Ken Kamlet's BNA Article--Part I

Brownfields and Voluntary Cleanups: Does New York Measure Up or Miss the Mark?

This article, which will be presented as a two-part series, examines New York state's voluntary cleanup and brownfield programs, identifies their weaknesses, and compares them to programs in other states considered to be leading the way in brownfields redevelopment. The first part of this article focuses on the key elements of brownfield programs generally, as well as the development and current status of New York's administrative program. Part two, which will appear in July's issue, focuses on comparing New York's program to those in Maryland, Massachusetts, Michigan, New Jersey, and Pennsylvania. Part two also provides recommendations for improving the program in New York by integrating the successful elements of other VCP and brownfield programs.

231.1321 Introduction¹

Widely quoted estimates put the number of brownfields sites nationally at between 450,000 and 650,000 sites.² In the short time that most state brownfield programs have been operating, generally less than a decade, these programs have successfully facilitated reuse of more than 40,000 sites.³ However, much work and many opportunities remain.

New York is one of the nation's most populous states and contains some of its oldest cities, towns, and villages. Like the Midwest, it has been plagued in recent years by an exodus of high-paying industrial employers. There is no official inventory of New York's abandoned, underutilized industrial sites, or other potentially contaminated properties that present special redevelopment challenges. Nevertheless, it is clear that New York contains many thousands of brownfields, not only in the New York City metropolitan area, but also in the widely scattered urban areas of upstate New York, including such places as Albany, Binghamton, Buffalo, Corning, Elmira, Rochester, Syracuse, and Utica.

Although New York, like nearly all U.S. states and territories, has an operational brownfield program and a voluntary cleanup program (VCP), it remains one of only six states with an administratively-established VCP in the absence of a specific statutory program. Because of unusual politics (a state Assembly dominated by downstate Democrats and a state Senate controlled by upstate Republicans), efforts to enact controlling state legislation have languished for years in the state Legislature.

This article, presented in two parts, takes an objective look at New York's voluntary cleanup program, in relation to the VCPs established by other states and also briefly examines the relevance of the recently enacted federal brownfields legislation. Specifically, the article compares the key elements of New York's VCP to the corresponding elements of the VCPs of the five states (Maryland, Massachusetts, Michigan, New Jersey, and Pennsylvania) considered to be brownfield "leaders."⁴ It is hoped this comparison will provide insights that will assist New York officials in improving the performance of its program and be of value to public officials and regulated entities in other states who would like to see improvements in their programs.

(a) Relevant New York State Demographics

New York state is the third most populous U.S. state, with nearly 19 million residents, according to the 2000 Census. It has 6.7 percent of the country's population, but occupies only 1.3 percent of the country's land area. It contains an average of more than 400 people per square mile of land area, compared to an average of about 80 persons per square mile for the United States as a whole. New York's 87 federal superfund National Priorities List (NPL) sites constitute 7.1 percent of the 1,223 NPL sites nationwide, roughly commensurate with the state's proportion of the total U.S. population, but far less than its proportion of U.S. land area. New York state has 1,729 sites presently or formerly listed on its state Registry of Inactive Hazardous Waste Sites (state superfund), but only 509 are "Class 2" sites deemed to pose a "significant threat to the public health or environment" and require response action. As of March 31, 2001, more than six years into VCP, New York's Department of Environmental Conservation (DEC) had executed voluntary cleanup agreements for 255 projects⁵ and completed 50 VCP investigations and 33 cleanups.⁶ Another 107 municipal projects had been approved for funding under New York's Brownfields Program.⁷

A U.S. Conference of Mayors survey of member cities in late 1999 indicated that there were more than 6,200 brownfield sites in New York, compared to more than 21,000 brownfield sites nationally. These estimates by a small proportion of New York's cities, towns, and villages clearly understate the complete statewide total. If the total number of brownfield sites in the United States is upwards of 450,000, and if the same percentage (29.5 percent) as in the U.S. Conference of Mayors survey applied, this would suggest that there are upwards of 132,750 brownfield sites in New York state.

Six states--Maryland, Massachusetts, Michigan, New Jersey, New York, and Pennsylvania, viewed as having preeminent voluntary cleanup and brownfield programs--collectively account for a third of U.S. superfund sites. While easily the most populous of these states, New York has a lower overall population density than Maryland, Massachusetts, and New Jersey. For these three densely populated states, the relative distribution of superfund sites correlates closely with population as a percentage of the U.S. total. For the other three states (Michigan, New York, and Pennsylvania), there is no correlation with population, and degree of industrialization appears to be a more important factor. Former industrial sites that are abandoned or underutilized are the very definition of brownfields.

New York has both a large population and a long history of industrialization. Therefore, it is not surprising that it should contain its share of both NPL sites and brownfield sites.

(b) Distinction Between Brownfield and Voluntary Cleanup Programs

In the recently enacted Small Business Liability Relief and Brownfields Revitalization Act(hereinafter, "the Brownfields Act"), the U.S. Congress officially defined a "brownfield site" as "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."⁸

However, similar to the approach of many states, the federal definition excludes many sites or facilities that have been targeted under other environmental enforcement authorities by the U.S. Environmental Protection Agency (EPA) or an authorized state.⁹ There seem to be two primary rationales for these exclusions, based on the severity of the contamination and/or the culpability of the site's owner or operator: (1) brownfield sites considered suitable for receiving regulatory and financial incentives to encourage their redevelopment are relatively low-risk sites that are only slightly, moderately, or perceived to be contaminated, in contrast to the "heavy-duty" contamination associated with superfund or Resource Conservation and Recovery Act hazardous waste sites; and (2) where recalcitrant polluters have recklessly created a severe enough environmental problem to necessitate governmental enforcement action, they should not be able to slip off the hook and benefit from relaxed treatment under a "brownfield" program.

The Brownfields Act does not define voluntary cleanup program.

Most states now have statutory "brownfield programs" providing various financial and/or regulatory incentives to promote the beneficial redevelopment or reuse of variously defined "brownfield sites." An even larger majority of states have established statutory or administrative VCPs¹⁰ to promote the cleanup of contaminated sites. Some VCPs are limited to low-risk brownfield sites. Others encompass a broader universe of contaminated sites.

(c) What Drives Effective Brownfield Programs?

Whether a developer will view a brownfield site as a viable site for redevelopment is a function of two competing considerations: (1) the expected return on investment (ROI) in the real estate, and (2) the risk of environmental liability. These two factors bear an inverse relationship to one another. The greater the expected return, the greater the tolerance for higher levels of environmental risk and cleanup cost. The lower the ROI, the more risk-averse will be the prospective brownfield entrepreneur.¹¹ Between the two extremes of very high ROI/very low environmental risk (highly viable site) and very low ROI/very high environmental risk (highly nonviable site) is a band in which reside many "threshold sites" that could easily be nudged into either the "viable" or the "nonviable" category.¹²

All state and federal brownfield and voluntary cleanup programs theoretically are designed to stimulate the redevelopment of viable sites and push threshold sites into the viable category. Other state and federal programs (e.g., superfund laws) are intended to promote the cleanup of nonviable sites that pose high environmental risks, whether or not such sites ever can be made viable candidates for redevelopment.

Threshold sites can be prodded into the "viable" category through regulatory incentives, financial incentives, or a combination of the two--whatever serves to bring the balance between ROI and environmental risk into an acceptable range. Many states have separate programs for addressing regulatory and financial risks. Regulatory incentives are typically addressed in a VCP, administered by the state's environmental agency, where such devices as expedited review, use-based cleanup standards, and liability releases are used to offset or reduce the cleanup volunteer's environmental liability exposure. Financial incentives typically are addressed in companion programs, often called "brownfield programs" or "brownfield redevelopment" programs, which often are managed by a separate economic development agency (EDA) or jointly by an EDA and the state's environmental agency. Financial incentives take many forms, but they all are designed to improve the ratio between ROI and environmental risk by reimbursing site assessment and/or cleanup costs, and/or by helping to finance redevelopment costs.

Where some states may get into difficulty is when they try to combine brownfield and VCP programs geared primarily to promoting economic redevelopment of low- and moderate-risk sites, with programs focused on remediating high-risk sites where cleanup objectives predominate.

This article focuses primarily on programs geared to promoting economic redevelopment and regulatory incentives of brownfield programs, which typically are addressed in voluntary cleanup programs.

(d) Published Literature on Best Practices

Recent studies, with different areas of emphasis, indicate that economic development and long-range planning goals are more effective in stimulating the cleanup of brownfield sites than the desire to alleviate environmental risks. They also indicate that, especially for larger sites, regulatory incentives, including fair, flexible cleanup standards, are even more important in promoting remediation and reuse of brownfields than financial incentives. Paradoxically, tough cleanup standards result not only in fewer economic benefits but in fewer cleanups because they deter the private developers who perform most brownfield cleanups.

(1) National Governors Association Report

A 2000 report by the National Governors Association (NGA) Center for Best Practices¹³ concluded that five states are "leading the way" in improving program performance "through greater integration into state, regional, and local growth and land use planning." These states are Maryland, Massachusetts, Michigan, New Jersey, and Pennsylvania. The NGA report cited six factors as driving success in these states:

• involvement by the governor in providing clear and public support for "the importance of Brownfields in advancing the state's quality of life and economy;"¹⁴

• an areawide perspective for viewing brownfields redevelopment, rather than a project-by-project basis, and integration of brownfields cleanup and redevelopment objectives into state growth planning;

• strong involvement in brownfield programs by state planning agencies and other appropriate state and local government agencies (not just environmental regulatory agencies);

• improving the full package of incentives, assistance, and liability reduction offered to developers to eliminate all remaining barriers to brownfields redevelopment; ¹⁵,¹⁶

• considering brownfields redevelopment in the full context of "smart"community design; and¹⁷

• shifting emphasis to the broader economic value of brownfield sites, while ensuring the protection of public health.¹⁸

(2) U.S. Conference of Mayors Report

The U.S. Conference of Mayors, in its third annual brownfields report,¹⁹ identified lack of cleanup funds and liability issues as the two major impediments to brownfields redevelopment by member cities. The top four potential benefits from brownfields redevelopment were viewed as increasing the city's tax base, the ability to support additional people given the existing infrastructure, job creation, and neighborhood revitalization. A smaller majority also viewed environmental protection as a major benefit.

