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Comments on DEC Draft BCP Eligibility Criteria

Subsection 2.1.1 (elements of "brownfield site" definition) clarifies that DEC will reject any request for participation in the BCP if it determines that the property does not meet either of the two elements of the statutory definition (ECL 27-1407.8): (1) confirmed contamination... or a reasonable basis to believe that contamination is likely to be present...," and (2) the presence or potential presence of contamination "may be complicating the development or re-use of the property" (ECL 27-1405.2).

Subsection 2.1.2 ("public interest" test) proposes to expand the six statutory public interest criteria under ECL 27-1407.9 for rejecting on public interest grounds an applicant's request to participate in the BCP, even where the property meets the "brownfield site" definition.  These six statutory criteria authorize DEC to exclude from participation in the BCP, applicants who have previously violated environmental requirements, been denied participation into the BCP (or its counterpart in another state), been convicted of certain types of Federal or state criminal offenses, knowingly falsified or concealed a material fact in connection with a submittal to DEC, or committed an act that served as the basis for permit denial.

DEC is proposing to add eleven new public interest factors that could be used to eliminate a party or site from participation in the BCP, even if the site meets the "brownfield site" definition and is not deemed ineligible based on the six statutory criteria.  These criteria relate to the nature of the contamination threat, attractiveness of the site for redevelopment or reuse, the anticipated benefits of BCP participation (promoting redevelopment of surround areas, reinvigorating a depressed area, protecting public health, potential for re-contaminating the site), proportionality of cleanup costs to property (or project) value, and the site's industrial or commercial history.

1. Comments of the National Brownfield Association NYS Chapter's Legislative & Policy Committee

Key points:

• Supports Subsection 2.1.1, which merely amplifies the statutory intent that eligible sites present both some likelihood or potential for contamination and a resultant inhibitory impact on the site's prospects for redevelopment or re-use.
   
• Finds problems with Subsection 2.1.2, based on the following:
  • Dubious statutory authority to add 11 new "public interest" factors which have nothing to do with prior bad acts on the part of the applicant to the 6 statutory factors which all relate to past misdeeds.
  • This would give a challenger the basis for a disruptive lawsuit, alleging ultra vires action by DEC--which could leave the program in limbo, just as it is starting to build positive momentum.
  • More than half of the proposed new "public interest" factors really go to the definitional issue of whether the site meets the "brownfield site" definition; these factors, if retained, should be moved to Subsection 2.1.1.
  • Most of the remaining factors require information that will often not be available during the application phase--e.g., effect of the project on reducing contaminant exposure, indicators of economic distress in the site area, estimated cleanup cost in relation to the value of the property or project, and likelihood that the project may re-contaminate the site.
  • DEC lacks the institutional expertise to make some of these economic and demographic judgments.
     
• Acknowledges that the most direct way to correct a perceived deficiency in the tax credit program would be to re-write certain aspects of the tax credit program (or through interpretive guidance).  However, potential direct corrective measures all have significant downsides and "require considerably more discussion and analysis."
   
• Hopes the Legislature "will not run the risk of destabilizing the current program by even raising the specter of a rollback in the availability of brownfield tax credits."

2. Comments of the NYS Bar Association's Environmental Law Section

• The proposed new restrictions on site eligibility do not have a clear basis in the statute.
   
• Even if the statute intended to give DEC broad discretion to define "public interest," this would constitute an unconstitutional delegation of power without clear guidelines.
   
• The factors create an opportunity for unfettered discretion by DEC to "pick and choose" among projects, based on subjective criteria--with no indication as to how the factors would be weighed against one another.
   
• In attempting to make major changes to the BCP through guidance rather than regulations, DEC is depriving those affected of procedural safeguards under the statute and of the opportunity for judicial review.
   
• When finalized, the proposed revisions should be applied prospectively only.
   
• The proposed "complex and detailed" eligibility criteria are inconsistent with the statutory requirement that DEC make "all best efforts" to make eligibility decisions within 15 days after the close of the public comment period.
   
• The proposed revisions will introduce unpredictability into the application process, which will have a detrimental impact on the attractiveness of the BCP to site owners and developers.
   
• Restricting eligibility under the BCP will eliminate the only mechanism by which contaminated properties can be voluntarily cleaned up under DEC supervision.  Excluded sites, if they are cleaned up at all, may not be cleaned up "adequately"--and will not have the benefit of public participation and a transparent decision-making process.
   
• Restricting BCP eligibility will leave site owners and developers who need a state signoff on cleanup without any avenue to secure such regulatory approval.  [This will inhibit brownfields redevelopment and could add to the incentive of site owners to continue "mothballing" their contaminated sites.]
   
