Brownfields, Part 1: What Is A Brownfield? By Benjamin Alter

The Comprehensive Environmental Response and Cleanup Liability Act (CERCLA), commonly known as Superfund, had consequences not envisioned by its creators.  The threat of liability, especially the onerous threats of strict, joint and several liability costs, put a chill on real estate owners, developers, financers, and insurers who had financial interests in urban areas.  Such areas were having difficulty attracting investment capital due to blighted, deteriorating infrastructure, the additional costs associated with demolishing old buildings compared to the availability of undeveloped, unencumbered properties outside of the urban core, and many other reasons unrelated to environmental degradation.  Fear of inadvertently incurring Superfund liability added another layer of concern to entities interested in investing in old, urban areas.  By creating a stigma regarding properties that have actual or perceived contamination, Superfund quite possibly accelerated the process of urban decay and complicated governmental efforts at urban renewal.

The Brownfields Act

The Small Business Liability Relief and Brownfields Revitalization Act of 2002, commonly known as the “Brownfields Act,” addressed some of the shortcomings of the original Superfund law. The term “brownfields” was coined to identify properties in the hazy middle ground between heavily polluted properties and unpolluted properties colloquially called “green fields.”

According to the Brownfields Act, a brownfield is “a property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.”  The Act excludes the following types of known contaminated properties, to avoid conflicting with environmental priorities under other federal statutes:

• Properties that are listed or are proposed for listing on the National Priorities List (NPL)
• Properties that are subject to a unilateral administrative order, consent decree, or a similar type of legal proceeding under a federal environmental statute
• RCRA corrective action facilities
• Title C solid waste disposal facilities as defined by RCRA
• Properties that are managed by the United States for a Native American tribe
• Portions of a property with releases of polychlorinated biphenyls (PCBs)
• Portions of a property with leaking underground storage tanks that are being remediated using funds from the federal Leaking Underground Storage Tank Trust Fund.

Brownfields typically are real estate, that is, properties that can be bought or sold.  The appearance in the definition of brownfields of terms such as “expansion,” “redevelopment,” and “reuse” identifies them by their economic rather than their technical or scientific condition.  The definition implicitly states that brownfields are properties that currently are unused, underutilized, or not being used to their best economic advantage.  As such, they are contributors to urban blight and its associated sociological problems. Depending on how it is defined, there could be hundreds of thousands of brownfields in the United States.

FIGURE 1

An abandoned factory.

Practical Definition of a Brownfield

For practical purposes, brownfields can be separated into two categories.  The first category includes properties for which property expansion, redevelopment (which will be called “redevelopment” in this series of articles) is likely is economically viable.  Typical economic evaluations of such a property with potential environmental impairments are shown in Tables 1 and 2. The complications in redeveloping the property consist of uncertainties in timing, budget, liability relating to the presence or potential presence of contamination.

TABLE 1

Economic evaluation of a viable brownfield property redevelopment with diminished value due to threat of contamination

TABLE 2

Economic evaluation of a high-value brownfield property that likely is contaminated

The second category includes properties whose redevelopment is complicated because of economic considerations.  Such properties, common in areas of urban blight, might be worthless or even have a negative worth (colloquially known as an “underwater” or “upside-down” property) due to environmental contamination.  Consider the same property as evaluated in Table 1, but, as shown in Table 3, with a much higher likelihood of contamination.

TABLE 3

Economic evaluation of a brownfield property with negative worth due to real or perceived contamination

Because of the perception that the property is likely to be contaminated, it actually has negative worth.  Note, however, that if this property is not contaminated, then the project is economically viable.  In such cases, the business community will not show an interest in this property due to the uncertain potential costs of remediation.

Relief from Superfund Liability

One of the primary goals of the Brownfields Act was to establish the criteria with which a purchaser of contaminated sites could be exempt from Superfund liability.  The prospective purchaser would have to satisfy the Bona Fide Prospective Purchaser provisions, which include conducting an All Appropriate Inquiries-compliant Phase I environmental site assessment.  The BUILD Act of 2018 expands the liability protections for local and state governments that seek to take control of contaminated properties within their jurisdiction and expanded the Bona Fide Prospective Purchaser provision to include entities that have tenancy or leaseholds on the property.  State brownfields programs have similar stipulations for developers to avoid similar liability under state regulations.

Relief from Off-Site Contamination Concerns

Brownfields often lie in urban areas that have become blighted through past operations, age and disuse.  Such areas may harbor numerous properties with environmental concerns, as demonstrated on Figure 2.  Financial organizations may be reluctant to supply capital to a redevelopment project in such an area for fear of being sucked into the cleanups and liabilities associated with several of the neighboring properties.  The developer may not show an interest in redeveloping such a property not only for financial concerns but also due to the complexities deriving from multiple contaminated properties contaminating each other and other nearby properties.

FIGURE 2

Environmental concerns in a typical urban area

In acknowledgement of this issue, several states have passed brownfields legislation that grants the developer immunity from remediating contamination emanating from another site (especially if the same contaminants are found on the subject property).  In exchange, the developer is typically asked to commit the requisite resources to the project and to complete the project in a certain timeframe.  This liability protection is a win-win: a major barrier has been removed for the developer, and the municipality benefits through the conversion of a blighted property into one that will add to the tax base and possibly attract other developers to the area.  It should be noted that state brownfields laws and provisions do not exempt the prospective purchaser from Superfund liability.

The next installment in this series will discuss the public financing of brownfields projects in the United States.

References

Hollander, Justin B., Kirkwood, Niall G., and Gold, Julia L., 2010.  Principles of Brownfield Regeneration.  Island Press.

National Association of Local Government Environmental Professionals, 2006.  Superfund Liability – A continuing Obstacle to Brownfields Redevelopment.

U.S. Environmental Protection Agency, 2006.  Anatomy of Brownfields Redevelopment. https://www.epa.gov/brownfields/anatomy-brownfields-redevelopment-october-2006.

U.S. Environmental Protection Agency, October 2011. Handbook of the Benefits, Costs, and Impacts of Land Reuse and Development. EPA-240-R-11-001.

U.S. Environmental Protection Agency, 2017.  2017 Brownfields Federal Programs Guide.

U.S. Environmental Protection Agency, 2017.  Putting Sites To Work – How Superfund Redevelopment in EPA Region 2 Is Making a Difference in Communities.

About the Author:

Benjamin Alter
Principal and Senior Vice President, GZA GeoEnvironmental

Environmental Consulting Fundamentals, by Benjamin Alter