1 Brownfield Cleanup Program Reforms Statutory changes, Regulatory proposals, and Enforcement updates Robert Schick, Division Director Andrew Guglielmi, Associate Attorney & Section Chief Jane O’Connell, Chief Remediation Engineer, Region 2 November 12, 2015 (Albany) & November 17, 2015 (NYC)

2 DISCLAIMER The views expressed by the speakers are their opinions alone and do not necessarily represent the position of the NYSDEC or the State of New York

3 Brownfields 101 1) You know it when you see it; 2) liability issues; 3) other clean land

4 Brownfield Evolution in New York Original VCP administrative program – mid 1990’s Original BCP – prime feature unlimited tax credits 2008 BCP reforms – caps tax credits at $35M per site (non- manufacturing) 2015 BCP further reforms – extension of program and other aspects of the program revised

5 Background The BCP tax credits were previously scheduled to sunset on December 31, 2015 The new law: extends the BCP tax credits for 10 years, reforms the program and refinances the State Superfund, modifies the Environmental Restoration Program (ERP) and adds exemptions for hazardous waste fees and special assessments

6 Result 1: Continues tax credits for 10 years with program reforms New sites must enter program by 12/31/22 and obtain COC by 3/31/26 Will continue successful private cleanups under state oversight Will limit state’s expensive cleanup burden Will provide certainty to developers Existing sites pre-2008 must meet 12/31/2017 deadline for COC and post-2008 have until 12/31/2019 Otherwise comes under new program

7 Result 2: Separates BCP & Tangible Property Tax Credit Eligibility in NYC Properties eligible for TPCs in NYC are: Properties in Environmental Zones (En-Zones), which are areas with high poverty and/or unemployment levels “Upside down” properties, where the cost of cleanup is 75% or more of the property value as if uncontaminated “Underutilized” properties, to be defined in regulation “Affordable housing projects”, to be defined in regulation

8 Applying for TPCs in NYC Can apply for TPCs at any time from application until COC EXCEPT for sites seeking “underutilized” criterion Those seeking the “Upside Down” criterion must produce an independent appraisal, as of the date of the application, assessing the value of the property in an uncontaminated state Department has developed a new application that requests this information from NYC applicants (check website)

9 Outside of New York City: All sites outside NYC eligible for Tangible Property Credits EXCEPT:  Sites where groundwater or soil vapor contamination found is solely emanating from another property (i.e. not the source)  The property has previously been remediated under one of the Department’s remedial programs (RCRA, Superfund, BCP, ERP, or Spills)

10 Result 3: Limit Eligible Site Preparation Costs Previously, broader definition of costs associated with preparing a site were eligible for the Site Preparation Credit, including extensive building foundations Site preparation costs are the basis for calculating the cap on the Tangible Property (redevelopment) Credit, so that cap was higher than what was appropriate based on the required cleanup remedy

11 Site prep reforms: More closely aligns site prep with the required cleanup:  moves costs not associated with investigation, remediation and qualification for a COC to tangible property credit  limits foundation costs to equivalent of a site cover as required by regulation  includes costs of addressing asbestos, lead and PCBs in structures that will stay on site This will reduce the maximum tangible property tax credit since the cap is 3X the site’s eligible site prep costs (or 6X if the use will be manufacturing)

12 Result 4: Tangible Property Credit Restructuring Base is 10% for all sites with bonuses, up to 24%, as follows: 5% if located in an EnZone 5% if located and in conformance with a designated BOA 5% for affordable housing (even outside NYC) 5% for manufacturing, and 5% for Track 1 cleanup Maintains caps (3X site prep up to $35M, 6X site prep up to $45M for manufacturing)

13 Disclaimer #2 DEC makes no warranties, expressed or implied, regarding an applicant’s ability to obtain tax credits NYS Dept. of Tax and Finance can answer tax questions

14 Result 5: Clarifies Definition of Brownfield Moves away from “potential” presence of contamination and the often- litigated “complicates redevelopment” test Applicants will have to demonstrate that contamination on the site exceeds SCOs for reasonably anticipated use prior to approval How to determine reasonably anticipate use? Volunteers can bring orphan Class 2 Superfund sites and RCRA sites into the BCP When is a site orphaned? What if PRP notice letters previously were sent? Must show that a site “requires remediation”

15 Result 6: Reduced Administrative Burdens Eliminates oversight costs for volunteers All existing volunteers in prior program will be sent final bills for costs up until July 1, 2015 May consider flat fees for participants Waives hazardous waste generator fees and surcharges for EPA Superfund and NYC OER Brownfield program sites

16 Result 7: BCP EZ: A voluntary cleanup option with no tax credits For many sites, a liability release is needed for financing and for some, tax credits are less important than the liability release In exchange for waiving rights to tax credits, lightly contaminated sites will be able to enter a streamlined program with State oversight Requires revisions to the Department regulations, which will most likely not be final until 2016

17 When did these changes go into effect? Law states that the effective date is the later of July 1 or the date DEC publishes regulations with the definition of underutilized in the State Register DEC published proposed regulations in the State Register on June 10, 2015, so law was effective on July 1 st Amendments to pre-existing BCP sites Will be subject to prior law and rules

18 BCP Current Rulemaking DEC published proposed regulations defining “affordable housing project,” “underutilized,” and “brownfield site” on June 10 th Public meeting was held in NYC on July 29 th DEC received comments almost exclusively on the definition of “underutilized” DEC plans to publish a revised rulemaking, addressing comments raised on “underutilized’ to make the definition more flexible

19 BCP Second Rulemaking After the three definitions are finalized, additional revisions to Part 375 will be necessary (consistency with new statute) NYSDEC will take the opportunity to update other portions of 375 beyond BCP-EZ regulations will be a part of the next rulemaking

20 Litigation, Compliance and Enforcement Most litigation remains defensive Article 78 Ineligible Sites (Wythe Berry v. DEC – 2015) Participant v. Volunteer (Maggio v. DEC – 2015) Areas of possible dispute under new law Tangible property credits? Class 2 Orphans? Affirmative litigation Department initiated administrative enforcement

21 Post-COC Compliance Issues Property is subdivided with multiple owners: Who is responsible for site management? Department needs to track these sites forever Failure to record Notice of COC or transfer of COC: grounds for revocation SMP or Easement violations

22 Common enforcement scenarios: Failing to maintain site cover (Region 3 example - $100k) Failing to submit periodic review report (Region 8 example $100k) Failing to maintain soil vapor mitigation system Importing unauthorized fill (Region 3 example - $250k) Change of use – not in compliance with an approved work plan

23 Consequences of enforcement Penalties Brownfield termination Revocation of COC Once a COC is transferred, what happens to prior holder of COC when a COC is revoked? Loss of liability release?

24 Thank You Robert W. Schick, P.E. Division Director Andrew Guglielmi, Associate Attorney Jane O’Connell, Section Chief NYS Department of Environmental Conservation Connect with us: Facebook: Twitter: twitter.com/NYSDEC Flickr: