Jobs Sprawl and Brownfields

 A very interesting article appeared in Crain's Cleveland Business by Jay Miller discussing "jobs sprawl" and the lack of easy access to jobs.  

Brad Whitehead, president of the Fund, points to a study by the Center for Neighborhood Technologies, a Chicago nonprofit that focuses on making cities work better, that found that housing costs in Greater Clevelanders are low, but people here spend more of their money on housing plus transportation — 41% of their income — than people in Boston, 38%, or New York, 39%.

Similarly, a 2015 study by the Brookings Institution, a Washington, D.C., think tank, found that between 2000 and 2012, the number of jobs near the average person in the Cleveland metropolitan area declined by 26.5%, the steepest decline among 96 metropolitan areas. The Akron metro ranked 84th. Part of that loss of job access is the result of an overall decline in jobs in the region, a 2.5% loss between 2002 and 2014, according to the U.S. Census, and part is the movement of jobs, of employers, from the central cities.

And finally, the Federal Reserve Bank of Cleveland in a 2015 study found that low-skilled and low-paying jobs are the hardest to get to. It also found that, "Millennials and baby boomers alike want more accessible communities, whether that means a workplace within reach of transit or downsizing from large suburban homes to areas where amenities important to them are just a walk away."

I found it amazing that the Clevelanders spend more money on housing plus transportation than major cities like Boston or New York.  As long as Ohio can't leverage the lower cost of living in the state as a true strategic advantage, Ohio will never be able to compete with major cities like Boston, New York or Chicago.

The images below have appeared before on this blog, but they dramatically show the issues with urban sprawl as well as jobs sprawl.  The graphic on the left is developed land in Cuyahoga County in 1948 and the graphic on the right is developed land in 2002.  As development spreads out, the ability of the urban population to access jobs becomes more difficult.  










The link between avoiding job sprawl and brownfields is unmistakable.  The more we discourage redevelopment of our inner core cities, the more we push jobs out into greenfields which fosters jobs sprawl.  Also, without an growing population and affordable transportation to jobs, large employers face increased challenges finding qualified candidates to fill job vacancies.  If the problem persists, employers look to relocate where they can ensure vacancies will be filled.

While Ohio used to be a leader in promoting brownfield redevelopment, a combination of factors over the last several years has pushed us to the back of the pack, even when compared to neighboring states like Michigan.  The combination of factors, all which have been discussed on this blog, include:

  • Clean Ohio, a national model in brownfield redevelopment incentive programs, sunset approximately 5-6 years ago leaving behind no definitive brownfield redevelopment program.  Between 10-20 major brownfield redevelopment projects were occurring per year over the decade Clean Ohio was in place
  • A lack of tax policy that promotes brownfield redevelopment.  The most significant tax benefit, the VAP 10-year tax abatement, is too cumbersome and too limited in scope.
  • JobsOhio, while the program has some major advantages and is currently has the best incentives for brownfields, the JobsOhio Revitalization Program has steep eligibility requirements and does not focus on specifically targeting brownfields for redevelopment
  • Local brownfield programs have dwindled- For example, Cuyahoga County has basically done away with its brownfield program and forgivable loans, a key incentive to promote brownfield redevelopment
  • VAP- Controversy surrounds the VAP program and whether it still provides the legal liability protection envisioned when the program was launched more than two decades ago
  • Vapor Intrusion-  Greater federal and state scrutiny on vapor intrusion issues has increased liability concerns for property owners and redevelopers looking to reuse brownfields

As we head into an Gubernatorial election year, more voices need to be raised discussing issues like jobs sprawl, brownfields and how to get Ohio's population growing again.  While tax policy, education and economic development are critical to Ohio's future, making sure we are putting new jobs in locations that can easily be accessed needs to be a key strategy in Ohio. 

Ohio EPA Responds to Concerns Regarding the VAP and the Agency's Response to TCE

[SPECIAL BLOG POST: Ohio EPA asked to publish a guest post on the Ohio Environmental Law Blog regarding recent developments pertaining to the Agency's response to sites with trichloroethene (TCE) and the Voluntary Action Program (VAP).  The Ohio EPA response is posted below in its entirety]

In August 2017, Ohio EPA announced to Certified Professionals (CPs) that letters would be sent to owners of trichloroethene (TCE) contaminated properties. The intent of the agency’s action is to inform property owners that U.S. EPA had lowered the acceptable indoor air levels for TCE, and updated the federal technical guidance on assessing vapor intrusion to indoor air stemming from soil and/or ground water contaminated with solvents such as TCE. In the letter, Ohio EPA requested that owners evaluate the conditions on their property to ensure TCE vapor intrusion was not harming people working or living on their property or that nearby neighbors were not affected. While the intent of the letter is to inform the property owner in order to prevent human health risks, this announcement caused some concern among the Voluntary Action Program (VAP) community, leading some to mistakenly believe that Ohio EPA was undermining the value of a Covenant-Not-to-Sue (CNS) issued through the VAP.

While most acceptable indoor air levels for chemicals are based on a chronic risk, or long-term exposure, the change made by U.S. EPA regarding TCE was based on an acute risk, or short-term exposure, particularly to women with developing fetuses. This change presented a concern to Ohio EPA because fetal heart anomalies were determined to occur with only a few weeks of exposure to breathing TCE above the health standards.  Therefore, prompt attention to this new standard and exposure timeframe required a timely and thorough reevaluation of all known sites that may have TCE contamination. As part of this review, Ohio EPA contacted the property owners, informing them of this change, and asking them to investigate the conditions, and to make sure that people at and near their property were not being harmed. This action is consistent with the responsibility of the Director of Ohio EPA to ensure that the health of Ohio’s citizens is adequately protected.

Ohio EPA’s interest is in public health and not to invalidate property owners’ CNSs as part of this reevaluation. To date, no CNS has been revoked under this reevaluation, nor is Ohio EPA requiring a property with a CNS to update to the new federal standard for TCE.  Ohio EPA is working cooperatively with property owners to ensure that public health is protected. Our request for property owners to look at the information they have, and, if necessary, take samples, is in fact a good and necessary choice for these property owners. Understanding that a property is adequately protective allows an owner to use or redevelop a property with the certainty that it won’t be harmful to users or neighbors.  It protects the value of the property, enables safe and economically feasible redevelopment of contaminated property, and allows reduced remediation without having to “turn a blind eye” on future liability and injury.

