In-Depth Analysis of the Underutilized Brownfield Program which Provides Big Opportunities for Developers of Contaminated Properties

Written By: Paul Jacobi & David Speranzini, 

Environmental Attorneys

Contaminated properties, commonly referred to as Brownfields, often remain underdeveloped as interested parties believe the cost to clean-up the site and the unknown potential liabilities are too great a risk.  In order to encourage the revitalization of Brownfields in Connecticut, Brownfield Bill HR 11-141[1] was passed on July 1, 2011, and amended by HR 12-183[2], effective July 1, 2012. Public Act 11-141 created the Brownfield Remediation and Revitalization Program (the “Program”) which protects eligible applicants, including a bona fide prospective purchaser, innocent land owner or contiguous property owner, from potential environmental liability that may arise due to past contamination by a regulated substance.

 

A person who acquires ownership of a property after July 1, 2011 who demonstrates by a preponderance of the evidence that all disposal of regulated substances occurred before the person acquired the property is eligible to apply to the Department of Economic and Community Development (“DECD”) for acceptance into the Program. The Commissioner of DECD (“Commissioner”) works with the Department of Energy and Environmental Protection (“DEEP”) to administer the Program.  As it is now more than a year since the inception of the Program, it is informative to reflect on the implementation and utilization of this Program.  This article will detail the eligibility requirements, application process, and environmental liability protections afforded by the Program.

 

A. Eligible Persons and Properties

 

An application must be submitted along with a certification that the applicant meets all the eligibility criteria.

 

1. Bona fide prospective purchasers are eligible for liability protection

 

A “bona fide prospective purchaser” is a party that can, among other requirements, show that the party acquired a Brownfield site after it was contaminated and that the party is complying with all environmental protection requirements.

 

2. Innocent landowners and contiguous property owners are eligible for liability relief

 

Environmental liability protection is afforded to “innocent landowners” who either own or acquire real estate that was subject to a spill or discharge caused by someone else.  Liability protection is additionally eligible to a “contiguous property owner”, meaning a person who owns real property contiguous to property that may be contaminated by a release or threatened release of a regulated substance and the contiguous property owner can, among other requirements, show that the party is complying with environmental protection requirements.

 

3. Only applicants who did not cause or contribute to pollution on the property may apply 

 

To be eligible, the applicant must not have established, created, or maintained a source of pollution to the waters of the State.  Additionally, the applicant must not be affiliated with any person responsible for the pollution or source of pollution on the property through any direct or indirect familial relationship or any contractual, corporate or financial relationship, other than by the sale of the property.

 

4. Only properties that meet the definition of “Brownfield” are eligible under the Program

 

The Program restricts the types of properties that may eligible to only those that meet the statutory definition of “Brownfield”.  “Brownfield” means any abandoned or underutilized site where redevelopment, reuse or expansion has not occurred due to the presence or potential presence of pollution in the buildings, soil or groundwater that requires investigation or remediation before or in conjunction with the restoration, redevelopment and reuse of the property[3].

 

5. Only properties that are not currently subject to enforcement actions may be eligible under the Program

 

To be eligible, the property cannot be currently the subject of an enforcement action, including any consent order issued by the DEEP or the United States Environmental Protection Agency under any current DEEP or United States Environmental Protection Agency program, listed on the National Priorities List, listed on the State of Connecticut Superfund Priority List, or subject to corrective action as may be required by the Resource Conservation and Recovery Act.

Although this seems like a daunting list of eligibility requirements, when each element is broken down, the criteria reflect nothing more than would be evaluated in any ordinary real estate transaction.  The criterion sets out the applicant’s basic eligibility requirements and ensures the applicant is not responsible for the contamination on the property.  In order to prove you meet these criteria, you would need to describe in a narrative how the presence or potential presence of pollution on the property is the reason for the lack of redevelopment, reuse or expansion.

