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Making
Chicken Salad
You
really can convert nasty brownfields into delectable
urban development. It just takes regulators willing
to bend and entrepreneurs willing to take a chance.
Rocketts
Landing on the banks of the
James River
in Richmond
looks like many old industrial
sites -- overgrown with weeds and dotted with
dilapidated buildings. Despite a desirable location
a stone's throw from downtown, the site has been
unattractive to developers. Heavy metals have been
detected there in high concentrations. Until now, no
one has been willing to take on the expense and
liability associated with cleaning up the property.
But
reforms in environmental laws, coupled with
regulatory flexibility and a developer willing to
take a risk, may result in the property becoming the
$250 million community that Rocketts Landing’s
managing partner William Abeloff sees when he looks
out his window. Abeloff, the original developer of
the Tobacco Row project, envisions a community of
apartments, condominiums, stores, restaurants and
recreational areas that extends the vitality of
Shockoe Bottom and Tobacco Row east along the
riverfront.
Virginia is old. The Commonwealth’s less attractive history
includes abandoned industrial properties: piles of
brick that once were structures, heaps of trash and
debris, and unknown -- and potentially toxic --
chemicals that leaked into the ground or water. At
the same time, the state is being overrun with
sprawling housing and commercial developments in the
suburbs that stress the transportation system,
overwhelm local government finances and threaten
waterways and habitats. Meager state funds can’t
keep up.
So
why not rehabilitate the old sites and leave the
green fields green? It’s simple: The old sites are
dirty. They are contaminated with hazardous
substances. Cleanup costs could dwarf the financial
return of any beneficial development.
Until
recently, regulatory agencies required so much
environmental sampling that sites looked like
practice putting greens. Agencies also insisted on
cleanup to "background" -- to pristine
standards that existed at the time of the great
flood. Few
developers were willing to spend the time or the
money on rehabilitation when pure sites were
available.
The
problem began with the 1980 enactment of the
Superfund law, officially the Comprehensive
Environmental Response, Compensation, and Liability
Act or CERCLA.
Besides taxing the chemical and oil
industries, the law made property owners, waste site
operators and shippers to toxic sites responsible
for cleanup. Early CERCLA court decisions imposed
broad and sweeping joint and several liability not
just on operators, shippers and original property
owners, but to persons who owned or purchased waste
sites, regardless of whether they knew of or caused
the pollution. In
what soon became the norm, the EPA forced cleanups
using the aggressive liability scheme rather than
the inadequate sums generated by the tax.
The
broad liability as interpreted by the courts soon
became a part of the “polluter pays” culture,
and it was firmly embedded in law when Congress
reauthorized Superfund in 1986. The concept of
polluter pays sounds reasonable, but CERCLA’s
net caught people who had purchased
property but had nothing to do with polluting it.
Some
early relief came in the form of an “innocent
purchaser” defense to liability, relieving a buyer
of liability if he could show he had conducted a
diligent environmental investigation. This protected
innocents from being trapped but left the property
abandoned and dirty.
EPA
and the states began to recognize Voltaire’s maxim
that "the best is the enemy of the good.”
The result of requiring cleanup to pristine
standards was no cleanup at all, except at the point
of a liability bayonet. Now, risk-based cleanups —
ones that evaluate real risks and pragmatic ways to
control it — are employed. For instance, instead of excavating a
large volume of contaminated soil, a developer can
cover it with an asphalt parking lot to prevent
direct human contact. Likewise, deed restrictions
can ensure that industrial properties remain in
commercial use rather than be redeveloped as, say,
day care centers. The Virginia Department of
Environmental Quality (DEQ) has administered a
Voluntary Remediation Program (VRP) for several
years, which has enjoyed some success by allowing
such reasonable accommodations.
Congress
joined the effort with the Brownfields
Revitalization and Environmental Restoration Act of
2001,
relieving a prospective purchaser of Superfund
liability if he didn’t cause the problems and if
he cooperates with cleanup activities. The federal
law also keeps EPA from enforcing if a party is
cleaning up under a state plan. EPA and the Virginia
DEQ have entered into a Memorandum of Agreement
setting out the details of the relationship: EPA
won’t take over a site being handled by Virginia
unless there is a real endangerment to health or the
environment, so long as Virginia
is running the show in compliance with its VRP.
The
Virginia General Assembly enacted a similar law in
its 2002 session. Under the Brownfield Redevelopment
and Land Renewal Act, Virginia
gives liability relief parallel to the federal law
and provides amnesty from civil penalties.
These
legal developments are very positive, but it's not
clear if they are sufficient to stimulate much
private investment. The
government shepherd still has his crook, and the reforms all have escape hatches for the
government to conclude that a site isn’t
appropriate for liability relief. And nothing in the
law changes the fact that, even with all the options
available, many environmental cleanups can be very
expensive. Some projects must have significant
offsetting advantages to make them worth the effort.
A
developer
must have vision and an appetite for risk to head
down a smoother — but uncertain — path. Still,
the new laws do signal a huge shift in government
thinking. The
challenge going forward will be for agencies to
focus on those projects with adequate resources to
do the job right. Not every idea on a cocktail
napkin should be given regulatory latitude
Under
the new legal regime, Rocketts
Landing can avail itself of an array of options.
The developer can remove contamination completely by
excavating soil and replacing it with clean fill. He
can top contaminated soil with hard surface, limiting
exposure to underground contaminants. He can use
public water rather than ground water for
drinking. And he can bind all future owners to his
DEQ agreement through deed restrictions.
For
this particular project, DEQ
has approved a remedial plan that allows Abeloff to
develop Rocketts Landing by piece, parcel by parcel,
so that income from the development can be plowed
back into remedial actions, as opposed to requiring
all the cleanup to take place up front. Without
this flexibility, the ambitious Rocketts Landing
project just wouldn’t be possible.
--
December
9, 2002
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