Brownfield redevelopment opportunities in NYS.

The redevelopment of thousands of idle properties in New York State has become significantly more lucrative with the 2003 passage of the Brownfield Law.

This law has changed the standards governing the remediation and reuse of mildly contaminated property in New York State, reduced the liability facing owners and operators of that land, and provided enticing tax credits.

The path to these benefits is through participation in the State's new Brownfield Cleanup Program operated by the Department of Environmental Conservation (DEC). This program marks a major achievement for the State's environmental and business leaders who have been seeking such a law for years, encouraged in part by the success that New Jersey has had with its brownfield program.

New York's law promises to make reuse of these sites more likely through reduced cleanup obligations, long-term liability relief, tax incentives, and lender protection.

Defining Brownfield

"Brownfield" is defined by the new law as follows: "any real property, the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant." (1) Such property may include manufacturing sites, oil storage facilities, gas stations, dry cleaners and sites with contaminated fill. Although a brownfield is generally thought of as contaminated land, "real property" includes both land and buildings. Furthermore, the contamination need not be severe for a site to qualify as a brownfield.

Therefore, the number of properties that qualify for the program in the State is likely to be quite large. Many will be found along the formerly industrial shores of the Hudson River, Harlem River and East River in New York City. Sites that have entered the program include the Bronx Terminal Market near Yankee Stadium and a new commercial tower site near Times Square. Besides these high profile applications in urban areas, the law applies to less well known sites throughout the State.

The Brownfield Law, among other things, creates the new Brownfield Cleanup Program (Program). Through participation in the Program, applicants can apply reduced cleanup standards to their property and receive liability protection from the State upon receipt of a Certificate of Completion for the cleanup. The Program is not without its obligations, however. Applicants must agree to work through investigative, design and remediation phases that include significant public involvement. In exchange for the reduced cleanup obligations (which will significantly lower the cost of putting a site back into active use), the applicant may have to install engineering or institutional controls on a property. For example, pavement may be required over an area of soil contamination. That cap must remain in place and be monitored over time. Similarly, a deed restriction (filed as an environmental easement with the State) may restrict the methods and types of development that can take place on the property. It is likely that in many cases these restrictions will be worth the reduced cleanup obligations that the Program offers.

Liability protection will give some measure of comfort to those redeveloping brownfields and will be available to future purchasers. Traditionally, under the State's environmental laws (and federal law as well) owners and operators of contaminated sites were liable for contamination cleanup costs and damages without regard to fault (strict liability). Thus, a property owner who discovered contamination on his property after purchase totally unrelated to his ownership or operations was still liable for its cleanup. Moreover, a party that partially contributed to contamination could be forced to pay the entire cleanup cost, leaving it to seek contribution from those who caused the remainder of the contamination. Not surprisingly, redevelopment of brownfields suffered.

The Program changes this liability scheme for those successfully completing a cleanup under it by providing a covenant from the DEC and the New York State Attorney General not to sue. Protection from contribution claims of others is provided. Lenders are also given further assurances under state law that they will not be liable for contamination when they must foreclose on a contaminated property. This should make financing the redevelopment of brownfields easier.

Tax credits of up to 22% percent are available for those successfully participating in the Brownfield Cleanup Program. The credits, deducted directly from a tax bill, cover depreciable costs incurred for site preparation (related to the cleanup), construction costs and groundwater remediation. They are also refundable to the extent that they exceed the year's tax liability. The tax incentives are designed to encourage redevelopment in the State's poorest census tracks; the full 22% will be achievable only for sites that are in "Environmental Zones", which are areas mapped by the State and defined by a poverty rate of 20% and an unemployment rate 1.25 times the state average.

The Brownfield Law has significantly increased the funding available to municipalities for brownfield remediation. Up to 90% of on-site, and 100% of off-site, investigation and remediation costs are available to municipalities.

Technical Assistance Grants of up to $50,000 are available to community-based organizations (CBOs) to educate and involve the public in the brownfield process. Finally, funding will be provided to municipalities, CBOs, or combinations of the two for the creation of Brownfield Opportunity Areas (BOAs). The BOAs are areas that have a concentration of brown fields and will receive priority state funding.

These financial incentives, combined with the extensive public participation process, represent an unprecedented effort to involve the public sector in brownfield redevelopment.

Several issues will need to be cleared up for the Brownfield Law to realize its full potential. For example, practitioners have pointed out several vague areas in the law that need clarification. Additionally, the liability protections are not iron-clad. The DEC can reopen a matter for a variety of reasons and even revoke a Certificate of Completion in narrower circumstances.

The somewhat broad definition of "brownfield" has led to concern at the DEC that otherwise lucrative sites will enter the program and take unfair advantage of lucrative tax breaks. There is likely to be a continuing dialogue about what qualifies as a brownfield under the law. Finally, the Program's full implementation will require detailed regulations from the DEC, setting forth the variable cleanup standards in particular.

These uncertainties have not stopped many applicants interested in the many real benefits the Brownfield Law offers. If the first year buzz over the law is any indication, the redevelopment of idle land, long elusive in New York, may finally be achievable.

(1) N. Y. Envtl. Conserv. Law [section] 27-1403.