio programs share significant financial incentives, broad eligibility requirements, an expedited process, cleanup standards and liability relief designed to get sites cleaned up and redeveloped and it is working. For example, as of June 30, 2001, the Massachusetts Governor's Office of Brownfields Revitalization, in conjunction with the state's loan program and first of its kind environmental insurance incentive program ⁽¹⁵⁾ was in the process of facilitating 350 projects. Since the environmental insurance incentive program also covers lenders, over $272 million of private financing for 64 projects has been leveraged with state subsidies of only $500,000. Brownfield redevelopment is happening in Massachusetts, Connecticut and Ohio. Cleveland, once full of brownfields, has been transformed and is once again thriving.

Connecticut is in the midst of an aggressive advertising campaign for program, marketing at ball games on billboards!

C. Pennsylvania Land Recycling Program - "Act 2" (1995) ⁽¹⁶⁾

Pennsylvania's Act 2 program also includes all five essential brownfield program components. Responsible and non-responsible party participants remediate their site through a simplified approval process (and special process for municipal and severely upside-down sites) to applicable state cleanup standards, and receive a CNTS at the end of the cleanup. Pennsylvania has also successfully leveraged private financing and tax incentives, and worked well with the lending community to make banks feel confident lending on brownfield sites. Providing an appropriate level of comfort has facilitated large numbers of projects in Pennsylvania on highly contaminated sites. Over 1,200 sites have entered the program, and 1,000 have been completed and approved, with over 25,000 jobs created.

D. Marketing Makes these State Programs Successful, Leaving New York at a Competitive Economic Development Disadvantage

Most importantly, Pennsylvania, New Jersey, Connecticut, Massachusetts and Ohio all market their programs. They have consciously decided to change their dinosaur, decading former industrialized image to attract new, modern high-tech industrial development back to their states through their brownfield programs. In other words, they have not told developers and new industry, come to our greenfields. They have said, come back to our formerly used industrial properties where we will make it easy for you to build a new facility.

Former Pennsylvania Governor Tom Ridge was a frequent speaker at national brownfield conferences before taking on his new position as Homeland Security Advisor to President Bush. The President must have been aware that Governor Ridge transformed Pittsburgh and other brownfield-laden portions of Pennsylvania at a time when corporate America was not thinking of Pennsylvania as a place to relocate or move a facility. By spending money on marketing of the Pennyslvania Act 2 Program once it was adopted, and changing the "attitude" at the Pennsylvania DEP from "we are here to enforce" to "we are here to help facilitate," Pittsburgh is no longer the same city. There are shiny new buildings where steel mills once stood along the rivers that transect the City's downtown. Governor Ridge deserves much credit for the success of Pennsylvania's program.

Many states, including Pennsylvania, New Jersey, Connecticut, Massachusetts and Ohio, have put a positive spin on their programs. Environmentalists in New Jersey were highly critical of Governor Christie Whitman (now EPA Director), when New Jersey decided to adopt risk-based cleanup numbers as the solution to the residual contamination problem. However, the New Jersey Governor turned the tables on the program opponents by being upfront and honest.

Risk or use-based cleanup numbers represent the actual levels of residual contaminant concentrations deemed safe by that State to leave on a site based on the site's use. Once the public understands that these numbers generally represent small residual concentrations after source removal, the public embraces the program. If New York could just get comfortable advocating for adoption of cleanup standards and a use-based approach to cleanup, as did its competitor states, we could start marketing our state as having the best brownfield redevelopment (i.e. economic development) program in the country.

III. What Essential Components Make a Brownfield Program Successful?

While no two states in the country have identical programs, the Northeast-Midwest Institute ⁽¹⁷⁾ has been conducting a comprehensive analysis of the country's brownfield programs for at least the last four years, and has concluded among the 40 states with developed statutory programs, all have one or more of the following five essential elements in common:
 

• EXPEDITED PROCESS - Most states with programs now recognize that the development cycle (approximately one-year lead time before commencement of project construction) and the environmental site investigation and remediation cycle (definitely more than one year) did not coincide. In response, internal review times for brownfield projects were significantly shortened ⁽¹⁸⁾ via new statutory programs, providing developers with the certainty needed to proceed with a project on a contaminated site. States with expedited programs have statistically proven that their programs result in more cleanups, since the development project's time schedule drives the cleanup.

 

• LIABILITY RELIEF - Most states with programs also recognize the unfortunate reality that existing cleanup technologies simply do not get out every drop of contamination. Liability relief of some type, typically in the form of a certificate of completion ("COC"), no further action letter ("NFA letter") or covenant not to sue (CNTS") ⁽¹⁹⁾ , is provided to parties conducting remediation to cover the minor residual contamination remaining at most sites after cleanup, but which should not be a stigma to the real estate after the cleanup.

• CLEANUP STANDARDS - Since most states have now come to terms with the reality that existing cleanup technologies do leave minor residual contamination, thereby preventing some sites from achieving unrestricted or residential levels, "virtually all states take future use into consideration." ⁽²⁰⁾ Therefore, many states have either developed tables of cleanup numbers for specific chemicals based on the anticipated residential, commercial or industrial use of the real estate, or allow parties to develop site-specific cleanup standards based on use. ⁽²¹⁾

 
• FINANCIAL INCENTIVES - Most states recognize that many brownfield sites are not "low-hanging fruit" but rather "upside-down" properties ⁽²²⁾ , particularly in a downturn economy. Therefore, financial incentives in the form of tax relief (e.g. Tax Increment Financing or TIF), or outright grants to perform investigation, remediation and even planning work have been highly successful in many states, providing the upfront funding needed to reposition the site for sale in the real estate market. ⁽²³⁾

 
• BROAD ELIGIBILITY: The states with the broadest eligibility requirements - allowing both non-responsible and responsible parties in their program - appear to have the most successful programs. States have recognized that while there are some "white knights" willing to cleanup up someone else's mess, the sites attractive to brownfield developers are limited to certain criteria. Parties responsible by virtue of ownership or which caused the contamination and want to eliminate liability are the more likely parties to step up to the plate with the right mix of incentives in a non-enforcement oriented program.

1. At 4:54 AM on December 21, 2001, Congress passed  and on January 11, 2002, President Bush signed into law the Brownfields Revitalization and Environmental Restoration Act,  HR 2869. An easy way to link to the complete text of the new federal law is through our web site: www.nyenvlaw.com. Click on the bullet that reads: "Federal Brownfields Law!" In the first sentence of the article, click on the highlighted phrase "Brownfields Revitalization Act."

2.  As attorneys, we cannot help but conjure up our own definitions for catchy phrases, such as "brownfields". Therefore, one initial ground rule needs to be established. When the word "brownfields" is used in this article, it is not meant to be limited to those sites eligible for one of New York's existing programs. The applicable definition of "brownfields" for purposes of this article is "real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.". 

This language comes from the new federal law definition of the term "brownfields" in Section 211 of HR 2869, which will amend CERCLA §101 (42 U.S.C. 9601) by adding a 39^th definition for the term "brownfields". Immediately after this general part of the definition appear a number of excluded sites. The excluded sites are those ineligible for new funding under the program. Many of these excluded sites reappear in the "State Response Program" section of the new federal law in Section 231 as "eligible response sites."  Section 231 amends CERCLA §101 (42 U.S.C. 9601) by adding a 41^st definition for "eligible response sites." This definition is broader than the "brownfields" definition. Why Congress did not define the broader category of eligible response sites as brownfields, and the sites limited for receipt of funding as eligible funding sites is unclear. It certainly has created unnecessary confusion. For purposes of this article, the new general portion of the brownfields definition shall suffice.

3. See "Brownfields State of the States" Report, Fourth Annual Ed. Nov. 2001, prepared by Charles Bartsch of the Northeast-Midwest Institute at www.nemw.org/brownfields.htm.

4.  The new model Voluntary Cleanup Agreement form and new model Consent Order form are essentially the same document.   The main difference is that the model Voluntary Cleanup Agreement does permit cleanup to be driven by the contemplated use of the site.  However, since there are no use-based cleanup standards in New York, site by site cleanup standards must be negotiated.  A similar liability release now appears in both the model Voluntary Cleanup Agreement and the model Consent Order.

5. Governor's Bill (S.6257; A.9759); Brownfields Coalition Bill (A.7498-A; S.4788); The Business Council Bill (S.4789-A); and the Brodsky Bill (A.9265-A).

