September 24, 1999
New York's Pending Superfund/Brownfields Legislation
New York Law Journal
As this column noted last May, two overlapping groups had spent much of the previous year trying to map the future of New York State's programs to clean up sites that are contaminated with hazardous wastes, hazardous substances and petroleum. Growing out of the work of these groups, two draft bills have been introduced into the Legislature. The purpose of today's column is to compare the two bills. The first group to get started was the Superfund Working Group, established by Governor George E. Pataki on August 7, 1998. Its 17 members were chaired by John P. Cahill, Commissioner of the Department of Environmental Conservation (DEC). The Superfund Working Group did not reach full consensus. However, the Governor released a draft bill on June 15, 1999 based in part on a final report issued by this advisory panel. It will be called the "Governor's Bill" here. The other group, the Pocantico Roundtable for Consensus on Brownfields, was convened by a consortium of foundations in September 1998 and organized by Jody Kass, director of regulatory initiatives for the New York City Partnership. The Roundtable agreed in advance that no final report would be issued unless all 25 of its members said they could live with everything in the report. Ultimately they could not all agree and the Roundtable dissolved on May 18, 1999. However, about two-thirds of the members of the Roundtable, along with other interested groups, immediately reconstituted themselves as the Brownfields Coalition and issued a report on June 3. The Brownfields Coalition released a draft bill (the "Coalition Bill") on August 4 that embodies that report. In comparing these two bills, extensive use was made of a draft side-by-side comparison prepared by Linda R. Shaw of Knauf Craig Koegel & Shaw in Rochester and another by Mark Izeman and Amanda Gonzalez of the Natural Resources Defense Council. Overview The Coalition Bill is much longer than the Governor's Bill and contains considerably more detail on many issues. The bills mostly overlap; they both codify the state's voluntary cleanup program and create methods for setting soil cleanup standards that are tied to the site's present and future land use, and they both modify the State Superfund Program, DEC's enforcement program for hazardous waste cleanups. However, there are some areas covered by one but not the other. Only the Governor's Bill specifies how to refinance the State's remediation programs, including the State Superfund Program - one of the original purposes for the creation of the Governor's Superfund Working Group. Disagreements over financing were one of the main reasons that the Pocantico Roundtable dissolved. (The Superfund Working Group also did not agree on how to refinance Superfund, but the Governor was not constrained by that report in writing his bill.) Only the Coalition Bill contains a specific strategy for remediating groundwater and it is also far more detailed on issues of community redevelopment and financial incentives. This is in part because the Pocantico Roundtable's funders insisted on extensive representation of community groups in the Roundtable, and the Roundtable grew to have a community development and participation orientation. Since many of the most important and contentious issues concerned cleanup standards, the comparison of the two bills will begin there. Cleanup Standards The two bills have significantly different approaches to setting standards for the cleanup of contaminated sites - in many ways the heart of the debate. The Governor's Bill would utilize the same sets of standards for all three programs - State Superfund, Voluntary Cleanup, and Oil Spills. The Coalition Bill continues the current policy of requiring the "complete cleanup" of sites under the State Superfund program, but it has a different set of standards for the Voluntary Cleanup Program (allowing cleanup standards to vary depending on current and anticipated land use), and allows most sites, including those that might otherwise end up on the Superfund list, into that program. In this way the Coalition Bill aims to encourage both true volunteers and responsible parties to enter the more flexible voluntary program and get more sites cleaned up more quickly. Both bills create technical advisory panels to recommend soil cleanup standards (though the Governor's Bill enables DEC to select the panel and the Coalition Bill has a much more elaborate process for naming members to this panel to ensure broad representation of stakeholders). Under the Governor's Bill, the panel has 18 months to submit recommended standards to DEC; there are no time restrictions on DEC in promulgating standards. The Coalition Bill gives the panel 60 days to identify the "threshold contaminants" and 12 months to recommend standards for those contaminants. DEC then has 18 months to promulgate standards for those contaminants. Under the Coalition Bill these standards would apply only to the Voluntary Cleanup Program. In neither case would there be one standard for each chemical. Instead, both bills contain hierarchies of choices. The Governor's Bill has three categories: Soil Category 1 -- Unrestricted use without institutional or engineering controls Soil Category 2 -- "Cleanup levels that are protective for current, intended, or reasonably anticipated residential, commercial or industrial use with consideration of institutional or engineering controls to reach such levels." Soil Category 3 -- A process to determine cleanup levels that will be protective using site specific data for the current, intended or reasonably anticipated residential, commercial or industrial use. The Coalition Bill has three categories of its own: G (Goal) -- Remediate to a level of naturally occurring conditions LU (Land Use) -- "Look up tables" for unrestricted/residential use and for restricted uses (which may be residential, commercial or industrial) where remedies may include institutional or engineering controls. M (Methodology) -- Utilizing site-specific data, employ a designated methodology to establish site-specific cleanup standards; remedies may include institutional or engineering controls. In mandating how the numerical standards are to be set, the Governor's Bill (for all programs) and the Coalition Bill (for cleanups using category LU standards) rely on a cancer risk of one in a million and a hazard index of one for non-carcinogens. The Coalition Bill requires that, in setting residential standards, the needs of various sensitive populations be taken into account where appropriate. There would also be a supplemental process - perhaps the first of its kind in the United States -- to determine the practicability of achieving more protective remediation levels than those arrived at in a risk analysis, particularly when there are gaps in information on the risks posed by particular chemicals. The objective would be to set the standard higher than the risk analysis level if that is technologically and economically feasible. This would be based on an historical analysis of cleanup levels achieved under current remedial programs, conducted as a check on the standards arrived at using the risk formula. Coupled with this aspect of the Coalition Bill is an innovative program to encourage development of new technologies to allow the cleanup standards to be tightened. Negotiations on these provisions of the bill were key to securing the assent of many environmental groups to the bill. End Use Cleanups on Class 2 Sites One of the most controversial issues confronting both the Governor's Superfund Working Group and the Pocantico Roundtable concerned cleanup requirements for Class 2 sites. Those are the sites on the New York State Registry of Inactive Hazardous Waste Disposal Sites (the "State Superfund list") that DEC has declared to pose a "significant threat" to public health or environment such that action is required. (A Class 1 site would pose an imminent danger of causing irreversible damage to health or the environment, but DEC has never identified such a site, and Class 3, 4 and 5 sites are not deemed to pose significant threats.) Both programs impose an additional process before allowing the application of end use standards for Class 2 sites that are being cleaned up by a responsible party. The Governor's Bill creates a presumption that Class 2 sites will be cleaned up to residential standards if they are being remediated by a responsible party, are not in active use for industrial or commercial purposes, and are adjacent to residential uses. The presumption can be overcome by written findings by the DEC Commissioner after citizen participation. The bill contains no description of what the findings are to be based upon, and makes no distinction whether the site is being cleaned up voluntarily or under an enforcement action. As stated previously, the Coalition Bill does not provide for end use cleanup standards for Class 2 sites that remain in the enforcement program. However, for those Class 2 sites that do enter the voluntary program, if the volunteer is a responsible party the proposed cleanup must protect adjacent uses, and findings must be made that the site is actively used, or intended to be used, as an industrial or commercial site, and is anticipated to remain in such use. End use cleanup standards would not be available at sites where these "active use" findings cannot be made, or where the long term reliability of institutional controls is in doubt. The Coalition Bill also provides the other benefits of being in the voluntary program to these Class 2 sites, including flexibility in remedy selection, expedited processing, and liability releases. Groundwater Standards The Governor's Bill does not separately address cleanup standards for groundwater. The Coalition Bill addresses this issue at great length with regard to the Voluntary Cleanup Program, based on the recognition that groundwater moves, and therefore any meaningful remedial strategy should contain an area-wide approach. In the short term, the remediation of on-site sources of groundwater contamination, measures to assure protection of all current and future users, and the elimination of exposure pathways to adjacent properties are always required. Volunteers are responsible for remediation of on-site groundwater contamination (though non-responsible volunteers receive a partial tax credit for this work). Once this short-term remediation is completed, the responsibility for long-term cleanup of remaining groundwater contamination depends on whether the site owner is deemed to be a non-responsible party or a responsible party. (The distinction is discussed below.) Non-responsible parties receive a liability release and are exempt from liability for any long-term remediation requirements for remaining groundwater contamination. Responsible parties remain liable if any long-term remediation is needed. The Coalition Bill bestows upon DEC the responsibility to see to it that off-site groundwater contamination is cleaned up. The speed with which this responsibility must be carried out varies depending on whether the groundwater "is or may be used for drinking water." DEC may search for responsible parties to pay for the work, but its lack of success in finding them is not to delay the cleanup of priority sites. For areas with ubiquitous groundwater contamination, the Coalition Bill creates a new approach that formally recognizes the futility of cleaning up groundwater under only one site, and requires the State to develop a long term area-wide strategy to remediate the