The VAP has always acknowledged the Director’s responsibility to address imminent health threats; the reevaluation of potential exposure to unsafe levels of TCE is not a separate, or new legal authority.  Each CNS that is issued by Ohio EPA states, “Nothing in the Covenant limits the authority of the Director to request that a civil action be brought pursuant to the ORC or common law of the State to recover the costs incurred by Ohio EPA for investigating or remediating a release, or threatened release, of hazardous substances or petroleum at, or from the Property, when the Director determines that the release or threatened release poses an imminent and substantial threat to public health or safety or the environment.”  This provision allows Ohio EPA to evaluate for current, or likely imminent, health threats, and recover expended costs when a property owner is uncooperative and an imminent health threat may exist.

Ohio EPA is aware that some members of the public may have mistakenly inferred that a CNS issued after the submission of a No Further Action Letters (NFAs) is no longer worthwhile for property owners to obtain.  That assumption is false. Furthermore, it has been stressed that the Ohio EPA VAP is losing relevance, with the proof offered being the lower number of NFAs that have been submitted to the Ohio EPA in the past year.  That assumption is also false. Ohio EPA’s position is that NFAs submitted for a CNS is not the only measure of the success of the VAP.  The number of NFAs submitted for a CNS fluctuates over time and can be impacted by a variety of factors. One of the factors that has the greatest impact is the implementation of a new rule change. This results in a significant increase in NFA submittals, like the one that occurred in 2014.  Another factor is the change in brownfield funding available in the state. Loss of sources of funding, such as the Clean Ohio Fund, will continue to reduce the number of NFAs submitted to Ohio EPA in the coming years. CPs have indicated that only 10 percent of their VAP work is ever submitted to Ohio EPA for CNS, because volunteers, lenders and insurance companies are comfortable with work done by VAP CPs who follow VAP rules and guidelines. These institutions don’t require a CNS from Ohio EPA for there to be value in the program. Ohio EPA considers the program a success knowing that the use of the program rules and guidelines provide participants that level of comfort. 

In summary, Ohio EPA is not taking this action due to a meaningless bureaucratic function. Ohio EPA is committed to ensuring protectiveness of human health and the environment, particularly when significant questions such as TCE exposure are raised by the best science and research available from US EPA. The VAP has shown over the past 22 years, that the program is able to protect human health without putting a stop to redevelopment, which demonstrates that citizens, owners, workers, and neighbors can be adequately protected without invalidating the VAP program.

Has Ohio Undermined Its Voluntary Cleanup Program?

As discussed in my prior post, in September Ohio EPA announced that it would be sending "hundreds of letters" to property owners that have trichloroethylene  (TCE) contamination, including property owners that cleaned up their property under the Voluntary Action Program (VAP).  At the September meeting of VAP professionals the Agency announced that it could take legal action against property owners with TCE contamination even if the property owner received a Covenant-Not-to-Sue (CNS) under the VAP (i.e. a legal release).

Since the September meeting many in the environmental community have questioned whether the Agency has undermined a cornerstone of the program- the ability to rely on a legal release through a VAP CNS that no additional cleanup would be required.  The Agency was careful to state it would not be reopening the CNS to apply the more stringent TCE VAP cleanup standard.  The Agency still agrees the VAP CNS locks in the cleanup standards once the CNS is issued (even if standards get more stringent for certain types of contamination based on the more up-to-date science).

The ability to lock in cleanup standards has always been viewed as one of the most significant incentives for submitting a VAP No Further Action (NFA) letter to Ohio EPA to obtain a CNS.   Without the ability to rely on the legal release, the VAP would provide very little incentive to make public information about levels of contamination at your property.  

While the Agency said it would not reopen a CNS issued under the VAP to apply the more stringent TCE cleanup standard, the Agency also said it has an obligation to protect public health and the environment.  The Agency indicated it has separate legal authority, outside the VAP program, to take action at properties it believes present a threat to public health and the environment.  The Agency stated it could perform cleanup itself and recover its costs under this separate legal authority if property owners refused to do anything more to address TCE at their sites.

Legal End Around?

While Ohio EPA says it would not reopen VAP covenants to apply more stringent cleanup standards, it said it could use other legal authority to take action to address TCE.  Most property owners won't care which legal authority the Agency utilizes. Most will be upset that they are being told to perform more investigation or cleanup after they thought they had met all their obligations.

Does this the Agency's recent announcement weaken the VAP program?  It certainly diminishes the incentive of entering the program.  

For years, many outside attorneys and consulting firms have advocated simply cleaning up the property to VAP standards and obtaining an NFA, but electing not to submit the NFA to Ohio EPA to obtain a CNS.  What are the perceived advantages to this approach:

  • Meeting VAP standards provides a technical argument that the property does not present a threat to public health or the environment;
  • While not a legal release, the Ohio EPA or U.S. EPA would have a much more difficult time taking enforcement against a property that is deemed protective of the public health or the environment (as indicated by issuance of the NFA);
  • By not submitting the NFA to Ohio EPA all sampling data can remain confidential.  No information will be accessible by the public regarding the condition of the property; and
  • By not submitting the NFA, the owner avoids the costs associated with Ohio EPA's review of a CNS

While there are advantages to not submitting an NFA to obtain a CNS, these must be balanced against the limitations of such an approach:

  • The CNS still locks in cleanup standards.  Obtaining only an NFA leaves the property open to application of more stringent cleanup standards;
  • A CNS still provides a much stronger legal defense against EPA enforcement for cleanup
  • A property with a CNS is more easily transferred to a new owner because the property still has a sign-off from the Ohio EPA that the property meets standards;
  • Financing is more easily obtained for a property with a CNS versus an NFA; and
  • While the VAP is self-implementing, it is very common for VAP Certified Professionals and Ohio EPA to disagree over whether the cleanup was sufficient.  Obtaining a VAP CNS provides the assurance the Agency signed off on the cleanup.

This laundry list of pro's and con's make this a complex decision for the property owner.  The recent announcement regarding notices to property owners holding a CNS with TCE contamination adds another factor to be considered.  

The numbers don't lie, the number of VAP CNS have gone down over the last few years. 

VAP CNS Issued by Year

NFA Letters

Requesting a CNS

CNS Issued Review Pending
2014 65 60 2
2015 33 33 0
2016 28 18 7
2017 to date 14 2 12


The cost and complexity of the program results in only a limited number of sites entering the property each year.  As has been discussed in prior blog posts, Ohio need to develop more options to address liability from pre-existing contamination to accelerate reuse of brownfields in Ohio. 