Nationwide, participating cities estimated they had more than 21,000 brownfield sites--averaging 100 sites per city. In New York state, 11 participating cities estimated they had more than 6,200 sites, averaging 566 sites per city. Nationally, 201 cities had more than 81,000 acres of abandoned or underutilized land, averaging 403 acres per city. In New York, 11 cities estimated they had a combined brownfields acreage of 6,766 acres, averaging 615 acres per city. On a national basis, smaller cities of less than 100,000 people averaged 21 brownfield sites and 189 acres. In New York, smaller cities averaged 13 brownfield sites and 95 acres. New York City alone had 6,000 estimated brownfield sites, but their average size was only two-thirds of an acre.

(3) HUD Study

A 1999 study for the U.S. Department of Housing and Urban Development (HUD),²⁰ concluded that "variable cleanup standards appear to help redevelopment of contaminated sites." In fact, 85 percent of the successful projects in Massachusetts, Michigan, and Pennsylvania took advantage of such standards. The HUD study also found that, in most cases, "state regulatory interventions" and "new flexibility in regulations" were the key factors that motivated project initiation and "made the redevelopment projects more attractive to investors." Regulatory relief was especially important in promoting redevelopment of larger and more complex sites and for new commercial and industrial uses. The addition of financial incentives was necessary only in "economically depressed areas" where subsidies might be needed to overcome nonenvironmental impediments.

(4) Competitive Enterprise Institute Report

The Competitive Enterprise Institute, in a 2000 report on brownfields,²¹ attributed the success of state voluntary cleanup programs, compared to the strict liability approach of the federal superfund program, to their more innovative, flexible approaches. "Unlike federal requirements authorized under CERCLA, legislation enacted by the states emphasizes: incentives over enforcement; relief from unfair and debilitating liability laws to reduce risks to owners, developers, and lenders; risk-based remediation standards over one-size-fits-all; and financial incentives." The report cited five elements associated with the most effective state programs, including:

• voluntary programs,

• liability relief, and

• variable remediation requirements that move away from rigid and unrealistic cleanup standards and determine cleanup levels based on future land use and risk-based standards.

Public participation and financial incentives also were features of effective state programs.

(5) U.S. General Accounting Office Report

In a December 2000 Report to the Chairman, Committee on Commerce, House of Representatives,²² GAO "selected five states that were identified by EPA and other knowledgeable organizations as operating some of the largest or most innovative brownfield programs in the nation: Massachusetts, Michigan, New Jersey, Pennsylvania, and Wisconsin." The report compared the brownfield assessment and cleanup assistance programs of these states with EPA programs. Based on this comparison, the most noteworthy lessons to emerge from these and other studies²³ are:

• The same basic principles appear to guide the most effective brownfields and VCP programs.

• The nature and quality of state programs are constantly changing and evolving.

Although there is no unanimity on the five best programs at any given point in time, the same states come up repeatedly when best practices are discussed.

(e) Basic Brownfields Principles and Best Practices

Today's brownfield and VCP programs trace their origins to the enactment of the Comprehensive Environmental Response, Compensation, and Liability Act in 1980, EPA policy initiatives beginning in the early to mid-1990s, and to the first state brownfield program in Minnesota in 1988.

(1) How Specialized Brownfield Programs Evolved from Superfund

It took 15 years of experience using the rigid and punitive strict, joint and several, and retroactive liability approach of CERCLA and parallel state superfund laws for it to dawn on government regulators that this was a no-win, counterproductive situation. The superfund "atomic bomb" approach was preventing, rather than stimulating, the cleanup of lesser-contaminated brownfield sites and was contributing to the economic decay of urban centers throughout the country. Owners and operators of such properties were keeping them off the market to avoid calling them to the attention of regulators so that the risk of being forced to carry out an expensive cleanup would not materialize.

Beginning in 1995, and continuing thereafter, EPA launched a series of brownfields initiatives designed to stimulate voluntary site cleanups and promote economic revitalization. What had been a trickle of similar state programs became a torrent of state brownfield reforms. By early 1997, there were at least 39 state brownfield programs. Today, virtually every U.S. state and territory has one.

(2) Basic Principles and Practices

Programs geared toward both economic redevelopment and environmental cleanup should be formulated around the following 10 principles:²⁴

1. An Economic Redevelopment Focus: The program's overriding thrust should be the promotion of economic development and urban revitalization. Environmental benefits will flow automatically from recycling of existing sites and restoring vacant sites to productive use.

2. Risk-Based Standards: State cleanup standards must be modified so the objective is to avoid significant risk (not all risk); industrial and commercial sites need not be cleaned up to residential levels.

3. Need For Certainty: Cleanup standards must be defined clearly and simply and disseminated widely. Interested parties must have a way to secure rapid state approval of cleanup work plans that will satisfy these standards.

4. Need For Finality: Parties need assurance that, if they meet their cleanup commitments, the state will not arbitrarily come back and impose new requirements.

5. Broad Program Scope: The program should cover both actual and perceived contamination, and should not categorically exclude any type of contamination except where a site is the subject of active state or federal regulation or enforcement action.

6. Fair Treatment of Innocent Volunteers: While those responsible for site contamination should be held to a high standard of accountability, a more flexible approach should be taken toward nonresponsible purchasers and developers, particularly where they are providing significant economic benefits. It should not be government policy to punish the innocent.

7. Liability Assurances: When a voluntary, non-responsible party cleans up to state standards, it should receive broad and legally enforceable protections against liability.

