Liability Relief Central to Superfund Site Reuse, Investors Say

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By Sylvia Carignan

Liability concerns may scare off investors interested in renovating Superfund sites, which could hobble the EPA’s new effort to woo third parties to clean up the properties.

Enticing companies to redevelop properties with contaminated groundwater or soil would likely require the Environmental Protection Agency to protect landowners from long-term cleanup liabilities, building on similar provisions commonly used for less-contaminated brownfields, people involved with the Superfund program told Bloomberg BNA.

The EPA’s Superfund task force recommendations, released in July, emphasize leveraging private investment to clean up Superfund sites for reuse, much as the agency’s Brownfields Program provides grants to developers to redevelop sites. The task force has focused on changes it can make to the Superfund program that don’t require legislation.

Private investment in brownfields sites can be a catalyst for redevelopment, Dan French, chief executive officer of Brownfield Listings, which runs an online bulletin board for brownfields sites open for redevelopment and developers looking for sites, told Bloomberg BNA. But the Superfund program doesn’t yet work that way.

“Can Superfund be opened up and made more flexible? Yeah, it’s time for a refresh,” French said. A lack of new sources of capital may be “the bigger problem undercutting the program’s potential.”

Though questions linger about liability and funding, the possibility of modeling Superfund after brownfields intrigues some investors.

Third Party Funding

Superfund sites would have to be more appealing investments to get third parties interested in the initial purchase, Mathy Stanislaus—former assistant administrator at the EPA’s Office of Land and Emergency Management, which handles Superfund—told Bloomberg BNA.

“The reason that [Superfund] is a government program is because it’s fundamentally a health risk and an ecological risk” program, Stanislaus said. Investors were more willing to clean up brownfields, which were spun off from the Superfund program in 2002, once they were shielded from the liability.

Brownfields sites can be contaminated, but are generally not as toxic as Superfund sites. Brownfield properties are sites where redevelopment or reuse “may be complicated by the presence of a hazardous substance, pollutant, or contaminant,” according to the Small Business Liability Relief and Brownfields Revitalization Act (SBLRBRA).

Albert “Kel” Kelly, EPA Administrator Scott Pruitt’s special adviser on Superfundtold Bloomberg BNA the agency wants to make the Superfund program more like the Brownfields Program by drawing on Superfund money to leverage more private funding.

“Making Superfund more like the Brownfields [Program] is the dream of many redevelopment pros,” French said.

But Stanislaus said the task force’s desire to blend the Superfund and Brownfields programs shows a “fundamental misunderstanding” of why they’re separate.

“You’re not fundamentally going to promote third-party investment in these properties—these are large liabilities,” Stanislaus said. “You will get the private sector to invest in a real estate transaction when the market conditions are right and the liability concerns are appropriately managed.”

Sarah Sieloff, executive director of the Center for Creative Land Recycling, said some firms may be primed to take that role. “EPA sees the role of a third party as a potential business opportunity for firms that already invest in highly contaminated land, and have some expertise managing the requirements,” she told Bloomberg BNA.

That may encourage a market for Superfund sites to grow out of the existing real estate field, attracting firms that had not previously been interested in contaminated lands.

“Whether or not they invest in Superfund sites,” she said, “these firms would be some of the most likely to possess the capacity to act in the role EPA anticipates.”

Banking on Land Banks

The city of Cleveland’s Industrial-Commercial Land Bank takes on site assessments and other pre-redevelopment tasks to prepare properties for reuse.

The land bank has addressed brownfields as well as closed Superfund sites that needed more remedial work.

According to David Ebersole, the city’s interim director for economic development, the land bank helps fund further cleanup efforts at closed Superfund sites so that the properties can be put back into productive use.

Ebersole told Bloomberg BNA that the land bank has not yet had to decide whether to start working with any active Superfund sites.

But if the opportunity arises, Ebersole said, the EPA and responsible parties would have to provide certain assurances on potential liability and cleanup funding before the land bank would consider taking on an active Superfund site.

Arthur Bogen, president of the Connecticut Brownfield Land Bank, said the bank approaches sites as transactions. “We help the project by organizing it, identifying regulatory compliance and liability relief, and locking down the redevelopment plan and developer,” he told Bloomberg BNA.

Bogen said the bank has not considered Superfund sites, and that the sites are much more expensive to clean up.

“There are some Superfund sites we are aware of in Connecticut, but the cost of the cleanup exceeds the funding we could envision,” he told Bloomberg BNA.

Legal Protections

Eric Williams, president of Legacy Land Stewardship, primarily takes on mining properties and former industrial properties where potentially responsible parties can pay for cleanup.

His public benefit corporation is working on properties such as the former Cotter Corp. uranium mill, a Superfund site outside Canon City, Colo. “We get involved in properties that oftentimes don’t have strong real estate value,” he told Bloomberg BNA.

Legacy Land Stewardship completes the closure of the site on the responsible party’s behalf. But, he said, that may not be the end of it.

“In most cases, properties are never fully cleaned up, and so there’s long-term care that’s still required for those properties,” he said.

The EPA’s task force notes in its recommendations that “even the most comprehensive arrangement” does not protect a responsible party from being sued by EPA in the future for new contamination discovered at its Superfund site.

“Five years from now, if [EPA representatives] are unhappy with the cleanup, or are critical of it, they may come back to you as the original owner and say, ‘You need to fix this,’” said Ron Tenpas, partner at Morgan, Lewis & Bockius and counsel for the Superfund Settlements Project, which represents companies active on waste issues.

On the Hook

The EPA’s task force recommendations suggest site-specific agreements that would allow third parties to assume legal liability and remediation responsibilities at a site. The agency must now decide how to implement the recommendations by the end of fiscal year 2018.

Those third parties are separate from contractors that are hired to perform cleanup work at a site, such as engineering company Bechtel’s construction of a radioactive waste treatment plant at the Department of Energy’s Hanford Superfund site in Washington state.

For example, Stanislaus said, a third party might be interested in taking on a Superfund site with soil and groundwater contamination.

“If a third party just wants to pay for soil cleanup, not groundwater, that may be a legitimate transaction, but at some point, someone needs to be on the hook for the long-term obligations of the groundwater cleanup,” Stanislaus told Bloomberg BNA.

An agreement that exists in the brownfields world could be adapted for Superfund sites, Tenpas said.

The “bona fide prospective purchaser” (BFPP) provision in the 2002 brownfields act protects landowners from liability for cleanup costs if they meet certain conditions, including:

  •  reviewing records and inspecting the site for the presence or possibility of contamination;
  •  demonstrating that the purchaser is not affiliated with any liable party;
  •  complying with land use restrictions; and
  •  cooperating with information requests.
“Some third parties still remain concerned about potential liability and the availability of the BFPP protection at contaminated properties,” the EPA’s task force recommendations state.

To protect third parties from future liabilities, Tenpas said the EPA would need to provide long-term assurances when the third party buys the contaminated site, not just EPA guidance that covers the subject.

“You need a mechanism at the time of the sale,” Tenpas said.

To contact the reporter on this story: Sylvia Carignan in Washington at scarignan@bna.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bna.com

For More Information

The task force recommendations are at https://www.epa.gov/sites/production/files/2017-07/documents/superfund_task_force_report.pdf.

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