Third Party Liability Protections –

The Next Wave of Brownfields Reforms?

Evans Paull

Northeast-Midwest Institute www.nemw.org

[email protected]

Redevelopment Economics www.redevelopmenteconomics.com

[email protected]

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Northeast-Midwest Institute Brownfields Federal Policy supported by the Brownfields Inner Circle

Redevelopment Economics

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Brownfield Equity Company

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Redevelopment Economics

       Green Job Strategies Brownfields and Smart Growth Strategies Climate Benefits of Smart Growth Site Redevelopment Analysis and Financing, Tax Increment Financing Incentives to Support Smart Growth Economic Impact Analysis Local Government Energy-Climate Plans 3

Getting a Handle on Liability for Brownfield Sites

Type of Liability

Liability relative enforcement actions

Solution

  To the State To EPA Third Party Liability       Contribution actions by RP’s Citizen suits Property damage suits Property value diminution Toxic tort (personal injury) Other Common Law – nuisance, trespass State VCP’s Bona fide Prospective Purchaser and State “enforcement bar” Most state VCP’s Private liability insurance Private liability insurance Private liability insurance Private liability insurance Private liability insurance 4

Ranking Third Party Liability Relative to other Brownfields Tools

  2004 survey of developers – ranked 3 rd party liability first among five mechanisms: 1.

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Third Party Liability Cleanup Liabilities (to governmental agencies) Redevelopment subsidies Site assessment reimbursement Public hearing requirements Lenders have become more risk averse – third party liability protection could be a key element for lender participation 5

Current Third Party Liability Solutions

  Private liability insurance and liability transfer:  Expensive – widens the brownfields-greenfields gap    Insurance usually covers no more than 10 years Generally works only for properties with high cleanup costs Liability transfer – limited third party coverage Governmental response to third party liability  Subsidized environmental Insurance   Massachusetts – 50% of private insurance costs Pooled environmental insurance  Ohio – 10% discount 6

Liability Transfer

 Environmental Liability Transfer (ELT)    Euclid, Ohio, former PMX Corporation 80 ac site Environmental Liability & Risk Transfer: In excess of $12,000,000 Up to 1,000 jobs 7

States that have Third Party Liability Protections

    Comprehensive  Connecticut   Georgia South Carolina Common Law protections  California Property damage  Massachusetts Tax credit recipients  Missouri Public agency protections:  Comprehensive protections  Pennsylvania  Wisconsin   Protections for public agency grantees  New York Common law protections  New Jersey 8

States w/ Comprehensive 3 rd party Protections

Georgia

 2002 Georgia Hazardous Site Reuse and Redevelopment Act.

(a) Upon the director's approval of the prospective purchaser corrective action plan or concurrence with the certification of compliance described in this Code section, whichever first occurs, a prospective purchaser shall not be liable to the state or any third party for costs incurred in the remediation of, equitable relief relating to, or damages resultant from the preexisting release…

 Development community – positive response      VCP participation way up Lenders like it – more willing to participate Residential developers, in particular, value added protections Requires superfund cleanup standards, but developers willing Developers foregoing environmental insurance 9

Atlantic Station

    Expected $4 billion investment TIF $167 million of $250 million gap Reimbursing $50 million cleanup Dramatic VMT reduction      6 mil sq ft office 5,000 DU’s 2 mil sq ft retail 1,000 hotel rms 11 acres open space 10

States w/ Comprehensive 3 rd party Protections

South Carolina

Section 44-56-750 of the 1976 Code, SECTION 1:  

"(H)(1) A nonresponsible party is not liable to any third-party for contribution, equitable relief, or claims for damages arising from a release of contaminants which is the subject of a response action included in the nonresponsible party voluntary cleanup contract provided for in this section.

Development community – positive response   Third Party protection is a “primary driver” for VCP participation Regarded as effective even though there are no corresponding federal protections:  Toxic tort or property damage lawsuits are brought under state statutes or common law, both under the jurisdiction of state courts. 11

States w/ Comprehensive 3 rd party Protections

Connecticut

  CN Senate Bill No. 795, Public Act No. 05-90, “An Act Concerning Third-Party Liability for Contaminated Property.

Section 1. … (a). No owner of real property shall be liable for any costs or damages to any person other than this state, any other state or the federal government, with respect to any pollution or source of pollution on or emanating from such owner's real property that occurred or existed prior to such owner taking title to such property, provided: (1) The owner did not (cause or exacerbate the pollution)…

 Development Community – little response – Issues:     Not linked to CNTS – separate process Only available after state certifies the cleanup Requires notice to all potentially affected parties Requires state oversight – slower than LSP 12

Property Damage Protections and Lender Protections

Massachusetts

  Liability protection granted by the Commonwealth confers protection “from claims by third parties for contribution, response action costs and property damage under (statute)… and property damage under common law.”   Projects (statewide) that achieve a permanent cleanup or remedy, or Project is located in certain distressed areas and meets certain job, affordable housing, or preservation criteria. Mass also protects lenders from all third party liability 13

Public Agency and Lender Protections

Pennsylvania

1995 Act 3:

 “An economic development agency that holds an indicia of ownership in property as a security interest for the purpose of developing or redeveloping the property or to finance an economic development or redevelopment activity shall not be liable under the environmental acts to the department or to any other person …”   “A lender, fiduciary or economic development agency can avoid liability under the environmental acts or the common law equivalents by showing evidence…” 2009 amendments added third party liability:       Bodily injury or death (e.g., toxic torts) Claims under common law Property damages Diminution of property claims Natural resources damages Economic loss 14