8. Financial Incentives: The state should earmark a small percentage (e.g., 10 percent) of available economic development funds to provide financial incentives, including low-rate and government-backed loans, grants, and tax abatements, to stimulate the cleanup, acquisition, and development of brownfield sites in urban and designated growth areas.

9. Funding Priorities: If financing is limited, priority should go to financing of initial site assessment and quantification of cleanup costs, and nonresponsible parties and public agencies should receive preference over responsible parties.

10. Need To Leverage Financial Resources: Public moneys should be used, to the extent possible, to leverage private resources (e.g., repayable loans, loan guarantees, etc.) and such private resources should be preferred over grants.

(f) Elements of New York's Voluntary Cleanup Program

New York state is an important and interesting brownfields forum, particularly when considering the number of its contaminated sites, its degree of industrialization and urbanization, the departure of industry from many older cities, and the inability of its political leaders to enact VCP legislation.

New York's administrative VCP has been criti-
cized²⁵ as being too punitive and inflexible; insufficiently geared to promoting economic revitalization; subject to frequently changing rules, which, in some instances, are not available to the public; overly concerned with statewide consistency and uniformity; and taking a "one-size-fits-all" approach to the very different risks posed by different types of contaminated sites.

While not openly critical of New York state's program, the National Governors Association's New Mission for Brownfields report does not include New York among those "leading the way" in the performance and effectiveness of its brownfield program.

New York state's VCP was established administratively in 1994 and has yet to be formally embodied in a legislative program. No regulations and little formal guidance exist to explain to the general public or regulated industry the requirements and details of the program. Much of the content of the VCP has been communicated through brief publications, speeches by agency officials, and interactions with practitioners and consultants on individual voluntary cleanup agreements (VCAs). Some changes are discernible in DEC's approach to certain VCP issues as the program has evolved over the past eight years.

A separate municipal brownfield program was authorized by the state Legislature in the Clean Air / Clean Water Bond Act of 1996, and was further elucidated in DEC regulations and a procedures handbook.

(1) Initial Establishment in 1994

The department's VCP was formally announced on Oct. 19, 1994, by then-Gov. Mario Cuomo. Initial program policy and organization were set forth in Organization and Delegation Memorandum 94-32--Policy: Voluntary Cleanup Program (Dec. 9, 1994) (ODM 94-32).²⁶ As initially designed, the program covered "all sites over which the department exercises enforcement jurisdiction." Eligible entities were restricted to "those who are not legally responsible for having caused or maintained the site's contamination …." In limited circumstances, only three types of entities that could be considered "legally responsible parties" would be eligible to participate: a secured lender, a municipality, and an Industrial Development Agency (IDA) conduit financier. In addition, entities would be rendered ineligible if the site were ever conveyed, or intended to be conveyed, to any of the site's potentially responsible parties (PRPs).

(2) Key Elements of the New York State Program

To the average owner, prospective purchaser, or developer of a nonpublicly owned brownfield site in New York state, little written information is available about the VCP. The DEC Web site reveals only a one-page fact sheet, a downloadable two-page Voluntary Cleanup Agreement (VCA) application form, a one-page instruction sheet, and a list of regional program coordinators.²⁷ For deeper insights into the workings of New York's VCP, the diligent practitioner or researcher must consult various historical sources.²⁸ Authoritative information is difficult to come by, however. There is no statute, regulation, or VCP-specific guidance on which one can rely.²⁹ Even after an applicant is accepted for participation in the VCP and has entered into a VCA signed by the DEC commissioner, the scope of the cleanup volunteer's obligations may expand over time, as new steps are added to the process in unpublished internal VCP procedures.³⁰

Therefore, the following summary of New York's VCP must be read with caution. Where requirements or interpretations have changed over time, this evolution is described (as best it can be discerned)--both as an aid to understanding the program's current requirements and as an indication that further changes could occur in the future.³¹

(a) Program Organization and Management

Within the New York state DEC, the brownfield program, known as the Environmental Restoration Program, and the VCP both are administered by the same section chief within the Division of Environmental Remediation (DER). DER also administers the state's superfund program within the Bureau of Hazardous Sites Control and the state's oil spill program within the Bureau of Spill Prevention and Response. Of the three programs geared to contaminated sites, only the brownfield and VCP are managed below the bureau chief level. There are four reporting and management layers between the section chief and the Commissioner. There is no specialized brownfields ombudsman or coordinator in the Office of the Commissioner or of the Governor. Also, there is no primary brownfields point of contact in the state's lead economic development agency, Empire State Development (ESD). Clearly, the New York program is driven primarily by an emphasis on environmental remediation and not economic development.

(b) Program Flexibility

From 1994 through 1996, DEC emphasized its desire to use maximum flexibility "in fitting the right technical and legal resources to address a particular negotiation's circumstances," and to tailor its negotiation schedule to the volunteer's degree of readiness and ability to negotiate. By the fall of 1999, DEC's emphasis had shifted to concerns about process efficiency and consistency. A new "Model Agreement" was used in place of negotiated VCAs. Any loss of ability to tailor elements of the agreement to particular circumstances was considered to be offset by enhanced predictability and expedition. Internal procedures also were developed to ensure greater uniformity and consistency among VCAs approved in different parts of the state and among similar types of sites.