groundwater. It requires "contributory volunteers" (those who contributed to that contamination) to help pay for implementation of an area-wide remediation strategy. For areas without ubiquitous groundwater contamination, if it is infeasible to restore the groundwater, the volunteer has the option of utilizing an alternative procedure: a site-specific assessment that identifies the short-term and long-term strategies for groundwater cleanup (similar to what happens now under State Superfund consent agreements). Hazardous Substance Sites Both bills expand the state's cleanup programs to include not only "hazardous wastes," a fairly narrow category derived from the federal Resource Conservation and Recovery Act (RCRA), but also "hazardous substances," a broader category from the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The Coalition Bill also includes sites with nuclear wastes not currently subject to CERCLA; the Governor's Bill does not. Both bills delay listing of these "hazardous substance" sites on the State Superfund list where the site is being cleaned up under the Voluntary Cleanup Program. Treble Damages Both bills attempt to strengthen DEC's enforcement powers by providing for treble damages, but they do so in different ways. The Governor's Bill provides that if "after expending reasonable efforts" DEC is unable to obtain a voluntary commitment by the owner or another responsible party at a State Superfund site to develop a remedial program, or to implement such a program, DEC may do the work itself and ask a court to award at least one and no more than three times DEC's cost as a penalty against the recalcitrant party. DEC has the burden of proving that the responsible party has refused to begin or continue negotiations, or acted in "bad faith" in the negotiation process. Additionally, there is a "good cause" exception from the penalty. "Bad faith" and "good cause" are not defined. Similar provisions are also added to the Navigation Law, which governs the cleanup of oil spills. The Coalition Bill provides that DEC may issue a "notice of recalcitrance" to parties it finds to be acting in bad faith. "Bad faith" is defined as "submitting materially false or misleading information" to DEC or "raising arguments or objections that are beyond the scope of reasonable legal argument, or scientific or engineering acceptability for the purpose of obstruction or delay." A recipient of such a notice may request that DEC withdraw it, and DEC "shall not unreasonably refuse a request for the withdrawal" of such a notice. DEC may then go to court to recover the treble damages, and the court shall consider DEC's claims de novo. DEC has the burden of proving the defendant's bad faith and several other necessary elements, including that DEC did its best to identify other potentially responsible parties. Liability Exemptions Both bills create several exemptions from damages. For example, both make municipalities and industrial development agencies exempt from liability for involuntary acquisition of properties, and the Coalition Bill also exempts municipalities for voluntary acquisitions. The Governor's Bill would prohibit the municipality that wishes to keep this exemption from "participating in the management of the site," while under the Coalition Bill the municipality loses the exemption only if it participates in the site's "development" - a narrower category of activity. The Coalition's purpose in this additional exemption and in creating the "participation in development" concept was to encourage municipalities to use their urban renewal powers to aggressively acquire, test, and remediate property. The Governor's Bill extends the municipal exemption to the State of New York and to public corporations that involuntarily acquired land by virtue of their function as sovereign. It also exempts industrial development agencies that act as conduit financers. Both bills include an innocent purchaser defense, a lender liability exemption and a fiduciary exemption that track those contained in CERCLA. The Coalition Bill (unlike the Governor's Bill) also exempts from liability those nonprofit organizations certified by the municipality as acting in the public interest. Private Right of Action The Governor's Bill gives parties that are subject to an order or that have entered into voluntary cleanup agreements with DEC a private right of contribution against other responsible parties at the site. Unlike under CERCLA, consistency with the National Contingency Plan is not required. A responsible party that entered into a consent order with the State may be awarded treble damages against any other responsible party (with one-third going to the State) if the defendant refused to participate in the cleanup despite being invited to do so, and if certain other prerequisites are met. (In this case, treble damages means three times the excess paid by the responsible party over its equitable share of the costs.) The Coalition Bill has a comparable provision, except that there are no treble damages and none of the money goes to the State. Assertion of claims against other parties would be aided by the provision of the Coalition Bill that requires DEC to "use its best reasonable efforts to identify all those it believes to be responsible parties" at contaminated sites and to issue them notice directives. No such provision is found in the Governor's Bill. Natural Resource Damages The Governor's Bill provides DEC with free-standing authority to seek natural resource damages. (Current authority for such damages derives from CERCLA.) This provision is something of a sleeper, as it was not included in the report of the Superfund Working Group. There is no parallel provision in the Coalition Bill. Defining Responsible Parties The Coalition Bill divides relevant parties into