Ohio EPA to Issue Letters Regarding TCE to Property Owners

At a recent meeting of brownfield cleanup professionals, Ohio EPA announced plans to issue letters to owners of property contaminated with TCE.  Ohio EPA says it reviewed thousands of sites and will be issuing letters to "hundreds" of sites where it has information in its files that TCE is present. Based on this review, the Agency intends to send letters in instances where TCE levels may be above recently lowered health risk standards.

While a draft of the letter was not provided, Ohio EPA indicated that the letter would "inform the property owner that TCE may be a health concern at their property."  The letters will request the following:

  • Ask the owner to evaluate the health risks (both on and off their property)
  • Ask that the owner notify the Ohio EPA of their plans of action and results

The letters will trigger a flurry of activity across the state as owners try and figure out the practical and liability implications of receiving notice the Agency believes their property may present a health risk.

Do Standards Move under the VAP?

The Agency said it even will reopen some sites that have completed an acceptable cleanup under Ohio EPA's Voluntary Action Program (VAP). Site owners will receive a letter if the Agency has information in its files that suggests TCE could be present at levels above the new more stringent standard for TCE (even if the property received a legal release based upon the old TCE standard).

At the meeting concern was expressed by brownfield professionals that the Agency was applying the new standard at closed VAP sites.  A core principal of the VAP program was that standards would not change after a volunteer completed a VAP cleanup. It was noted that standards used at the time of cleanup are directly tied to the legal release the property owner receives from Ohio EPA after completing the VAP cleanup (i.e. Covenant-Not-to-Sue or CNS).

With regard to properties covered by a CNS, Ohio EPA stated they hoped the property owner would "do the right thing" even in instances when the cleanup standards applicable at the time the CNS was issued are still not being exceeded.  However, Ohio EPA noted that it retains separate legal authority outside the VAP program to take action and recover its costs at any property the Agency believes may present an "imminent and substantial threat to public health and safety."

Implications for Property Owners and the VAP

The Ohio EPA announcement signifies a further escalation of its efforts to apply the new TCE risk standard to properties that either are not currently undergoing voluntary cleanup as well as those that actually completed such cleanups. The concern among the private sector and property owners is that the new TCE risk standards are very conservative.  Publicly calling out potential health risks both on and off property based on a conservative risk standard raises the liability exposure for property owners across the state.  

There is also concern that the Agency's actions on TCE may have the unintended consequence of dissuading property owners and developers from entering the VAP program.  With a few limited exceptions, Ohio law does not require property owners to make public sampling data obtained through due diligence as part of private transactions.  Therefore, unless a property owner believes the value of the VAP CNS outweighs the liability risks disclosure brings, owners will not be inclined to enter the VAP and make information about their site public.

With hundreds of property owners receiving letters it will be important to get advice from environmental consultants and attorneys regarding the implications for their particular site.

JobsOhio Launches Site Selection Search Database

JobsOhio launched a new site selection tool called SiteOhio designed to provide easy access to businesses looking for locations to either develop new facilities or buy/lease existing buildings.  The easy to use web based tool allows you to search by the following parameters:

  • Available buildings of a certain size
  • Vacant land based on acreage
  • Businesses that may be for sale
  • Properties in specific communities by either city or county

The site selector tool allows you to compare filter properties by energy or broadband capability or labor force.  The tool is designed to allow businesses to more quickly identify sites that meet their needs.  

The site is also designed to certify sites as ready for development with available utilities, zoning, etc. The site hasn't yet been fully populated with available sites, but JobsOhio will ensure that happens over time. Communities will be encouraged to go through the JobsOhio site authentication process to have sites in their communities certified as ready.

The JobsOhio authentication process is designed to identify sites that are "ready to develop on day one, saving businesses time and money."  JobsOhio in its announcement described the authentication process as follows:

“Through the SiteOhio authentication process, each site undergoes a usability audit designed to vet sites with companies in mind. All due diligence studies look to ensure strict criteria are met, as well as utilities and other site assets are on site, with excess capacity and accessible for doing business,” JobsOhio said in announcing the tool.

The site doesn't include other information that may be key to determining suitability of a site, such as:

  • Taxes
  • Ease of permitting
  • Capacity of sewers
  • Availability of water

Implications for Brownfield Redevelopment

As JobsOhio stated in its announcement regarding the site selection tool, the purpose is to identify sites "ready to go on day one."  This certainly would not include brownfield properties.  A quick search of industrial properties by acreage shows a number of greenfield sites, typically industrial parks ready for development.  A quick search of available buildings identified mostly sites that would not qualify as traditional brownfield properties.  

While the tool is an excellent idea to expedite identification of readily available sites for development, the site selection tool will not encourage reuse of urban sites.  If the goal is of the site selector tool is to populate sites "ready to go on day one," then in order to encourage redevelopment of brownfield properties this would appear to encourage reconsideration of programs such as the Clean Ohio Redevelopment Ready Program.  Under this program, Clean Ohio funds were used to address environmental issues at brownfield sites upfront to facilitate reuse.

Cuyahoga County May End Brownfield Program

After more than ten years of building a brownfield redevelopment program, Cuyahoga County Officials are currently contemplating bringing the program to a close.  Over the last few years significant staff cuts have reduced the amount of resources dedicated to the program.  Now it appears that in 2017 the various incentives available to attract redevelopment to brownfields may no longer be available.  Or, there will be no staff dedicated to run the program.

Hopefully, County Officials will understand the critical need the brownfield programs provide to overcome the major impediments to reuse of old industrial and commercial buildings in the region.  Even with the recent economic development boom in Cleveland there remain hundreds of underutilized or vacant brownfield properties.

One of the most critical needs the County program fills is grant funds to pay for Phase I and limited Phase II environmental assessments through the County's Brownfield Community Assessment Initiative. Under the program, the County would provide up to $5,000 in grant funds for Phase I assessments and up to $35,000 for Phase II assessments.  These incentives help overcome the first major hurdle to brownfield redevelopment- having no information about the condition of the property.  Many developers and businesses aren't willing to front these assessment costs as part of early evaluation of a property.  

The County also provided forgivable loans to help offset environmental cleanup costs.  Under its Redevelopment Ready Program, the County can provide loan funds up to $1 million with 40% of the total loan forgivable if certain criteria are met.  This type of loan was a critical tool in the Miceli Dairy expansion project which was one of the significant brownfield redevelopment projects in Northeast Ohio.  Without County incentives, both assessment grants and a forgivable loan, the project never would have occurred.  The expansion kept and expanded jobs in a critical area in Cleveland.  

The County had offered a wide array of programs and incentives to help renovate vacant buildings and spur brownfield redevelopment.  It took nearly ten years to build up the expertise and incentives which made it a very successful program.  For a full list of the County Brownfield Programs click here.

