1. Redeveloping Environmentally Challenged Property: Taking RCRA Corrective Action Sites and Creating Economic and Environmental Opportunities Todd Fracassi, Pepper Hamilton LLP Thomas P. Wilczak, Pepper Hamilton LLP

2. Introduction RCRA is unique in its effect on prospective purchasers –RCRA does not have a defense for prospective purchasers like CERCLA’s BFPP Defense –If the property is subject to a RCRA corrective action order, the purchaser will be bound by these obligations –How can a purchaser control or manage the uncertain future costs of RCRA corrective action liability?

3. Carefully negotiated consent orders or other instruments can be used that convert RCRA corrective action liability into a capped, fixed annual cost of doing business in exchange for agreed upon annual remedial obligations This approach was successfully used to facilitate the purchase of a distressed industrial facility in Michigan

4. Case Study – Site in Southeastern Michigan The site was environmentally and economically distressed –The property was in bankruptcy proceedings –The property was subject to an existing RCRA corrective action consent order (CACO) –10+ WMUs and AOCs that were not fully evaluated Created a high level of cost uncertainty

5. Goal: Facilitate the Purchase by Negotiating a New CACO to Create a Win-Win-Win-Win Scenario Provide investors with the financial certainty that they require Provide MDEQ a solvent party that will address environmental conditions under a schedule and annual cost cap Provide the state and local community with hundreds of jobs Preserve green space and prevent a ready-to- operate industrial site from becoming an inactive CERCLA site that would otherwise revert to the government for clean-up

6. The Approach Pre-acquisition due diligence: Identify contamination not associated with an WMUs or AOC that can be addressed outside RCRA Meet with the agency. Because the prior owner was insolvent, investors had a unique opportunity to work with MDEQ to provide the agency with RCRA site closure and the investors with cost certainty Letter of Intent can memorialize negotiations that can later be set forth in a new CACO

7. The Approach Under the new CACO, agreed to conduct annual RCRA corrective action pursuant to a yearly work plan submitted to and approved by MDEQ The expenditures for corrective action were secured by a financial assurance mechanism – a trust executed for the benefit of MDEQ The Key Provision: A fixed annual cap on required contributions to the trust was negotiated –The annual amount to be deposited is based on the corrective action cost estimate in annual work plans, but the annual deposit could never exceed the negotiated annual cap

8. The Approach At the end of each fiscal year after conducting the agreed upon work in the annual plan, owner is reimbursed from the monies in the trust fund This assured purchaser that it would not have unlimited RCRA expenses going forward in any given year, allowing it to plan for the cash flow needed to address environmental concerns like any other cost of business

9. The Approach - Isolating Non-RCRA Liability That Can Be Addressed Under Other Programs The Owner also was able to demonstrate, and MDEQ agreed, that certain releases were unrelated to RCRA WMUs/AOCs, and prepared a baseline environmental assessment (“BEA”) under Michigan’s Part 201 statute to qualify for a liability exemption for those releases

10. The Win-Win-Win-Win Scenario 1. Environment: A new solvent owner is committed to RCRA corrective action and addressing the impacted property. This approach promotes efficient use of existing infrastructure and reduces the unnecessary use of green space 2. Agency: A cooperative approach to RCRA compliance shifted the financial burdens of cleanup to a viable private entity that may otherwise have been borne by the state or federal government if a viable site had become an abandoned CERCLA site

11. The Win-Win-Win-Win Scenario 3. Purchaser: The purchaser avoided the uncertain costs of RCRA administrative orders –Due diligence may not reveal all the environmental problems –By converting unknown RCRA costs into known fixed annual business expenses that can be accounted for in annual budgets, a prospective purchaser can invest with confidence –The cost savings of buying an existing brownfield facility were available for necessary facility upgrades and not completely consumed in 5 or 10 years due to unpredictable RCRA liabilities –RCRA liabilities can be addressed over time as the facility is upgraded and able to operate profitably

12. The Win-Win-Win-Win Scenario 4. State/Local Economy: This approach can retain or generate hundreds of jobs that would otherwise not exist –As a result of the purchase and settlement reached with MDEQ, the plant resumed full production, thereby creating approximately 200 union jobs

13. The Win-Win-Win-Win Scenario The State acknowledged that this approach was a prime example of how parties can work together to address outstanding environmental issues, encourage redevelopment of existing infrastructure and sustain the economy by preserving jobs

14. Conclusion RCRA corrective action facilities can present a valuable investment opportunity for all parties A balance can be struck between the government’s interest in environmental protection and job creation, and private interests in cost-effective development With a willingness to work together to quantify the risk over time and develop financial planning certainty, RCRA corrective action sites can be put back into beneficial use

15. Conclusion The corrective action order, in conjunction with CERCLA’s BFPP defense and other exemptions under state law, is an approach that offers realistic incentives for private investment in RCRA brownfields while reusing existing resources, creating or retaining needed jobs benefitting the local economy and protecting the environment

16. Todd Fracassi – 313.393.7404 fracassit@pepperlaw.com Thomas Wilczak – 313.393.7398 wilczakt@pepperlaw.com