three categories: 1. Non-responsible parties (NRPs) (e.g., "true volunteers" who previously had no role or interest in the property or its contamination) 2. Non-contributory responsible parties (NCRPs) (current owners and operators who did not own or operate the site at the time of the release of contaminants; "release" does not include passive migration) 3. Contributory responsible parties (CRPs) (other parties who would be liable under CERCLA). NRPs, NCRPs and CRPs all must conduct on-site investigation and remediation (except that NRPs must study on-site groundwater impacts caused by on-site contamination only where on-site conditions suggest that such impacts may have occurred). Under the Coalition Bill NCRPs do not have to remediate off-site contamination that does not pose a significant threat. If it does pose a significant threat, NCRPs must remediate it unless it is in an area of ubiquitous groundwater contamination. The Governor's Bill creates two classes of parties: responsible and non-responsible. Responsible parties must investigate both on- and off-site contamination. Non-responsible parties must investigate on-site contamination and conduct an off-site exposure assessment; if that assessment shows a significant threat, the State will pursue responsible parties to clean up the off-site contamination, and if no such responsible parties then do so, the State carries out the work and seeks cost recovery from the responsible parties. Entering the Voluntary Program Both bills exclude from the voluntary cleanup program National Priorities List sites. The Coalition Bill would also exclude Class 1 sites (an empty category); Class 2 sites where a feasibility study has been commenced; and RCRA treatment, storage or disposal facilities subject to a permit, including closure requirements. The Governor's Bill would allow Class 2 sites unless the request is submitted by the site owner or a responsible party, or the applicant is subject to hazardous waste enforcement action. Also excluded are all permitted solid waste and RCRA facilities. Whether oil spill sites subject to petroleum stipulation agreements are excluded is unclear. It will be easier for parties to enter the voluntary cleanup program under the Coalition Bill than the Governor's Bill. With the Coalition Bill, a person must submit an application describing the site, its intended or anticipated use, and a Phase I investigation. DEC then has 20 days to inform the volunteer if the application is complete. With the Governor's Bill, site investigation well beyond Phase I (that is, physical sampling) is required. DEC will make its best efforts to notify the person within 60 days if their request to participate in the program is accepted. DEC must reject an applicant against whom is pending an enforcement action for the cleanup of hazardous waste or petroleum (apparently regardless of whether it is regarding this site or a completely different site). Under the Coalition Bill, when a person submits its application to DEC to enter the program, it must simultaneously notify the municipality where the site is located and, within ten days, publish notice of the application in the Environmental Notice Bulletin and the local newspaper. This provision was inserted at the request of community and environmental groups who felt that the state and federal superfund programs give public notice too late to allow meaningful public participation. The Governor's Bill also requires notification in the Environmental Notice Bulletin when an application is received; at other points later in the process, notice is published there and is also sent to interested individuals and organizations. Conduct of Voluntary Program Both bills provide that parties that have joined the voluntary program must enter into agreements with DEC. Under the Coalition Bill, there are separate agreements for investigation and remediation; under the Governor's Bill, both phases can be but need not be combined in one agreement. The Coalition Bill contains several deadlines for DEC review of submittals, and also provides for concurrent review of some submittals by the Department of Health; the Governor's Bill does neither. Liability Release Under the Coalition Bill, once the volunteer has finished the required work and submitted an acceptable final engineering report, DEC issues a Certificate of Completion and a no further action letter. By directly tying the final report to the liability release, the volunteer that thoroughly tests and reports is rewarded with a stronger liability release. DEC also provides the volunteer with a release of future liability to the state and to any other responsible party who may seek contribution or indemnification; in CERCLA parlance, this is contribution protection. For volunteers who are not CRPs, this release also covers natural resource damages. These releases are recorded with the site's property records and run with the land. They are lost, however, if required institutional controls are not observed. Subsequent owners or operators of a site remediated under this program, if not themselves responsible parties, are exempt from any liability for groundwater contamination that occurred prior to their acquisition of the site - a provision intended to promote the sale and reuse of property once a short term groundwater cleanup has been completed, even if there are long term groundwater remedial requirements. The Governor's Bill also gives a release, though it is framed differently. After DEC approves the volunteer's final engineering report, DEC issues a covenant not to sue, binding on the state, for any liability for further remediation of hazardous waste or petroleum at or from the site. The volunteer also receives contribution protection. Parties that are responsible for the site's remediation under applicable