We can only hope that the new Administration realizes what a critical function a brownfield program plays in an area with a long industrial past and limited space for redevelopment.

State of Ohio Pursues Recovery of Incentives

Companies expanding onto brownfield sites need public incentives to make their projects viable.  However, the days when cleanup of contamination by itself could attract public incentives are long over.  Under the new local and State brownfield programs companies must make job commitments and/or improvements to the property to attract government assistance.

When companies work with State and local officials to obtain brownfield incentives they must engage in negotiations regarding what they are willing to commit to as part of the project.  These commitments will often extend 3 or more years out into the future when it becomes more challenging to predict economic and business conditions.

The Dayton Daily News discussed the State of Ohio's pursuit to recover incentives from companies that failed to meet business expansion or development commitments.  The DDN reported:

State officials reviewed 329 economic development deals that concluded in 2015 and found that all but 50 had substantially complied with the terms, such as hitting job creation and retention numbers, training workers and generating new payroll.

If companies fail to live up to their promises, the state may demand repayment or make other changes to the deal. In the 50 cases where targets weren’t hit, the state is moving to clawback a collective $776,000. Some of the biggest take backs are being launched against well-known, big companies — Proctor & Gamble Co., U.S. Steel Corp., and The Dannon Co. — for failing to create or retain promised jobs

This is very relevant to JobsOhio brownfield grants and loans provided to companies to assist with sampling or cleanup at contaminated properties.  The grant agreements for the JobsOhio Revitalization Program include contractual commitments to increase payroll, add jobs or make capital investments to expand the business.  For example, at minimum, JobsOhio typically requires 20 new jobs over a three year period to compete for brownfield cleanup grant funding under its Revitalization Program.

The grant agreement language is somewhat vague as to what happens if the grant commitments are not met by the company.  The language does allow for companies to assert that changing economic conditions resulted in unmet commitments.  However, the contract language does leave open the possibility JobsOhio could request return of the entire brownfield grant provided.

It is important that companies pursuing brownfield incentives be aware of the consequences of not meeting commitments.  It is also important to avoid putting forward unrealistic job or capital investment commitments just to attract upfront grant money.  Companies that over commit open themselves up to clawback by the State of the funds provided as well as publicly being outed for failing to live up to their commitments.

Like Ohio, TCE Gets Attention in Massachusetts

Ohio is not the only state that is reviewing all sites that have trichloroethylene (TCE) contamination. Massachusetts Department of Environmental Protection (MassDEP) recently announced that is was going to review 1,000 closed sites with TCE contamination.  MassDEP will evaluate the sites "based on the current understanding of health risks, even if the site was previously closed properly under earlier standards."  

Unlike Ohio, MassDEP issued a public statement in April 2016 that it discussing its review of TCE Sites. Ohio EPA has not made a public announcement similar to Mass DEP.  Rather, Ohio EPA has discussed its review in meetings with environmental consultants and through issuance of letters and requests for information to sites with TCE contamination.

TCE was widely used as a degreaser for industrial metal parts and as an extraction solvent for organic oils. As a result of its use, TCE contamination related to use of solvents is very common at manufacturing sites.  

A discussed in the MassDEP announcement, the heightened scrutiny of sites with TCE contamination was based, in part, on a 2011 review to the U.S. EPA toxicity information.  The review included assessment of the potential for fetal developmental effects following even short-term exposure to TCE contamination.  As a result, the standards related to TCE have become significantly more stringent.

MassDEP provided a comparison of the levels of concern from 2011 to 2016 which shows the TCE standards:

Changes in TCE Risk-Based Levels in Massachusetts
Pathway 2011 Level of Concern 2016 Level of Concern
Indoor Air (Residential) 85 ug/m3 6 ug/m3
Groundwater (near residences)

300 ug/l pre-2006

50 ug/l post-2006

5 ug/l
Health Effect of Concern Long-term cancer risk Short-term development effect

 The primary pathway of concern in both Massachusetts and Ohio is vapor intrusion (volatilization of contaminants into the indoor air of a building).  Ohio's current indoor air standards are relatively comparable to MassDEP.

Ohio TCE Indoor Air Standards
Pathway Standard
Residential 2.1 ug/m3
Commercial Industrial 8.8 ug/m3

Continued developments with regard to TCE are surely forthcoming.  As the new significantly more stringent standards get implemented property owners and site developers that have TCE contamination will need to proceed cautiously.  This includes sites that previously completed investigations or cleanup activities.

What Ohio Can Learn from the New Kansas Brownfield Law

In my four part blog post series- Rethinking Brownfield Redevelopment in Ohio- the final post advocated for a new Ohio liability protection law for buyers of contaminated property.  The new law would provide brownfield redevelopers liability protection faster and at a lower cost than the current Ohio Voluntary Action Program (VAP).

I suggested looking to Michigan's Baseline Environmental Assessment (BEA) law for guidance on how to set up such a program.  Well Kansas has recently passed a new law that provides a second example.  

On May 9, 2016, the Contaminated Property Redevelopment Act (S.B. 227) was signed into law by Kansas Governor Sam Brownback.  Similar to the Michigan BEA, the new law provides buyers of contaminated property liability protection under certain conditions. Those conditions include:

  • The Buyer cannot have caused or contributed to the pre-existing contamination on the property;
  • The Buyer cannot exacerbate pre-existing contamination on the property either through redevelopment or other activities;
  • Buyer must request liability protection from the Kansas Department of Health ("Kansas DHE") and Environment by applying for a Certificate of Environmental Liability Release ("CELR");
  • The Application for a CELR must include a Phase I or Phase I/Phase II assessment report or other reports requested by Kansas DHE that demonstrate the property was adequately assessed; and
  • The Buyer must provide notice to future purchasers of the existence of the CELR and notify Kansas DHE upon transfer of the property.

What is interesting is that the new law does not affirmatively require the Kansas DHE to make a finding that buyer has taken appropriate steps to address immediate environmental threats or public health risks similar to the "reasonable steps" requirement under U.S. EPA's Bona Fide Purchaser Defense.

A fee is charged by the Kansas DHE to review CELR applications.  Those fees are placed into the Contaminated Property Redevelopment Fund to assist municipalities with brownfield redevelopment.

Kansas provides another example of an enhanced Bona Fide Purchaser Defense at the State level that will likely accelerate brownfield redevelopment. 

