INSIGHT: How Interagency Cooperation Played a Critical Role During the Historic Environmental Transformation of Sparrows Point

December 4, 2018

By Colleen Kokas

The redevelopment of Sparrows Point, a former Bethlehem Steel plant, represents one of the most successful brownfield reclamation projects in U.S. history.

As if the remediation planning of a contaminated industrial site isn’t hard enough, consider the heightened level of complexity by adding in Resource Conservation and Recovery Act cleanup obligations, state cleanup obligations, 100+ areas of environmental concern from 125 years of steelmaking operations, an existing federal consent decree, and two major regulatory agencies. Despite all of this, the project was still considered to be a great brownfield opportunity, with its ultimate success directly attributable to the parties’ commitment to working together to allow the acquisition, remediation, and redevelopment by a third party.

Background

Sparrows Point is a former steel manufacturing plant located on 3,100 acres of waterfront in Baltimore County, Maryland, with hazardous waste operations that drew federal and state regulatory attention as far back as 1987.

In 1997, the U.S. Environmental Protection Agency and Maryland took legal action against Bethlehem Steel Corporation (BSC), the owner at the time, which resulted in BSC’s entry into a Consent Decree (1997 Consent Decree) to evaluate and address environmental releases at the site. Both EPA and Maryland Department of Environment (MDE) oversaw the remedial activities.

From 2001 to 2012, site ownership of Sparrows Point changed hands several times. Operations related to steelmaking continued until May 2012.

In September 2012, Sparrows Point LLC (SPLLC), an affiliate of Environmental Liability Transfer, Inc., assumed ownership of the site through a bankruptcy court-ordered auction with the intention of finding a permanent owner. SPLLC subsequently assumed BSC’s obligations under the modified 1997 Consent Decree. SPLLC’s willingness to assume and retain environmental liabilities following a sale/transfer proved to be the catalyst that would induce interest from potential investors. A buyer soon followed in the form of Sparrows Point Terminal (SPT), a newly-formed entity focused on acquiring Sparrows Point for the purpose of vertical development.

Not surprisingly, there were significant administrative, environmental, and legal challenges that needed to be addressed throughout this project. Interagency cooperation between EPA and MDE, as well as SPLLC’s ability to allay the complex environmental, legal, and fiscal concerns that were raised in the bankruptcy proceedings, were critical to success in overcoming these myriad challenges.

Today the transformation of Sparrows Point is well underway, construction is ongoing, and the former steel making site has been rebranded as TradePoint Atlantic, a world-class international trade hub expected to generate $2.9 billion in regional economic activity.

Below is an overview of how the process unfolded, paving the way for remediation and revitalization.

Addressing Liability with Multiple Regulatory Programs

In September 2012, SPLLC assumed ownership and the responsibility for environmental liabilities at the site under the 1997 Consent Decree. There would be two other agreements that would make administrative oversight more complex.

First, SPT wanted to resolve its RCRA liability and ensure its Bona Fide Prospective Purchaser’s liability protection under the Comprehensive Environmental Response, Compensation, and Liability Act. SPT entered into a Settlement Agreement and Covenant Not to Sue with EPA (EPA Settlement Agreement) that would outline its obligations. This agreement was executed in 2014.

Additionally, SPT formalized its obligation to MDE under RCRA, the Voluntary Cleanup Program, and its “inculpable person” determination, i.e., that Maryland does not hold them responsible for the contamination at the site. SPT accomplished this by entering into an Administrative Order on Consent (ACO) with MDE, also in 2014.

Recognizing remediation at the site would be required under three separate documents (1997 Consent Decree, a new EPA Settlement/PPA Agreement and a new MDE ACO), EPA and MDE provided a great deal of flexibility by allowing work performed at the site to satisfy the obligations of more than one regulatory program, and the requirements of more than one cleanup document.

For example, the EPA acknowledged that work performed pursuant to the MDE ACO and the EPA Settlement Agreement may be used to meet the requirements of the 1997 Consent Decree. Additionally, MDE agreed that for certain areas, where interim measures had already been performed under the 1997 Consent Decree, further remediation work may not be required. Having these specific documents was important, but understanding how to comply with each of them in an efficient manner was key.

Varied Administrative Procedures

EPA and MDE have worked closely to integrate the RCRA process and the Maryland Voluntary Cleanup Program (VCP) to avoid duplication and delays in the remediation. For example, the 1997 Consent Decree required all 3,100 acres to be investigated and if necessary, remediated. In response to this condition, 2200 acres of the site has been “carved out” of the 1997 Consent Decree, and the agencies have provided flexibility in addressing these areas.