 

B. Application Process

 

1. Application

 

The DECD works with the DEEP to administer the Program.  An application is available on the DECD website and may be submitted to the DECD on a rolling basis.  As part of the application the applicant must submit (1) a title search, (2) Phase I Environmental Site Assessment (“ESA”) conducted by or for the applicant, (3) current property inspection, (4) documentation demonstrating the satisfaction of the eligibility criteria, and (5) information about the project that relates to the state-wide Portfolio Factors, discussed below.  The property inspection must be separate from the Phase I ESA.  Additionally, the Phase I ESA must be completed no less than 6 months prior to the sale of the property.  If the Phase I ESA was completed more than 6 months prior to the sale of the property, an updated Phase I ESA will be required.

 

The application requires a narrative description of the following statewide Portfolio Factors:

 

(1) job creation and retention;

 

(2) sustainability;

 

(3) readiness to proceed;

 

(4) geographic distribution of projects;

 

(5) population of the municipality where the property is located;

 

(6) project size;

 

(7) project complexity;

 

(8) duration and degree to which the property has been underused;

 

(9) projected increase to the municipal grand list;

 

(10) consistency of the property as remediated and developed with municipal or regional planning objectives;

 

(11) development plan’s support for and furtherance of principles of smart growth or transit-oriented development; and

 

(12) other factors as may be determined by the Commissioner.

 

The more information the applicant provides regarding these factors the more likely it is that the application will be approved.  The DECD indicated these factors are only considered when the Program becomes competitive and more than 32 properties have applied.  Since the Program’s inception in July 1, 2011, 20 applications have been submitted to the DECD.  As of November 13, 2012, the DECD has approved 10 applications.  The remaining applications were either withdrawn by the applicant or rejected by the DEEP because the applicant did not qualify for the Program.  For example, one application was rejected by the DEEP because the applicant was subject to corrective action under the Resource Conservation and Recovery Act.

 

2. Application Submittal Timing

 

An application can be submitted prior to the execution of a formal Purchase and Sale Agreement.  The Program anticipates that an application will be submitted during the negotiation process between a buyer and seller.  In fact, the fee associated with the application is due six months after the application is approved or after the purchaser takes title, whichever is the later of the two dates.

 

3. Application Fee

 

An applicant must pay to the Commissioner a fee equal to 5 percent of the assessed value of the land, as stated on the last-completed grand list of the relevant town.  This fee is paid in two installment and there are options to reduce this fee based on compliance with remediation schedules and Licensed Environmental Professional (“LEP”) verification.

 

4. Application Review Process

 

Once the application is submitted, the DECD Commissioner reviews the application and if approved, will forward to the DEEP for their separate review and approval.  The DECD contact person for this program indicated the DECD and DEEP review process each take several weeks on average depending on the complexity of the application.  The DECD indicated the time between application submittal and final approval may take less than two months.

 

C. Remediation Requirements on Property

 

1. Brownfield investigation plan and remediation schedule

 

An applicant whose application to the Program has been accepted by the Commissioner must investigate the release or threatened release of any regulated substance within the boundaries of the property in accordance with prevailing standards and guidelines under the supervision of a LEP.  The applicant must remediate the release or threatened release within the boundaries of the property in accordance with the Brownfield investigation plan and remediation schedule.  Failure to comply with the investigation plan and remediation schedule may result in an applicant being removed from the Program and becoming subject to an enforcement action.

 

The Brownfield investigation plan and remediation schedule must include both interim target dates and a date for project completion not later than 8 years after the LEP submits the investigation plan to the DEEP.  The plan must include a schedule detailing: completion of investigation of property in accordance with prevailing standards and guidelines, submittal of a complete investigation report, submittal of a detailed written plan for remediation, publication of a notice of remedial actions, completion of remediation in accordance with standards adopted by the commissioner pursuant to 22a-133k and 40 CFR Part 761 and submittal of a remedial action report.  As noted above, the applicant is required only to investigate and remediate conditions existing within the property boundaries and is not required to investigate or remediate any pollution or contamination that exists outside of the property’s boundaries, including any contamination that may exist off site or has migrated to sediments, rivers, or streams off site.