Rethinking Brownfield Redevelopment in Ohio: Part 4 of 4

This is the final post discussing the current state of brownfield redevelopment in Ohio.  It provides suggested changes to the regulations and incentives in Ohio to accelerate brownfield redevelopment. The prior posts in this series discussed the following:

  1. The Issues Presented by Brownfields- In particular the impact to Urban Centers
  2. The Current State of Brownfield Redevelopment in Ohio-  Including the issues of urban sprawl and the number of brownfield sites in Ohio.
  3. Progress made in Addressing Brownfields in the Twenty Years Since Ohio's Voluntary Action Program was Adopted

As discussed in these prior posts, Ohio needs to accelerate brownfield redevelopment in Ohio.  So how does that occur?  

  • Need to be Faster- The ability to address the environmental, public health and liability risks presented by brownfield properties needs to occur much faster.  A cleanup under Ohio's Voluntary Action Program (VAP) can take anywhere from 1, 2, 3 or even more years to complete.  
  • Need Lower Costs to Redevelop Brownfields-  According to the Cleveland Department of Economic Development the per acre are significant.  These costs push businesses to consider greenfield sites
    • On average it can cost $13,000 per acre to perform sampling to determine how contaminated a brownfield site may be
    • It can cost on average $66,000 per acre to remediate a brownfield site
    • Brownfield redevelopment projects currently require a minimum of 32 -35% in public subsidies 
  • Effectively Address Liability-  VAP can be effective but takes too long and costs too much. The Bona Fide Purchaser Defense under CERCLA provides no regulatory sign-off that due diligence and cleanup were adequate.
  • Broad Based Incentives-  Current incentive programs require creation of jobs or specific types of redevelopment such as manufacturing.  More value needs to be placed on simply returning idle property to productive use.
  • Cleanup Grants should Target Public Health or Catalyst Projects-  Some portion of brownfield funding should be used to address highly contaminated sites that present public health risks to local communities or catalyst projects that may attract more development.

Rethinking Ohio's Incentive Programs

The first major hurdle to a brownfield redevelopment project is the unknown cost of cleanup.  Therefore, a large portion of incentives need to fund assessment activities.  

Ohio should drop the complicated VAP automatic tax abatement.  There are too many implementation issues (discussed in the prior posts) and the abatement does not cover new structures.  In its place, Ohio should adopt a brownfield based tax credit program that allows developers to take assessment and cleanup costs as a tax credit.  Such a credit would start to even the playing field between brownfield and greenfield sites.

Rethinking Ohio's Tools to Address Environmental Liability

The VAP should remain in place with an effort to reduce the current complexity of Ohio's primary brownfield cleanup program.  The VAP is a very good program for full assessment and cleanup of a property.  However, full assessment and cleanup isn't always necessary to put property back into productive use.  

U.S. EPA's Bona Fide Purchaser Defense under CERCLA does not require a complete Phase II assessment or full remediation.  Under the program, a buyer must take "reasonable steps" to address any threats to public health or the environment.  Reasonable steps is far less than full remediation of soil and ground water.  It typically means preventing ongoing release and eliminating complete pathways for human health exposures.  Such flexibility dramatically lowers to the cost of redevelopment.

The major issue with the BPFD is that it is a legal defense with no regulatory review or sign-off.  Some purchasers are comfortable with no oversight.  However, many would prefer the comfort of knowing their assessment and cleanup strategies received regulatory sign-off.

Ohio should adopt a State version of the BFPD that includes some level of regulatory oversight.  A similar program was adopted in Michigan- Baseline Environmental Assessments (BEAs).  While Michigan's program could be improved, it has greatly accelerated brownfield redevelopment. 

According to figures provided by Joe Berlin, BLDI Environmental Engineering, here is a comparison between the Michigan BEA and Ohio VAP Programs:

  • Michigan BEA
    • 1995-2015 there has been 20,634 BEAs completed
    • Average of 1,032 per year
  • Ohio VAP Covenant-Not-to-Sue (CNS)
    • 1995-2015 there has been 527 CNS issued
    • Average of 26 per year

The proof is in the numbers.  Maybe its time Ohio look to its neighbor up north for new ideas to accelerate brownfield redevelopment.

Rethinking Brownfield Redevelopment in Ohio- Part 3 of 4

This is the third post in a series of four assessing the current state of brownfield redevelopment in the State of Ohio.  This third post will evaluate the progress Ohio has made in the last twenty years with regard to addressing brownfields.

Current Options for Addressing Environmental Liability 

As discussed extensively in the prior posts in this series, environmental liability concerns are a major disincentive for brownfield redevelopment versus greenfield development.  Many different federal and state environmental statutes can impose liability on owners of property: RCRA (hazardous waste and petroleum contamination); TSCA (PCBs), Clean Water Act (runoff, sediment, wetlands), and other federal or state statutes.

However, the law that imposes the most far reaching liability for environmental contamination is CERCLA (Superfund) which imposes joint and several liability on buyers of contaminated property. Under CERCLA, a new owner of property can have liability for preexisting contamination regardless of whether they performed activities that created the contamination.  

CERCLA's broad liability provisions act as a major deterrent to brownfield redevelopment. Ohio utilizes two principal mechanisms to address the risk associated with CERCLA legal liability:

  1. Voluntary Action Program (VAP)-  Adopted in 1996 to provide greater flexibility in cleaning up brownfield properties.  The VAP has been very successful.  No question the program provided greater and more cost effective cleanup options for brownfield properties. As detailed below, the VAP has been utilized to cleanup hundreds of brownfield properties. VAP cleanup standards are regularly referenced during due diligence as a means of evaluating environmental liability.  In fact, some developers or owners perform limited cleanups using VAP standards without seeking Ohio EPA's concurrence the cleanup was sufficient.   
  2. Bona Fide Purchaser Defense (BFPD) (i.e. "All Appropriate Inquiries" under CERCLA)-   In 2002, Congress created the Bona Fide Purchaser Defense to encourage brownfield redevelopment.  EPA adopted the "All Appropriate Inquiry" rule which established a mandatory level of environmental due diligence a buyer must perform to qualify for the liability defense.  If due diligence identifies ongoing releases or risks to human health, the buyer must take "reasonable" steps to address those issues.  However, a buyer does not need to perform a full cleanup of the property to qualify for the defense.

Issues with VAP 

Twenty years ago the VAP was considered groundbreaking.  The program allowed privatized cleanups where the company/developer's consultant completed the cleanup and submitted a No Further Action (NFA) after the cleanup was completed.  Ohio EPA reviews the NFA and, if the property meets VAP standards, the Agency will issue a legal release (i.e. Covenant-Not-to-Sue or CNS).