The MDE ACO outlines the submittals necessary to meet the requirements of the MDE cleanup program, and how MDE will work with EPA to evaluate Work Plans, since these plans will serve as EPA’s Statement of Basis to advance that area into the Final Decision phase of the RCRA process. The MDE ACO also acknowledges, in respect to those areas that are carved out of the 1997 Consent Decree, their ability to proceed in advance of an EPA Final Decision.

In evaluating this vast site for redevelopment opportunities, SPT identified areas it wanted to prioritize for remediation. Historically, regulatory agencies have addressed remediation in a comprehensive manner, investigating contamination on a sitewide basis. However, in this case, the agencies accepted SPT’s bifurcated approach, agreeing to designate certain parts of the site as a priority for review and approval. The agencies were then amenable to providing a sign-off of sites on a “parcel-by-parcel,” or area of concern basis. This is especially important for areas of the site where, after investigation is completed, no cleanup action is required by EPA or MDE.

Environmental Obstacles

There is always tremendous concern from the remediating party for contamination that has migrated offsite. This can be the number one issue that prevents a third party from acquiring a site for redevelopment. Significantly, in acquiring the site out of bankruptcy in 2012, SPLLC was not required to assume any liability for contamination that may have migrated offsite, as it is often required to in other deals. Instead, the agencies recognized that SPLLC and/or SPT would take on-site measures to control existing contamination migrating from the site. This provision was acknowledged by EPA and MDE in SPT’s subsequent negotiations of the EPA Settlement Agreement and MDE ACO.

Backstops for the Cleanup

The cooperation demonstrated by EPA and MDE has facilitated an effective remediation strategy for Sparrows Point, and compliance with federal and state statutes, without sacrificing protection of human health and the environment. The prioritization of the site into various development parcels, as well as remedial areas important to the agencies, will result in simultaneous remediation of the site.

The MDE ACO also requires SPT to remain liable for remediation at the site even if it is conveyed to another party. SPT can transfer the cleanup responsibility to the new owner, but SPT is still legally on the hook to MDE if the new owner fails to satisfactorily perform. In the event this occurs, all obligations for work on-site would be borne by SPLLC and/or SPT.

As an additional backstop, MDE also required $48 million in financial assurance (in the form of a trust and a letter of credit).

Conclusion

Key to the success of the Sparrows Point project was the regulatory agencies’ openness to the different avenues that a remediation process can take, while still meeting the cleanup standards and goals of the different regulatory programs impacting the site – i.e., RCRA, CERCLA, and Maryland’s VCP. As discussions with the agencies progressed, it quickly became apparent, especially in light of the site being in bankruptcy, that there was great potential for productive and time-efficient remediation and redevelopment of Sparrows Point. Additionally, the regulatory agencies recognized that the federal and state requirements somewhat overlapped and a collective solution was best for reaching those goals. The parts of the process that deviated from the more traditional route were memorialized in formal cleanup documents and reflect a willingness by EPA and MDE to be flexible and creative in order to achieve a timely and protective cleanup and redevelopment. The non-traditional, collaborative approaches that led to success included:

  • Having USEPA and MDE in meetings together to discuss obstacles to remediation and redevelopment.
  • Allowing work under one agreement to suffice for a commitment under another cleanup agreement.
  • Allowing for agency “sign off” on an area-by-area basis
  • Removing certain areas of the site from the obligations of the 1997 Consent Decree and allowing them to be addressed under the MDE ACO.
  • Recognizing the use of onsite controls to address any potential migration of contamination.
  • Prioritizing certain parcels of the site for remediation.

These actions, in whole or in part, can be afforded to all site cleanups. As illustrated by the Sparrows Point project, creativity is central to brownfield redevelopment successes when there are significant legal, environmental, and administrative hurdles, and these creative solutions will likely need to emanate both from the purchaser/developer and from the side of the regulatory agencies involved. If anything, Sparrows Point reinforces the notion that government bureaucracies are not always as monolithic and rigid as a prospective purchaser may assume, and that ultimately, brownfield redevelopment is an area of common interest for the regulator and the regulated parties. Of the creative solutions laid out above, some may seem simplistic in nature, and they are assuredly more complex in reality than on paper, but if approached with flexibility and initiative from both sides of the table, they can have the very tangible benefit of turning a project, even one as daunting as Sparrows Point, from a “nice thought” into a repeatable success story.

With over 30 years of environmental regulatory experience with the New Jersey Department of Environmental Protection (NJDEP), Colleen Kokas is recognized across the country as a top tier expert in brownfield redevelopment and remediation. She was recently awarded the “Lifetime Achievement Award in Brownfields 2017" by the Brownfield Coalition of the Northeast. Today she is Executive Vice President at Environmental Liability Transfer, Inc. (ELT), where she educates the redevelopment community and government agencies on the advantages of using environmental liability transfers during sustainable redevelopment projects.

The opinions expressed here do not represent those of Bloomberg Environment, which welcomes other points of view.


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