Bar News - September 20, 2017
Environmental, Telecomm, Utilities & Energy Law: Government Programs Facilitate Redevelopment in NH
By: Sherry Young and Mike Schowalter
Contaminated properties pose unique risks to any developer who may want to turn blight into productive use. Fortunately, federal and state governments have long recognized the existence of this challenge and have implemented various programs aimed at reducing or eliminating the liability of prospective purchasers of contaminated property.
NH Brownfields Covenant Program
New Hampshire’s Brownfields Program provides certain protections for developers proposing to remediate contaminated property in the course of redevelopment. The most important and widely used aspect of this program is the Brownfields Covenant Program. By taking part in this program, a developer will protect itself from being held liable by the NH Department of Justice (DOJ) and the NH Department of Environmental Services (DES) for environmental contamination on that property.
To be eligible, one must hold no existing responsibility for any real or threatened contamination at the subject property, the property must not already be eligible for one of New Hampshire’s petroleum reimbursement funds, and the property must be in compliance with any existing environmental obligations at the federal, state, and local levels. If these criteria are met, a developer may submit an application along with an Environmental Site Assessment and a description of the proposed redevelopment project to DES.
Once eligibility is established, a developer will need to cooperate with DES by submitting a round of reports and plans for DES approval. The first of these is the Site Investigation Work Plan, which is a preliminary report designed to gather enough information to identify and justify a preliminary recommendation for remediation. The second of these is the Site Investigation Report, which explains the exact nature of the contamination while providing preliminary recommendations for remediation. Finally, the developer will submit a Remedial Action Plan, which describes in detail the remedial strategy for cleaning up the property.
The Remedial Action Plan is subject to public notice and comment, and once approved by DES, DOJ will then issue a “Covenant Not to Sue” to the developer. Once the Remedial Action Plan is complete, then DES will issue a “Certificate of Completion.” So long as the developer abides by any conditions contained in the Covenant Not to Sue and the Certificate of Completion, that developer will be protected from enforcement against it by DES and DOJ. The Covenant Not to Sue and the Certificate of Completion must be recorded, after which they will run with the land to any subsequent owners.
Federal Liability Protection
A developer should also protect itself from being held as a “potentially responsible party” by the US Environmental Protection Agency (EPA). Fortunately, the EPA will refrain from holding a prospective owner liable for past contamination if that new party can show that it is a “Bona Fide Prospective Purchaser” (BFPP). To obtain BFPP status, before one purchases the property in question, one must: 1) conduct an Environmental Site Assessment meeting the “All Appropriate Inquiry” (AAI) standard; 2) have no affiliation with any past potentially responsible party; 3) not be responsible for any existing environmental contamination; and 4) comply with any existing obligations that are in effect during and after the time of the purchase of that property.
BFPP status is self-implementing, in effect being an exercise in documentation before any purchase of contaminated property, and during the time that one continues then to own that property. So long as one has conducted this documentation appropriately, the EPA will not hold a developer with BFPP status as a responsible party liable for environmental contamination cleanup costs related to historic releases.
It’s important to note that the EPA will not take an enforcement action at a particular property if that property is already being remediated under a state Brownfields program. However, this “enforcement bar” acts as an added layer of security in case something happens to one’s involvement in the state program. Since the steps necessary to achieve BFPP status can often be undertaken while fulfilling the requirements of any state program, it is still a good idea to have BFPP status available in case something goes wrong on the state level.
Liability is an important side of the equation, but federal and state governments have also created a wide variety of incentives to help spur redevelopment of contaminated property, either through direct assistance in paying clean-up costs or other incentives to help increase profitability.
In New Hampshire, the Cleanup Revolving Loan Fund provides inexpensive credit for projects that might otherwise not be attractive for private lending. Additionally, the NH Assessment Program assists municipalities and NGOs in preparing site investigations and remedial planning services. Other NH Brownfields Programs include the Cleanup Grant Program and the Grantee Assistance Program. Finally, as mentioned above, alternative help may exist in one of New Hampshire’s petroleum reimbursement funds.
Among the most widely used federal incentives is the Historic Tax Credit, which provides either a 20 or 10 percent tax credit for the redevelopment of blighted historic properties. Other popular federal incentives include the Federal Brownfields Grants, Assistance to States, Green Remediation, and the RE-Powering America’s Land Initiative.
While this article focuses on government programs, one should still keep sight of other modes of protection, including the use of limited liability entities, indemnification, and environmental liability insurance. In addition, there are many other considerations that exist for lenders, municipalities, existing owners, and neighboring property owners, among others.
Community involvement is a key first step that developers should never ignore. It can mean the difference between a smooth project and one caught up in litigation. Hopefully, this brief overview will serve as a jumping off point when examining the legal liabilities and government incentives that surround the redevelopment of contaminated property.
Sherry Young is a founder and president of Rath, Young and Pignatelli, where she heads the firm’s Environmental Practice Group.
Michael Schowalter is an associate at Rath, Young, and Pignatelli, focusing on environmental, corporate, and other matters. He worked for several years as an international human rights advocate.