While the VAP provides a lower cost alternative to perform a full investigation and cleanup, the program has been underutilized.  Here are some of the reasons why:

  • Slow Process- Many real estate deals need to be completed in a few months or even shorter.  It can take 90 to 180 days just to complete the VAP investigation of the property (i.e. Phase II assessment).  A full cleanup can take one, two, three or even more years to complete.
  • Costs-  Twenty years ago the program was championed as a lower cost alternative to traditional CERCLA cleanups.  However, the cost to take property through the VAP can still be very high.  It can cost $100,000 to $200,000 for a VAP Phase II alone.  Full cleanup can cost hundreds of thousands to millions of dollars.  These costs act as a strong deterrent to entering the VAP program.
  • Complexity-  The VAP program is highly complex.  There are around ninety guidance documents alone in addition to nearly one hundred pages of rules.  

Issues with BFPD

The Bona Fide Purchaser Defense (BFPD) has been in place for a little over a decade.  The advantages of the BFPD is that is much faster and cheaper than the VAP.  In many transactions, the Phase I assessment by itself is enough to establish the BFPD if no problems are identified (i.e. a "Clean" Phase I). Even if Phase II sampling is needed, sampling can be completed in 30-60 days at a much lower cost than a full VAP Phase II.  However, the BFPD has its own set of issues: 

  • No Sign Off by Regulators-  Some like that sampling and cleanup plans do not need to be reviewed by regulators to qualify for the defense.  However, without review there is no assurance to the buyer that they qualify for the defense.  In fact, a property owner cannot even voluntarily submit sampling and cleanup plans for concurrence.  As a result, property owners only find out if the sampling or cleanup was sufficient if it stands up in court.
  • No Public Disclosure-  Mandatory disclosure laws act as a strong deterrent to completing transactions involving contaminated properties.  However, providing incentives to voluntarily disclose the results of due diligence can create more public information regarding the condition of properties. 

Current Ohio Brownfield Incentives

Paying for sampling and cleanup of brownfield properties is expensive.  As discussed in prior posts, these costs push companies to consider greenfields over brownfields.  To offset these costs and attract companies and developer to brownfield properties, Ohio has a variety of incentives available. Those programs include:

Brownfield Grants and Loans Tax Incentives

Former Clean Ohio Program

  • No Longer Active
  • Up to $300,000 Phase II grant
  • Up to $3 million cleanup grants
Ohio Historic Preservation Tax Credit

JobsOhio Revitalization Program

  • Up to $200,000 Phase II grant
  • Up to $1 million 
New Market Tax Credit
County and Municipal Grant & Loan Programs VAP Automatic Tax Credit (R.C. 5709.87)

 Issues with Grant/Loans/Tax Incentives

  • JobsOhio Revitalization Program targets a limited number of projects.  Certain brownfield redevelopment projects cannot even qualify for funding, such as retail or residential.  This narrows the range of possible projects on brownfield sites that can offset investigation and cleanup costs
  • Insufficient Funding-  Cleanup grant funding at both the state and local level is capped at around $1 million.  While this amount of grant funding may be adequate for a number of projects, more contaminated properties will not attract sufficient funding to offset cleanup costs.
  • VAP Automatic Tax Abatement-  While this is the primary brownfield tax incentive, issues with its scope and implementation are well documented in prior blog posts.  One of the biggest issues is that it doesn't cover new structures.  It also assumes property valuations already account for contamination.

Ohio's Scorecard on Brownfield Redevelopment

Let's review the number of VAP projects completed and incentives utilized to leverage brownfield redevelopment.

VAP Cleanups Completed 1995-2015

659 NFA's submitted to Ohio EPA 

132 withdrawn, denied, revoked or pending

527 VAP Covenants-Not-to-Sue have been issued


Clean Ohio (2001-2012)

Clean Ohio was the primary brownfield grant program in Ohio for over a decade.  More data is available to evaluate the success of the program.  According to Greater Ohio, approximately 160 Clean Ohio Revitalization Projects were completed.  In reviewing VAP projects completed by year, clearly Clean Ohio accelerated brownfield redevelopment in Ohio.

1995-2001 (Pre-Clean Ohio) approximately 17 VAP covenants were issued per year

2001-2015 (During Clean Ohio) approximately 35 VAP covenants were issues per year

Based upon a study performed by Greater Ohio, an average grant incentive per Clean Ohio project was $1.97 million.  It is worth noting that this study showed each Clean Ohio dollar spent generated $4.67 in new economic activity.

Scorecard on Brownfield Redevelopment in Ohio
Total Sites to Address under the VAP Years to Address under VAP Total Cost in Incentives
527 covenants in 20 years since VAP implemented Assuming full restoration of Clean Ohio funding Assuming Clean Ohio available
estimated 10,000 brownfield sites* 35 VAP projects per year $1.97 million on average per project
9,437 brownfield sites left to be addressed 270 Years to address all brownfields under the VAP $18.5 billion in incentives to address all brownfields under the VAP

There are a number of assumptions built in to the scorecard that anyone could challenge. Including:

  • There is no reliable inventory of brownfield sites in Ohio.  The number 10,000 was taken from a U.S. EPA estimate discussed in a prior post.
  • Not all brownfield sites are addressed by the VAP.  However, when it was adopted most thought the vast majority of brownfield cleanups would go through the program.
  • Clean Ohio no longer exists and a brownfield program of that size and scope is not currently contemplated.

While the assumptions underlying the scorecard are fair game, it still demonstrates how long and how much it would cost to address a significant number of brownfield properties under the VAP. The scorecard also suggests there may be better strategies available to accelerate brownfield redevelopment in Ohio.  

The final post in the series will include a discussion of new strategies to try an accelerate brownfield redevelopment in Ohio.

Rethinking Brownfield Redevelopment in Ohio- Part 2 of 4

This second post in the series discussing brownfield redevelopment in Ohio will provide an overview of the extent and nature of Ohio's brownfield problem.  First, the post will discuss Ohio's progress in spurring brownfield versus greenfield redevelopment.  Second, the post will provide an overview of public information regarding the number of brownfields in Ohio  

Urban Sprawl in Ohio

One issue discussed in Part 1 of this series was how failure to re-utilize urban core properties significantly contributes to the issue of urban sprawl.  The negatives of urban sprawl are well documented:  decay of inner urban areas, increase infrastructure costs, more traffic (and associated air pollution) and greater impact to wetlands and streams as development moves to greenfields.

How is Ohio doing with regard to urban sprawl?  Not well based upon an analysis performed in 2014 by Smart Growth America.  Here are the rankings of some of Ohio's largest cities:

  • Cleveland 153
  • Cleveland 138
  • Toledo 117
  • Dayton 116
  • Canton 93
  • Akron 111
  • Cincinnati 166

Cincinnati Urban Sprawl Trends

A study performed by Smart Growth America of the Cincinnati region showed that during the time period of 1196-2005 the trends on brownfield versus greenfield redevelopment were as follows:

  • Thirty (30) businesses that expanded operations moved from transit accessible areas to areas without transit (i.e. out of the urban core);
  • Eight (8) business expanded within the urban core

This is a clear demonstration of the trends that the costs to redevelop brownfields pushes many businesses to expand or relocate to the suburbs contributing to Ohio's urban sprawl issues.

Cleveland Urban Sprawl Trends

Some times a picture (or in this case a graphic) is worth a thousand words.  Here is a graphic that shows developed land in Cuyahoga County from 1948 to 2002:










It is worth noting that there may be a major shift in these trends due to the millennials preference for downtown living.  A recent study showed that 7 city centers outperformed their surrounding metros in the 2002-07 period, 21 outperformed the periphery in 2007-2011.  Certainly, that trend is evident right here in Cleveland where residential occupancy is above 97.8% with major new downtown residential developments planned.  

The major shift in living preferences creates a golden opportunity to accelerate brownfield redevelopment.  

How many Brownfields are in Ohio?

Ohio does not maintain a registry that provides a good inventory of all brownfield sites.  The most extensive registry maintained by Ohio EPA was referred to as the "Master's Site List."  However, after a property owner challenged its listing on the MSL, it was determined Ohio EPA did not have the legal authority to maintain the list.  Ohio EPA stopped maintaining the list in 1999.

Currently, Ohio EPA maintains the Ohio Brownfield Inventory, but listing of properties is voluntary. Typically, properties are listed in order to qualify for some brownfield redevelopment incentives. Therefore, the registry does not provide a good estimate of the actual number of brownfields.

Public information is limited on brownfields.  A review of local studies and information from local officials and U.S. EPA reveal the following statistics which provide some insight into the extent of the brownfield problem in Ohio:  

  • 119 brownfields in Lucas County (1996 estimate);
  • An estimated 62% of real estate transactions in Lucas County are encumbered by environmental issues;
  • An estimated 25% of transactions in Toledo were abandoned due to environmental issues with an average job lost of 20 jobs per lost transaction;
  • An estimated 4,623 acres of brownfields are in Cuyahoga County;
  • 350 brownfields in Cleveland with an estimated 1,000 to 2,000 condemned structures
  • 40,000 acres or 14% of Cuyahoga County's land was industrial at some point (Estimate by the Cuyahoga Planning Commission)

Statewide estimates on brownfields:

  • 417 Ohio sites are currently identified on CERCLIS (sites on or being evaluated for Superfund Listing)
  • Over 5,000 RCRA sites listed on US EPA RCRAInfo data base
  • 4,000 to 6,000 brownfield sites in Ohio (as estimated by the Government Accounting Office)
  • U.S. EPA has a higher estimate- Over 10,000 brownfield sites have been inventoried by local governments according to testimony from Joe Dufficy (U.S. EPA) before Congress in 2005

Importance of Better Information on Brownfields

A strong case can be made that Ohio needs tools to create a better inventory of brownfields.  It's current system of waiting for volunteers looking for incentives to list sites results in very limited information.  

A better inventory helps to inform public policy as well as better track progress in addressing brownfields.  Also, better information provides more public information regarding sites that have issues.

Some may argue that there should be a mandatory law requiring all brownfield sites to be listed. However, there are many issues with this concept.  Such mandatory laws discourage brownfield redevelopment or even gathering data regarding contamination on property.  This is the exact opposite of what Ohio needs to do if it wants to encourage more brownfield redevelopment.

A mandatory law exists in New Jersey and my colleagues familiar with the New Jersey market state it acts as a strong deterrent to gathering data regarding contamination as well as transactions.

A better system is one that offers strong incentives to voluntarily disclose information regarding conditions of property.  The final post in this series will discuss Michigan's Baseline Environmental Assessment program which has been highly successful in gathering public information regarding the condition of contaminated property in the state while at the same time spurring brownfield redevelopment.

Rethinking Brownfield Redevelopment in Ohio - Part 1 of 4

Two weeks ago I participated in the Ohio Brownfields Conference in Columbus, Ohio.  2016 marks the twentieth (20th) anniversary of Ohio's Voluntary Action Program (VAP) which is implemented by Ohio EPA and is the primary regulatory program for cleanup of brownfields.  

To mark the anniversary, Ohio EPA encouraged presenters to reflect on the success of the VAP and other brownfield programs in Ohio.  Presenters were also encouraged to discuss ways to accelerate brownfield redevelopment in Ohio.  

Despite twenty years of the VAP as well as some of the best incentive programs in the country, Ohio has failed to get ahead of its brownfield problem.  I believe it is time to rethink some of the tools used to greatly accelerate brownfield redevelopment.  This three part series will cover the following:

  1. Review the Brownfield Problem-  Without looking at the issues created by brownfields it is impossible to properly design policies to address them.
  2. An Inventory of Ohio Brownfields-  The second post will discuss public information regarding the number of brownfields in Ohio.  
  3. Review Ohio's Progress in Tackling its Brownfield Problem-  The second post will provide an overview of Ohio's progress using tools like the VAP, Clean Ohio, JobsOhio Revitalization Program and brownfield tax incentives.
  4. New Strategy to Accelerate Brownfield Redevelopment-  The final post will provide recommendations for ways to better utilize incentives, streamline regulatory cleanup and better address public health issues.


What causes brownfields to occur?

Two primary forces create brownfields- market forces and fear of environmental liability.  


  • Expansion of business-  businesses looking to expand in urban areas often find the cost of expansion significantly higher to expand in onto neighboring property versus moving to a greenfield.  One study in Ohio found the cost of developing on a brownfield property four times higher then the cost of building on a greenfield. 
  • Closure/Relocation/Consolidation of Businesses-  Businesses close for a variety of reasons. One of the hardest hit sectors has been manufacturing.  When these businesses close they often can leave behind contaminated sites.  
  • Lower Tax Rates or Incentives-  Businesses can also be lured away by either lower tax rates or incentive packages.
  • Moving to a "Better Area"- Some businesses also move because of the decay of the urban areas where they are located.  