(c) Participation In The VCP

Through at least mid-1997, New York's VCP was said to cover "all sites over which DEC exercises enforcement jurisdiction" or "any contaminated property in the State" for which the federal government does not have lead responsibility. In recent years, three types of sites are said to be excluded: NPL sites under CERCLA³²; sites listed on the DEC Registry of Inactive Hazardous Waste Sites as "Class 1" sites³³; and sites regulated under N.Y. Envtl. Conserv. Law Article 27, Title 9, and 6 N.Y. Comp. Codes R. & Regs. Part 370.³⁴

There also have been changes in the scope of eligible VCP participants. Initial program guidance in 1994 indicated that only "those who are not legally responsible for having caused or maintained the site's contamination are eligible to avail themselves of the program." Certain other parties, including a secured lender that undertakes cleanup to protect its collateral, a municipality that forecloses to recover back taxes, and an IDA conduit financier "who may be legally responsible parties" also might be eligible. Later, DEC both broadened and narrowed these categories.

For at least a year, beginning in 1996, DEC sought to more carefully exclude participation by PRPs who, if they were allowed to participate in the VCP, could be considered to be evading their existing remedial obligations. Thus, PRPs would be excluded only if the property was a hazardous waste treatment, storage, and disposal facility (TSDF) subject to RCRA corrective action or closure (or interim status regulation), or if the property were subject to any other enforcement action requiring the PRP to remove or remediate a hazardous substance. Initially, DEC reserved judgment as to whether a PRP for a "Class 1" or "Class 2" Registry site³⁵ would be allowed to participate.³⁶ Late in 2000, a further distinction, although already in practice, was made explicit. PRPs at petroleum sites were excluded unless their liability arose solely from ownership after the cessation of a discharge.

Today, DEC's Web site simply states that the VCP "covers any contaminated property in the State for which the Federal Government does not have lead responsibility." Eligible participants are anyone other than a PRP for a property that is "Class 1" or "Class 2" on the New York State Registry of Inactive Hazardous Waste Disposal Sites; a TSDF facility subject to RCRA corrective action; a TSDF operating under RCRA interim status; or subject to other enforcement action requiring the PRP to remove or remediate a hazardous substance. The definition of PRP excludes the "present owner of a site, having purchased the property in an already contaminated condition and not otherwise a [PRP]…"

(d) "How Clean Is Clean" Standard for VCP

New York's VCP has not developed VCP-specific cleanup standards or guidance. Various principles have been espoused at various times to guide the program. From 1994 to 1997, cleanup levels were geared to what was safe for the purpose for which the volunteer intends the property to be used, if that purpose is industrial or commercial, commonly referred to as risk-based assessments or determinations. However, from 2000 until the present, DEC seems to view risk-based cleanup with disfavor, although the department occasionally refers to "use-based cleanup standards."

In 1994, DEC specified that "source removal" would be required if pollution significantly affected ground water or surface water quality. By 1996, it had decided that culpable PRPs must not only remediate on-site contamination to agreed-upon levels, but also must address off-site impacts of that contamination. Under this policy, nonculpable current owners and non-PRPs would have to remediate only on-site sources and address off-site impacts only to the extent of eliminating on-site sources contributing to such impacts. Still unclear in 1996 was how to apply the "risk-based methodology" to contaminated ground water. It was assumed that, similar to non-VCP sites, it would be necessary to consider ground water standards, the potential for use, discharge to surface water, and the practicability of cleaning up to standards.

Unlike CERCLA, the "Applicable or Relevant and Appropriate" (ARAR) concept³⁷ would not automatically drive cleanup levels, but the standards would have to be considered on a site-specific basis.³⁸ By 1997, DEC had decided that Technical and Administrative Guidance Memorandum (TAGM) 4046 Determination of Soil Cleanup Objectives and Cleanup Levels(Jan. 14, 1994),³⁹ would guide soil cleanup determinations under the VCP until VCP-specific guidance was issued. However, DEC would use the TAGM's evaluation method "with an exposure scenario tailored to the circumstances of the site's contemplated use."⁴⁰

By some point in 1999, it appeared that DEC was attempting to finesse some of these issues by relying more heavily on certifications by outside reviewers. Thus, it began to ask the state Department of Health (DOH) to provide its written concurrence on remediation work plans, attesting to the fact that the proposed remedies would in fact protect public health. The DEC project manager could not approve a volunteer's submittal without such concurrence. The DEC also started to require volunteers to submit an engineering report "certified" by a New York state-licensed professional engineer, demonstrating through "engineering analysis" that the remedy could achieve the cleanup goals enumerated in 6 N.Y. Comp. Codes R. & Regs. Section 375-1.10(c).⁴¹ Although the Section 375-1.10(c) cleanup goals basically define cleanup responsibilities under state superfund, as of late 2000, VCP cleanup requirements were described by a senior DEC official as follows: "Under the VCP, the work plan need not necessarily provide for remediation that would meet the strict cleanup standards of the State's Superfund. Rather, DEC will establish VCP cleanup levels on a site-by-site basis in connection with the intended use of the property ….."⁴² That has proven to be easier said than done.

