An economic development tool or a subtle environmental loophole?

Introduction

"Brownfields" is a new term used to describe an old problem: abandoned or contaminated urban properties. Most of the sites are former industrial properties with serious economic and environmental problems. So far, about 1,500 of these sites are known in Ohio (1). Although history testifies that it can be expensive to remediate and redevelop these properties, it is not prudent to allow them to stagnate while new businesses and industries continue to flood and possibly contaminate "greenfields" or virgin areas.

In June of 1994, the Ohio State legislature took an unconventional step in passing Senate Bill (S.B.) 221. This law created the Ohio Voluntary Action Program (VAP), whose purpose is to provide companies with the incentive to remediate and reuse brownfields. Not all abandoned or contaminated properties are eligible for VAP incentives, however. Noneligible properties include sites on the National Priorities List (NPL) and sites subject to closure requirements under state or federal solid, hazardous waste, and underground storage tank laws, including sites currently under an enforcement action for cleanup by the director of the Ohio Environmental Protection Agency (OEPA) (2).

S.B. 221 differs from the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Resource Conservation and Recovery Act (RCRA) in the following ways:

* it has created a multidisciplinary advisory board made up of representatives of environmental consulting firms, lending institutions, city and county officials, industry representatives, and environmental advocates;

* it allows cleanups to be voluntary;

* it does not encourage direct oversight by regulatory agencies;

* it relies upon private parties such as environmental consultants or professionals certified by OEPA to investigate and monitor cleanup of contaminated properties;

* it allows cleanups to be tailored to the future use of the property;

* it limits the property owner's civil liability for future cleanup; and

* it mandates OEPA to audit a portion (at least 25%) of the properties cleaned up under the program, rather than to provide comprehensive surveillance over cleanups (2).

Some elements of S.B. 221 do seem to have taken the "teeth" out of OEPA's ability to fully regulate and enforce this law. This diluted enforcement power is what many consider as the subtle loophole in the law. The law is subject to abuse by those who are interested in VAP only for the economic opportunity it presents. Furthermore, the appearance of a shared partnership between OEPA and the private sector in the oversight of contaminated sites is bothersome to some people. Perhaps time will tell if VAP is driven by economic interests only or also by an interest in protecting the public's health and safety through environmental protection.

Components of VAP

The driving force of the cleanup program is an incentive package with five principal components.

1. The Covenant Not to Sue 

This is a legal document that the state issues to property owners. The covenant guarantees that the state will not sue the property owners as long as a contaminated property is completely remediated. Nevertheless, should any contaminated spots be detected by OEPA after an assessment of a cleaned-up site, additional remediation will be called for. In this way, the covenant not to sue can be revoked by OEPA if the property owner reneges on the agreement. The covenant is attached to the deed, and it transfers with the property. Since the covenant not to sue went into effect in December 1995, seven sites have been cleaned and have been issued the covenant. Another 60 to 100 sites are expected to receive the covenant within the next two years (1). Also at this time, the U.S. Environmental Protection Agency (U.S. EPA) is evaluating the state's program in an effort to develop its own compliance standards for a national brownfields program; subsequently, a federal covenant not to sue may result.

2. Release of Lender Liability

Under VAP, lenders or other parties (e.g., trustees, agents) who did not contribute to site contamination will be released from liability associated with direct cleanup costs (2,3).

3. New Cleanup Standards

The intention is to make VAP accessible by allowing sites to be cleaned to a standard determined by the risks associated with the intended use of the property (2).

4. Privatization 

This component allows certain professionals and laboratories to be certified by OEPA as key players in site cleanup, thus promoting a coalition between the private and public sectors. The certified professionals will determine when a site undergoing remediation reaches "No Further Action Status," then make recommendations to OEPA, which in turn may issue a covenant not to sue" (2,3).

5. Financial Incentives

VAP offers financial assistance to participants by making low-interest state loans available, abating taxes on the property value for the first 10 years after cleanup, and permitting participants and the local governments to enter into an agreement to abate additional real and personal property taxes on development projects for up to 10 years (4).

Also, House Bill (H.B.) 441 and H.B. 442 provide for additional funding sources for voluntary cleanups. H.B. 441 offers a tax credit program for tax payers such as corporations, limited-liability companies, and so forth that have received covenants not to sue. H.B. 442 also provides a reimbursement grant to nonprofit economic development organizations that have received covenants not to sue and are located within economically depressed communities (3,4).

Benefits and Dangers

Given that Ohio was once a major steel industry empire, it is easy to see how industry closures have affected many host cities. For a long time, these cities have endured a socioeconomic downturn from which they have been unable to recuperate. Increases in crime rates, high unemployment, and lots of abandoned or possibly contaminated lands have all contributed to an inability to attract new business dollars. As a result, VAP is seen by many as an attractive perk - or as a stepping stone to urban renewal and economic revitalization.

In a desperate move to generate the needed revenue, some cities have also added other incentives to attract businesses. These incentives include selling the "questionable" (i.e., cleanup-intensive) brownfield properties for about $100 or less; signing "hold harmless agreements" with new owners, leasers, and buyers; and granting tax abatements for an extended period of time (five to 10 years) (5). Some city officials are optimistic that these added incentives will aid them in turning their cities around by accelerating cleanup and reuse of properties for industrial or economic development. This optimism, however, may negate their ability to protect their constituencies from environmental consequences that some not-so-clean former brownfields might inflict on members of the public.

Conclusion and Recommendations

Ohio's VAP is designed to promote voluntary cleanup and redevelopment of brownfield sites by providing incentives to current owners and prospective buyers. VAP is an unconventional program that combines economic stimulation with environmental restoration. Like many other programs with good intentions, however, VAP is fraught with loopholes that opportunists can prey on. Problems include:

* the fact that some oversight of remediation of contaminated sites is in the hands of professionals in profit-making enterprises;

* "user-friendly" cleanup standards that are being used for the purpose of achieving quick site remediations for economic development;

* excessive incentives for participants, with minimum environmental protection education geared at preventing history from being repeated; and

* the possibility that some VAP enthusiasts may be interested in the program only for economic windfall, without a total commitment to environmental restoration, public health, and safety.

In spite of these weaknesses, the potential exists for a more environmentally friendly VAP - if OEPA is more aggressively involved in cleanup oversight and in the day-to-day decision-making process that selects remedial techniques for each brownfield site. With better regulatory scrutiny and serious public participation in the decision-making process, the goal of VAP may be accomplished without compromise of public health and safety. If VAP becomes a major success, it may serve as a model for other states, as well as for U.S. EPA and countries around the world.

REFERENCES

1. Pfau, E. (May 5, 1997), Personal communication, Columbus, Ohio: Ohio Environmental Protection Agency, Division of Emergency and Remedial Response.

2. Summary Outline of Voluntary Action Program (1995), Columbus, Ohio: Ohio Environmental Protection Agency

3. Ohio's Voluntary Action Program (1996), Columbus, Ohio: Hull and Associates.

4. Financial Assistance for Voluntary Action Program Remediations (1996), Columbus, Ohio: Ohio Department of Development.

5. McCabe, E. (March 10, 1996), Personal communication, Garfield Heights, Ohio: McCabe Engineering.

Corresponding Author: Tunde M. Akinmoladun, Ph.D., R.S., F.R.S.H., Coordinator, Dept. of Environmental Safety, Tuscarawas Campus, Kent State Univ., New Philadelphia, OH 44663-9947.