 

2. Remediation/Investigation Deadlines

 

Within 180 days after the first installment fee due date, the applicant must submit its Brownfield investigation plan and remediation schedule.  Unless otherwise approved in writing by the Commissioner, the investigation must be completed not later than 2 years after the first installment fee due date.  Remediation must be initiated no later than 3 years after the first installment fee due date.  Remediation must be completed sufficiently to support either a verification or interim verification not later than 8 years after the first installment fee due date.

 

D. Benefits to the Program

 

1. Applicant receives environmental liability protection from state and third parties

 

Applicants accepted into the Program are not liable to the state or any third party for the release of any regulated substance at or from the eligible property, except and only to the extent the applicant caused or contributed to the release of a regulated substance that is subject to remediation.

 

2. Applicant is only required to investigate and remediate within property boundaries

 

An applicant is required only to investigate and remediate conditions existing within the property boundaries and is not required to investigate or remediate any pollution or contamination that exists outside of the property’s boundaries, including any contamination that may exist off site or has migrated to sediments, rivers, or streams off site.

 

3. Applicant has the ability to apply for funding

 

Applicants accepted into the Program can seek funding under other state and federal programs.

 

4. Applicant may transfer ownership of the eligible property

 

An applicant who has been accepted into the Program may convey or otherwise transfer its ownership in the subject property to another party prior to the completion of the remediation.  The transferee may be afforded the protections of the Program if the transferee meets the eligibility criteria, pays the applicantion fee and complies with all the obligations undertaken by the original applicant.

 

5. Applicant is exempt from the Transfer Act

 

An applicant whose application to the Program has been accepted by the Commissioner or any subsequent applicant whose application to the Program has been accepted by the Commissioner is exempt for filing as an “Establishment” pursuant to the Connecticut Transfer Act, Conn. Gen. Stat. §22a-134 et. seq.  This exemption does not alter an applicant’s existing “certifying party’s” obligations under a previous Transfer Act form filing.

 

6. The immediate prior Owner is eligible for liability relief

 

Upon the DEEP issuance of a successful audit closure letter, or no audit letter, or if 180 days have passed since the submittal of a verification or interim verification, the immediate prior owner regardless of its own eligibility to participate in the Program will have no liability to the state or any third party for any future investigation and remediation of the release of any regulated substance at the eligible property addressed in the verification or interim verification.

 

The immediate prior owner will retain any and all liability as it would otherwise have for the investigation and remediation of the release of any regulated substance beyond the boundary of the eligible property.  The immediate prior owner is still liable for penalties or fines, if any, relating to the release of any regulated substance at or from the eligible property.  Additionally, the immediate prior owner is still liable if it was a “certifying party” on a Connecticut Transfer Act Form III or IV filing.

 

In Summary, this Program is an underutilized tool in Connecticut and has the potential to save eligible parties substantial time and money.  If you are a current owner of a Brownfield site and are interested in selling your property, you should consider marketing your property as eligible for redevelopment under this Program.  As the seller of a Brownfield site, you will not be eligible to apply for liability protection under this Program, but you can assist the potential buyer with its application.  If you are a real estate developer or other interested party you should take a second look at contaminated properties and keep this Program in mind as you perform your due diligence and target properties for acquisition.

 

 

[1] CT P.A. 11-141 <http://www.cga.ct.gov/2011/act/pa/pdf/2011PA-00141-R00HB-06526-PA.pdf>

 

[2] CT P.A. 12-183 <http://www.cga.ct.gov/2012/act/pa/pdf/2012PA-00183-R00HB-05342-PA.pdf>

 

[3] Conn. Gen. Stat. § 32-9kk

 

 

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