6. See 6 NYCRR §375-1.10(b): "The goal of the [inactive hazardous waste] program for a specific site is to restore that site to pre-disposal conditions, to the extent feasible and authorized by law." For petroleum sites, see 6 N.Y.C.R.R. §611.6 (a)(4): "The objective of the cleanup and removal phase is: (4) the restoration of the environment to pre-spill conditions."

7. Visit the Business Council's web site at www.bcnys.org.

8. There are certainly many members in the Assembly who have been strong brownfield advocates and have fought hard to change the Assembly's position including Assemblyman Vito Lopez (D-Brooklyn) Chair of the Housing Committee and Robin Schimminger (D-Tonawanda) Chair of the Economic Development Committee.

9. See fn. 4.

10. www.state.nj.us/dep/srp/ brownfields/ .

11.  Compare New Jersey’s numbers to the New York Voluntary Cleanup Program statistics: since 1996, 259 New York Voluntary Cleanup Agreements have been signed.   This number does not include, however, the number of voluntary petroleum site stipulations signed each year in New York.  New York’s petroleum spills program has been successful remediating the spills.

12.  See fn. 2.

13.  My current hometown of Rochester, New York deserves honorable mention.  The City of Rochester successfully used its federal PILOT grant to facilitate the redevelopment of a portion of the City that was contaminated by a large 1920's vintage art deco car dealership, which has now been redeveloped into a funky Spot Coffee Shop thanks to the vision and efforts of the City staff.  Adjacent impacted land, after remediation, was redeveloped into townhouses which did not otherwise exist within the downtown area.  This redevelopment has sparked other restaurants and night clubs to open, and has really brought this portion of downtown back to life.  For those of us who enjoy good brownfield stories, it is an example of what good brownfield redevelopment stories are made of.

14.   For more detailed information on the Connecticut program visit http://dep.state.ct.us/wtr/index.htm . For information on the Massachusetts program visit http://state.ma.us/dep/bwsc/brownfields.htm and http://www/massbrownfields.state.ma.us . For more detailed information on the Ohio program visit: h ttp://www.epa.state.oh.us/derr/volunt.html .

15.  The Brownfield Redevelopment Access to Capital (BRAC) program is a $15 Million fund dedicated for the purpose of acquiring environmental insurance.  BRAC subsidizes premiums by 50%, such that the state pays for half the premium, and the developer/volunteer pays for the other half.

16. For more detailed information on the Pennsylvania program visit: http://www/dep/state/pa/us/dep/deputate/airwaste/wm/landrecy/.

17.  See fn. 1.

18.  By way of example, I remember sitting with a representative from Kansas and a representative of New York at the national Brownfield conference Atlantic City two years ago.  The Kansas representative indicated that applications for their state voluntary cleanup program are turned around in two days.  In New York, it takes approximately two months.

19.   Some may not be aware that New York’s Voluntary Cleanup Program’s liability relief, in the form of a CNTS, is among the best in the country.  Many states do not issue contractual liability releases, but merely no further action letters.  However, as noted above all of our competitor states now issue a CNTS.  In addition, the devil is in the details of New York’s CNTS.  There are a number of significant liability “reopener” provisions in the CNTS, which may or may not be significant to the specific real estate transaction.  In addition, because New York provides a contractual liability release, it is much harder to get through New York’s program.  In other words, New York really makes you earn your release.

20.  See fn.1.

21.  The cleanup standards issue, which has been over-politicized in New York, is the principle reason we do not have comprehensive brownfields reform to date.

22.  In the brownfield world, upside-down brownfield sites are pieces of real estate where the remediation costs shall far exceed the value of the site when clean. Low-hanging fruit sites may be slightly contaminated, but are in fabulous locations and the value of the land is significant compared to any required cleanup costs. Other than certain sites in the City of New York, this State has more upside-down brownfield sites than low-hanging fruit brownfield sites.

23.   See fn. 1 for a description of various state financial incentive programs. It is also important to note that brownfield planning becoming an important component of many brownfield projects since the question of "what are we going to do with this old building" is key to determining future use of the site and selecting cleanup standards. In other words, it is important to know the future use (i.e. development plans) for the site before you start a brownfield project given that the site's use is an important factor in the State's decision-making process that will take place in relation to the site.