• DEC's ability to subdivide brownfield redevelopment projects into brownfield and non-brownfield portions may hinder a developer from securing necessary financing and may complicate project scheduling.  It is unclear how such compartmentalization will impact on tax credits and certificates of completion--which were intended to apply to the entirety of a "site."
   
• As an alternative to using "public interest" criteria to limit site eligibility, DEC should enunciate clear and specific standards for when it believes that contamination or potential contamination "may be complicating" the development or reuse of a property.
   
• Many of DEC's proposed "public interest" factors should not come into play at the eligibility stage, but only at a much later stage of the process. 
   
• If DEC's impetus for this proposal is concern for the fiscal implications of the tax credit provisions of the statute, "this issue is one for the Legislature--and not NYSDEC--to address."

3. Comments of the Business Council of New York State

• DEC's draft language raises the bar for eligibility determinations by substituting the phrase "a reasonable basis to believe that contamination is likely to be present" for the statutory phrase of "potential presence." 
   
• Accepting sites with only perceived contamination into the program would benefit the state by assuring a more thorough, state-supervised investigation of the site.  If the investigation phase revealed that no remediation was necessary, the project would not move forward and the applicant would not be eligible for brownfield tax credits for that site.
   
• DEC should have only limited authority, and subject to specific criteria, to exclude real property from the scope of a BCP application--e.g., in cases where the alternative would be to reject the entire property based on limited contamination.  DEC should err on the side of inclusiveness.
   
• DEC will not have sufficient information at the application stage to evaluate many of its proposed additional "public interest" factors.

4. Comments of the New York State Economic Development Council

• The draft guidance "would serve to dramatically increase uncertainty with regard to program eligibility and the availability and value of tax credits, and significantly increase the discretion of NYSDEC to arbitrarily eliminate sites from the program."  This would "diminish the impact of the BCP as an economic development and environmental remediation incentive."
   
• The BCP legislation never contemplated dividing parcels into brownfield and non-brownfield components at NYSDEC's discretion.
   
• Statutory reasons for disqualifying an applicant that would otherwise qualify relate only to "bad actor" factors.  The factors DEC's seeks to add would add significant new discretionary considerations, "which the legislature could have included in the legislation, but did not."
   
• Some of the new factors would require DEC to make determinations for which it is not qualified (e.g., assessing a project's areawide impact, deciding whether a site is "attractive" for development, judging whether costs outweigh project benefits).
   
• NYSEDC believe that, in some cases, "the cost to the State of the BCP could be too generous for economic development purposes" and "would support a review and recalculation of BCP incentives."  However, any such revisions "should be accomplished through legislation, and not unilaterally implemented by NYSDEC through changes to eligibility standards."

5. Comments of Knauf Shaw LLP of Rochester, NY

• Guidance is an inappropriate means of solving any problems that may exist in the new BCP.  DEC's "self-serving action" in proposing guidance that gives it "unilateral power to eliminate legitimate brownfield sites from the program by a new list of largely unnecessary, premature, obvious or inappropriate factors" that don't appear in the original or recently amended statute, "cannot be justified" given the very smooth recent amendment process.  The new guidance "can lead to abuse" on the part of individual DEC staff who are empowered to "pick and choose" eligibility of projects on a case-by-case basis.  Also, comments are being solicited in a vacuum, since DEC "has not identified a reason for these guidance changes."
   
• The legislative history of the "brownfield" definition suggests that the proposed new
  eligibility exclusions are inconsistent with the broad intent of the statutory definition of a "brownfield site."
   
• The proposed new "public interest" factors are "misguided."  They are outside the scope of DEC's current statutory authority.  Also, many of them cannot be applied at the application stage of the process.  Others are outside of DEC's areas of expertise.
   
• Compartmentalizing brownfields based on the location of the contamination rather than the metes and bounds property boundary description creates serious technical difficulties.  This fails to recognize the realities of the real estate market, the potential discriminatory impact on large sites, and the technical difficulties that will be created as a result of this potential approach.
   
• DEC should commence a proper public debate after disclosing the problem that prompted the guidance changes in the first place.  In the meantime, it should implement the law.

6. Comments of New Partners for Community Revitalization, Inc.

• While we understand and support DEC's plan to develop eligibility requirements so that the tax credits are more focused on financial need, but we believe that changing the eligibility criteria for the entire BCP is not the best way to accomplish this.
   
• The notion of the State turning away people who want to voluntarily clean up brownfield sites is antithetical to good public policy.
   
• Rather than limiting tax credits by restricting entry into the BCP, DEC should issue guidance on tax credit eligibility and/or calculation of the brownfield tax credits.
   
• Absent clear statutory authority or the lack thereof for DEC to issue tax credit guidance, DEC should use its discretion to do so.
   
• The State should consider developing criteria for the tax credit program to directly address "our shared concern" that tax credits should be targeted based on need.