Thus, in New York state, cleanup volunteers at low-risk brownfield sites effectively find themselves subject to the same State Standards, Criteria, and Guidelines (SCGs) that apply to responsible parties at heavy-duty superfund sites, except to the extent that individual DEC officials choose to relax these requirements on a site-by-site basis. Although DEC asserts that it "has taken the intended site use into account when developing cleanup standards for the voluntary cleanup program…," an early review of actual VCAs found that the cleanup standards for nonresidential uses were typically no less stringent in practice than for "residential property cleanups under the traditional ECL [Environmental Conservation Law] program."⁴³

TAGM 4046 is an example of an onerous SCG that is applied to VCP sites, albeit with some discretionary site-by-site adjustment. DEC's soil cleanup goal, similar to its goal for other media at contaminated sites, is "to restore inactive hazardous waste sites to predisposal conditions, to the extent feasible and authorized by law." Where cleanup to predisposal conditions is not possible or feasible, this TAGM provides "a basis and procedures to determine soil cleanup levels" at individual sites. The TAGM specifies five alternative bases for determining soil cleanup objectives, including avoidance of an excess lifetime cancer risk of more than one in a million for Class A and B, known or suspected, carcinogens. According to the TAGM, the appropriate cleanup criterion is the one that "produces the most stringent cleanup level."

Soil cleanup objectives for the protection of ground water/drinking water quality must be protective for its best use. The objectives are based on "water/soil partitioning theory" and assume that contaminated soil and ground water are in direct contact. They predict "the maximum amount of contamination that may remain in soil so that leachate from the contaminated soil will not violate ground water and/or drinking water standards."

Recognizing that it is not possible for all the contamination in soil to impact ground water, the TAGM applies a correction factor of 100, but sets a maximum value for soil cleanup objectives for total volatile organic compounds (VOCs) at less than 10 parts per million (ppm), total semi-VOCs at less than 500 ppm, individual semi-VOCs at less than 50 ppm, and total pesticides at less than 10 ppm. It asserts that these values are consistent with the approaches in Michigan and Washington.

Despite the fact that this TAGM applies only to "individual Federal Superfund, State Superfund, 1986 EQBA [Environmental Quality Bond Act] Title 3 and Responsible Party (RP) sites," this TAGM is routinely applied by DEC officials to VCP sites that fall into none of these categories. The TAGM also is routinely applied in situations where its highly conservative assumptions about continuous leaching of soil contaminants into underlying ground water clearly do not apply, such as where redevelopment of a brownfield site results in an impervious building or pavement cap that will prevent leaching.⁴⁴

New York State imposes equally stringent ground water limitations. All nonsaline ground waters are assumed to be usable "as a source of potable water supply," and may not be impaired by waste discharges.⁴⁵ Because of this presumptive drinking water use and need to protect human health, the "most stringent" standards and guidance values must be applied.⁴⁶ Where a specific maximum contaminant level (MCL) under the federal Safe Drinking Water Act applies, the DEC standard or guidance value equals the MCL (with no provision for dilution or attenuation). For substances for which there is no specific MCL, if they belong to a "principal organic contaminant class," the "standard or guidance value" must be set at 5 ug/L (parts per billion),⁴⁷ an exceedingly low concentration.

Overall, the Governor's Superfund Working Group described⁴⁸ New York's regulatory approach as "the most conservative risk levels used in the country." By comparison, EPA uses a cumulative risk range for carcinogens at federal superfund sites that is up to 100 times less stringent.⁴⁹ The one in a million excess cancer risk tolerance adopted in New York has been compared to the cancer risk of smoking 14 cigarettes, or drinking 300 cans of diet soda, over a lifetime.⁵⁰

(e) Liability Release

After the cleanup is complete, the department issues a letter declaring that it "agrees that the volunteer has cleaned the site to the previously agreed-upon cleanup level and that, barring an event triggering a reopener, the Department does not contemplate further action will need to be taken at the site." The agreed-upon cleanup level is determined by the terms of a cleanup work plan negotiated between DEC and the volunteer and then appended to the VCA. Because there are no published guidance documents or regulations that define how this cleanup level is to be established or "how clean is clean," work plans often are quite general.

The liability release also shields the volunteer from further remediation liability for past contamination, subject to reopeners. Generally, the only past contamination for which the volunteer is absolved is that which is known, disclosed, and documented at the time the VCA is executed or at the time the cleanup is completed. The release runs with the land and benefits all of the volunteer's successors and assigns, except the PRPs.

Releases granted to non-PRP volunteers and nonculpable current owners generally are more extensive than those given to volunteers who are PRPs. Nonculpable volunteers are released from liability for on-site and off-site contamination, except for petroleum spills, and for natural resource damages (NRD), while PRP volunteers receive no release from NRD claims or off-site impacts.

This liability release protects the volunteer from DEC enforcement only. It does not provide protection from third parties, New York's attorney general,⁵¹ or EPA. However, legal action by such entities is unlikely at low-risk brownfield sites. Furthermore, if a volunteer were concerned about claims by other state agencies, it could seek to embody the agreement in a court-approved consent decree. Finally, EPA's longstanding policy to defer to state-supervised response actions is now embodied in the Brownfields Act (P.L. 107-118).

(f) Reopeners

Reopeners (sometimes referred to as "reservations") define the circumstances in which a cleanup volunteer, or subsequent owner or operator of the site, can be required by DEC to take further response action beyond that contemplated in the VCA. There are four standard reopeners in the New York VCP as follows:

• "the response action is not sufficiently protective to allow the contemplated use,"

• "the volunteer, or its successor, changes the site's use to a use requiring a lower level of residual contamination,"

• "the volunteer fraudulently obtains the release," and

• "environmental conditions present at the site at the time the Voluntary Cleanup Agreement was executed were unknown to the DEC at such time."