statutory or common law do not receive a release for natural resource damages. These releases apply not only to the Voluntary Cleanup Program but also to the State Superfund Program and the Oil Spill Program. Reopeners The Coalition Bill's liability release is subject to much narrower reopeners than the Governor's Bill. Under the Coalition Bill, the liability release does not apply where previously unknown environmental conditions are discovered that reveal that the cleanup does not protect public health and the environment for the site's current use; institutional controls or other ongoing remedial activities (e.g., pumping and treating groundwater) are not implemented; DEC demonstrates "that an environmental standard or other risk factor which a remediation program pursuant to this title was based renders the remediation proposed or implemented at a contaminated site no longer protective of public health or the environment;" or the volunteer committed fraud in demonstrating compliance with the program. The Governor's Bill allows a reopener in most of the above circumstances. But it also allows a reopener if DEC "determines that the remedy implemented is not protective of public health or the environment." Since the remedy will have been previously approved by DEC, it is not clear how the volunteer is left with any protection against the possibility that, years after the cleanup, DEC will change its mind and require additional cleanup. Both bills provide that if the cleanup is based on continued industrial or commercial use of the site, and the site is later converted to a more sensitive use (e.g., residential), further cleanup may be required. However, the Coalition Bill imposes this requirement only on the person responsible for the change in use. Although not clear, the Governor's Bill as currently drafted appears to allow DEC to pursue the original volunteer to carry out the additional work. This creates a real quandary for a volunteer who, having cleaned up a site, later wants to sell it and forget about it. The Coalition Bill has one final feature relating to reopeners not found in the Governor's Bill. If the volunteer has cleaned up the site to the point of naturally occurring conditions, then the reopeners available to DEC are limited to previously unknown conditions and fraud. If any of the other conditions for reopening occur, it is DEC, not the volunteer, that is responsible for remedying them. If the volunteer has cleaned up the site to the point where unrestricted residential uses are permitted, then the only available reopeners are also limited. Brownfield Area Redevelopment The Governor's Bill authorizes state assistance for the preparation of "brownfield redevelopment area plans" to revitalize areas containing clusters of abandoned, idled or under-utilized properties. It also creates a brownfield redevelopment tax credit for volunteers under the Voluntary Cleanup Program that have satisfactorily completed a cleanup. The tax credit ranges between 8 per cent and 12 per cent, depending on the type of tax and the degree of cleanup effectuated. The Coalition Bill establishes Land Re-Use Opportunity Areas, where special state financial assistance is available for area-wide planning and brownfield redevelopment. Like the Governor's Bill, it creates a brownfield redevelopment tax credit, but the tax credit ranges between 20 per cent and 75 per cent. The Coalition Bill also contains a long list of financial incentives not found in the Governor's Bill, based in part on the Pocantico Roundtable's examination of the incentives provided by other states. The Coalition Bill creates an Office of Brownfields Development within the Governor's Office to coordinate and encourage the efforts of state agencies in redeveloping contaminated lands. Funding The Governor's Bill establishes a remedial program fund that will be used to finance the State Superfund, Voluntary Cleanup and Oil Spill programs. Although not evident from the language of the bill, roughly half of the program funds will apparently come from the State General Fund and half from fees on industry (specifically, a per-barrel fee on petroleum; cost recoveries, fines and penalties from polluters; increased hazardous waste generator fees; and regulatory program fees). The Superfund Working Group Report projected that the total cost to the State for these three programs will be $130 million in state fiscal year 2001-2, and will rise in later years. The Coalition Bill does not contain funding provisions. Conclusion The above description is far from comprehensive; space constraints do not allow a full exploration of all the subtleties of the two bills, and their texts should be consulted by counsel desiring a full understanding of their implications for particular sites. Each bill is based in part upon painstaking negotiations by diverse groups over a period of many months, and numerous compromises are embodied in the language. However, the above descriptions should make clear that the Coalition Bill creates more incentives to enter the voluntary cleanup program, while the Governor's Bill leaves volunteers with somewhat greater risks. The Governor's bill grappled with the Superfund refinancing issues, while the Coalition Bill grappled with many of the fine points of cleanup standards and procedures. The fate of both bills remains to be seen. They may be considered at the special session that the Legislature will hold in the fall, but it is more likely that serious action will await the spring of 2000. ------ Michael B. Gerrard is a partner in the New York office of Arnold & Porter and a member of the adjunct faculties of Columbia and Yale. He is editor of Brownfields Law and Practice (2 volumes, Matthew Bender, 1998) and the forthcoming The Law of Environmental Justice (American Bar Association).