A fifth reopener cropped up briefly in 1996:

• when there is a change in scientific standards so that remedial action taken is no longer sufficiently protective.

Two more were mentioned in a speech in 2000:

• migration of petroleum contamination off site, and

• failure to implement the VCA to DEC's satisfaction.

The continued applicability of any of the latter reopeners is unclear.

(g) Financial Incentives

The only specialized financial incentive currently available in New York state for brownfield sites is environmental restoration funding for municipally owned brownfields under the Clean Water/Clean Air Bond Act of 1996.⁵² Sites successfully remediated under this program also receive a release from remedial liability to the state, as well as indemnification and legal representation by the attorney general in the event of third-party claims. In return for this financial assistance and liability protection, the Bond Act specifies⁵³ that "[t]he remediation objective of an environmental restoration project shall meet the same standard for protection of public health and the environment that applies to remedial actions undertaken pursuant to N.Y. Envtl. Conserv. Law Section 27-1313."⁵⁴ This has resulted in more stringent on-site cleanups as well as remediation of consequent off-site contamination. There currently are no pending legislative reforms that address these stringent remediation requirements.

There also are other limitations of this program, which Governor Pataki has sought to rectify in proposed legislative reforms. Limitations include that the municipality must have title to a property before receiving Bond Act funds for investigation, must provide a matching project share of 25 percent, may not leverage other state assistance or federal assistance to fund its matching share, may not delay its reimbursement obligation until it has recouped its own costs, and must share profits with the state when brownfield properties are subsequently sold.⁵⁵

Because of the strict cleanup requirements applicable to Bond Act sites, remediation costs have been high, causing some municipalities to forego Bond Act assistance. Despite a generous funding level of $200 million and a lower than expected level of local participation (95 investigations and only 12 remediations), program resources are being expended at a rate of more than $100,000 per investigation and nearly $1 million per remediation.⁵⁶

There are no corresponding financial assistance programs in New York state to assist nonmunicipal cleanup volunteers or any other private property owner or developer who seeks to investigate, remediate, or redevelop a brownfield site.⁵⁷ In addition, New York also has no program for systematically inventorying or identifying brownfield sites.

Empire State Development has various financial assistance programs available to assist private companies and entrepreneurs in carrying out certain qualifying capital improvement projects. However, none of these is geared specifically to facilitate brownfields redevelopment. Financial assistance also is provided for job-creating development that occurs in designated "Empire Zones." These zones often are economically disadvantaged areas that frequently contain abandoned or underutilized former industrial sites, which fit the "brownfields" definition. Qualifying projects in these designated areas may enjoy substantial benefits in property tax abatements for up to 10 years or more.

One final financing mechanism that should be noted is tax increment financing (TIF), although its use in New York state is more limited than in other states. Tax Increment Financing is a way of raising money now for a development project, by issuing bonds, and repaying them with a portion of the increased property tax revenues resulting in the future from the planned improvements to the property.

General Municipal Law Section 970-o authorizes a municipality in New York state "to issue by resolution of its legislative body tax increment bonds or tax increment anticipation notes of the municipality which are payable from and secured by real property taxes, in whole or in part …." It goes on to specify that "[t]he pledge of such real property taxes allocated and paid shall constitute a first lien on the revenues derived therefrom and [the bonds or notes], the repayment of which is secured by such revenues shall not be subordinate to any other indebtedness of the municipality with respect to the pledge of such revenues." The term "municipality" is defined to include a "county,"⁵⁸ but it does not appear to include industrial development agencies.

Such instruments appear to be an attractive means for local governments to pay for brownfield redevelopment projects and also may be attractive to financial investors. Municipalities may find them attractive as a convenient means of raising capital without having to make annual debt payments when revenues may be scarce because TIFs are repayable only after the development project has been completed and it has created a stream of property tax revenues. It also may be a way to increase local borrowing without negatively impacting the municipality's all-important bond rating. Investors may find them attractive because they retain the tax benefits of government bonds, while being subordinate to no other uses of the designated property tax revenue stream. Indeed, the only real risk the investor needs to be concerned about is that the brownfield will, for some reason, not be remediated and/or the new development will not be constructed.

(h) Consultant Sign-Off Requirements

"For remediation agreements, the Volunteer must submit an engineering report certified by a professional engineer registered in New York State that identifies the contamination problems at the site and through an engineering analysis, demonstrates that the remedy can achieve the cleanup goals of the agreement. This demonstration will be based upon an evaluation of the remedy against the factors given in 6 NYCRR 375-1.10(c)."⁵⁹

This requirement is being imposed despite the lack of any such mandate anywhere in state law or regulation (or even in published DEC guidance) and even where signed VCAs contain no such requirement.⁶⁰ Neither does this engineering certification requirement appear to have any counterpart in the VCP of any other state or territory in the United States. New York's approach of limiting reliance on environmental professionals other than registered engineers may have the inadvertent consequence of reducing the number and pace of voluntary cleanups and increasing DEC's workload. In Massachusetts, where the Department of Environmental Protection relies heavily on "Licensed Site Professionals" to design and implement cleanup work plans, the number of sites addressed under their VCP has reportedly increased 14-fold.⁶¹

(i) Source of Authority

New York is one of only approximately six U.S. states and territories (the others are Ala., Hawaii, Ky., S.D., and Vt.) that have established administrative VCPs in the absence of specific statutory authorization. Only North Dakota has no VCP at all.

Given the administrative nature of New York's VCP, it is interesting how New York sometimes has used its authority over state superfund sites to encourage voluntary cleanups. Similar to the federal NPL, New York maintains a Registry of Inactive Hazardous Waste Sites to identify those sites most in need of remedial attention and to compel action at the highest priority sites, known as "Class 1" and "Class 2" sites.

By 1997, DEC indicated it was creating a new administrative category ("V") in the Registry for sites "not previously listed that are covered under the VCP and have a consequential amount of hazardous waste," and that, if it became aware of "significant threats" and the volunteer failed to "satisfactorily" address them under the VCA, DEC would not hesitate to elevate the property's listing to "Class 2."

This gave DEC a potent tool for encouraging prospective volunteers to enter the VCP and discouraging them, once they had entered, from withdrawing from the program before completing cleanup action. DEC could and did argue that, without sufficient investigation, DEC might consider the site a "significant threat" and run it through the process for "Class 2" listing. DEC also could assert that the amount of contamination present was "consequential," so that if more investigation or cleanup were not done, the site might be listed administratively. Either way, the site would carry the stigma of being on "the List."

By 1999, DEC's internal procedures required the VCP project manager to review a site's Registry status at strategic points in the VCP to determine if changes to the site's Registry status were appropriate. As such, it kept pressure on cleanup volunteers to remain in the program.

(j) Liability Exemptions For Certain Entities

Most states establishing VCPs have carved certain exceptions out of the onerous "strict, joint and several liability" scheme of CERCLA to encourage brownfields cleanup and redevelopment activities. Some states accomplished this by modifying the standard of liability under their state superfund laws, potentially placing their state statutes in conflict with CERCLA. Other states, and EPA itself, relied on "prosecutorial discretion" to choose not to pursue enforcement action against various entities who did not cause or contribute to site contamination.⁶² New York state, so far, has done neither.

The Governor's Superfund Working Group has recommended inclusion of several liability exemptions in proposed superfund reform legislation. The following descriptions and commentary come from the Working Group and are not provided for in current law:

(1) Innocent Party Defense. To establish innocence, a party must establish that contamination was caused by an act of war, God, or some other person that was not affiliated contractually with the party; that it exercised due care with respect to the contamination; and it took precautions against foreseeable acts of other persons.

(2) Lender Liability Exemption. For lenders who do not participate in the management of a site, if the lender forecloses on a property, the lender must divest [itself] of the property as soon as practicable.

(3) Fiduciary Liability Limitation. The fiduciary is liable for cleanup [only] up to the amount of the assets held in a fiduciary capacity.

(4) Municipal Liability Exemption. A municipality is not liable for property taken involuntarily (i.e., tax delinquency).

(5) De Minimis and DeMicromis Liability Protection. De minimis (small parties) and de micromis (very small parties) settlement policies allowing qualifying parties to resolve their liability through settlements that are in proportion to the harm they have caused.

(6) Industrial Development Agency Exemption. This protection is not codified in the federal superfund statute but relies on case law. An IDA acting as a "conduit financier" would not be considered an owner or operator of the site.

(7) Prospective Purchaser Liability Protection. Instead of incorporating EPA's prospective purchaser liability limitation, New York's VCP [would] offer the same protection/ liability exemption while the investigation is being conducted. However, the liability exemption would be lost if the property were left in worse condition.

In the early days of the New York program (1994-1996), DEC spoke of providing liability protection to lenders--at least where they initiated response action on a site to protect its value as collateral. There have been no such references in recent years and virtually all legislative reform proposals would make such protection explicit, as it is under the federal law and in most states. The extent of a secured creditor's liability exposure under New York law will remain unclear until the Legislature establishes a specific protection for lenders in New York.

There also is no formal guidance in New York under the VCP program on protecting a municipality from liability when it acquires a contaminated property by foreclosure to recoup unpaid back taxes. However, in a widely circulated 1997 speech, a senior DEC official stated that DEC would not pursue administrative or judicial proceedings against a "public corporation" that took action in response to a release or threatened release of a hazardous substance, unless it did so recklessly, or against a public corporation that merely owns property on which occurred a release by another person (such as a foreclosure situation), provided that it did not participate in the property's management. It was explained that "public corporation" includes any taxing authority and entities like an IDA, provided it owns mere title and has no authority to manage or control activities at the location. Municipalities that receive state funding and enter into cleanup agreements under the 1996 Bond Act's Environmental Restoration Program are also protected under that program.

New York's failure to exclude from its hazardous waste liability net those whose only contact with a contaminated site is tangential or even involuntary serves only to ensure that abandoned or underutilized brownfield sites stay that way. If liability concerns deter lenders and fiduciaries from accepting potentially contaminated collateral or trust assets, municipalities from taking control of tax delinquent property, and IDAs from seeking redevelopment financing for such property, the promise of brownfields revitalization will remain a largely empty hope.

Copyright 2002, The Bureau of National Affairs, Inc., Washington, D.C.