  • Liability-  Expansive liability provisions in environmental laws also act as a strong impediment to businesses choosing to expand on a brownfield. The law with the broadest liability provisions is CERCLA (Superfund) which contains provisions that make any "owner" liable for pre-existing contamination regardless if they created the contamination.  Many other environmental laws can also create liability concerns as well (RCRA, underground storage tanks, TSCA, etc.)
  • Financing Considerations-  Banks understandably are concerned with the risk to their borrowers should they seek to redevelop a brownfield.  These concerns can translate into extensive due diligence requirements, more complicated financing or even refusal to finance certain projects.
  • Timing/Delays-  Navigating the complex environmental liability issues and addressing contamination under regulatory cleanup programs takes significant time.  Many businesses simply don't have the time to address the issues presented by a contaminated sites.

What social issues and environmental issues do brownfields create?


  • Vacant Buildings-  Invite abuse, including stripping of parts, materials vandalism, arson and "midnight dumping." 
  • Unemployment-  Higher unemployment occurs when businesses leave areas and those areas become blighted
  • Urban Blight- Discourage investment and contribute to pervasive sense of poverty and hopelessness.
  • Infrastructure-  Investment shifts from urban core to suburbs.  As a result of urban sprawl, more infrastructure is needed to be maintained. 
  • Taxes- Revenue sources for cities to pay for services are reduced as jobs migrate away from urban core.


  • Contaminated Sites-  Brownfields present public health risks from exposure to contaminants. Contamination can also migrate onto neighboring properties, discharge to surface water or create vapor intrusion issues.
  • Urban Sprawl-  Expanded development away from our urban cores results in more impacts to wetlands and streams.  Also, urban sprawl results in greater air pollution due to more vehicle miles traveled and less use of public transportation.


Applications Released for $20 Million Dollar Abandoned Gas Station Grant Fund

The Ohio Development Services Agency has announced that it is now accepting application for the Abandoned Gas Station Cleanup Grant Program.  Eligible activities include $100,000 for assessment and up to $500,000 for cleanup.  

The program targets abandoned gas stations and cleanup of underground storage tanks (UST).  To be eligible, the tank must be certified as a Class C BUSTR tank (i.e. abandoned).  

The first round of application are due by April 1, 2016.  A total of $3.5 million of the $20 million will be available in this round of funding.  

A review of the scoring matrix released with the application provides insight into which types of projects will score the best.  There are a total of 100 point available.  The points are awarded based on the following categories:

  1. Environmental Impact (extent of contamination, proximity to waterways or residences, etc) 15 points
  2. Community Impact (land use after cleanup and benefits to the community) 15 points
  3. Economic Impact (job creation, increase in land value) 15 points
  4. Previous planning efforts 10 points
  5. Cost to address sold waste removal- if over $5,000 get 10 points
  6. Prior recipient of a BUSTR loan 5 points
  7. Private funds invested in the property in the past 5 years -  Less than $10,000 5 points; More than $10,000 gets 10 points
  8. Previous Assessment or Fast Track grantee 20 points

The scoring matrix does look like a balance of environmental, community and economic benefit. Unlike JobsOhio Revitalization Program, projects involving heavily contaminated sites will get higher priority.  JobsOhio's program is almost entirely focused on economic redevelopment.  

Projects that have had prior planning efforts or investment in funds will also do better in this competitive grant cycle.

Potential applicants now have less than a month to get their applications in for this first round of funding. 


State Poised to Accept Grant Applications for Gas Station Cleanups

This Fall the Ohio Development Services Agency (ODSA) announced program implementation details for the newly created $20 million dollar Abandoned Service Station Fund.  ODSA sent out an announcement to contacts that it would likely begin accepting applications winter, however, to date the ODSA has yet to begin accepting applications.  ODSA developed the program in conjunction with Ohio EPA and the Bureau of Underground Storage Tank Regulation (BUSTR).

The Abandoned Gas Station Cleanup Grant was specifically created to target a certain segment of brownfields largely neglected in Ohio - abandoned gas stations and petroleum underground storage tanks.  The program provides grant funding to pay for sampling and clean up of BUSTR Class C sites (underground storage tanks with documented petroleum releases and the owner of the tank has no funds).

A key eligibility issue discussed in a prior post has been resolved favorably.  Local government entities do not need to actually own the site to be eligible to receive funding.  Local governments can work with the landowner, similar to other brownfield programs, and apply for funding so long as there is a development agreement between the government and the landowner.  However, the applicant and property owner cannot have contributed to the prior release of petroleum or other hazardous substance on the site.

Eligible activities include up to $100,000 for assessment and up to $500,000 for cleanup. Other eligible activities include costs to empty or remove underground storage tanks, abatement of asbestos, lead or other contamination, demolition and site clearance.

ODSA stated in its announcement that priority will be given to vacant gas or service station projects where cleanup provides the greatest environmental, community and economic impact.  This statement suggests that priority will be given actual abandoned gas stations.  There are also many instances where abandoned underground storage tanks exist on industrial or commercial property. It appears the State views these sites as less of a priority.

As discussed in the prior post, the State already maintains a list of BUSTR Class C tanks.  There are over 500 Class C tanks already appearing on the list.  With so many abandoned tanks, it is very likely that the $20 million in funding will be used up very quickly.  Therefore, it is important for any landowner or community seeking funding to make sure they are ready to submit an application as soon as the program opens.  

Update:  ODSA just released its webpage on the Abandoned Gas Station Cleanup Grant Fund.  Application materials and scoring matrices for projects will soon be availble

Ohio Attorney General Releases Economic Development Manual

Attorney General Mike DeWine should be commended for putting together a comprehensive manual regarding legal issues, resources and incentives available to assist with economic development. The manual is called the 2015 Ohio Economic Development Manual.  

The Attorney General collaborated with a number of state agencies and local economic development organizations in putting together the manual.  These collaborators helped summarize a number of highly complex issues and programs.  

To my knowledge, no other state official has attempted to compile such a manual.  For those like myself who are engaged in economic redevelopment projects, in particular brownfield redevelopment, it can take a significant amount of time to stay up on the latest issues, programs and incentives.  

While the manual is an excellent resource, there is no way it can provide anything other than a basic level of understanding regarding complex issues such as brownfield redevelopment.  The purpose of this post is to raise awareness of the various layers of complexities related to brownfield redevelopment that are not discussed or oversimplified in the manual.

Overview of Brownfield Section of the Manual

The manual provides an overview of the stages of brownfield redevelopment as well as a quick summary of possible incentives.

Stages of Brownfield Redevelopment

The manual states the following as the stages for brownfield redevelopment:

  • Identify Site
  • Develop remediation Plan
    • Due Diligence
      • Phase I (paperwork, database review and site visit)
      • Phase II (sampling)
    • Cleanup- Under Ohio EPA's Voluntary Action Program (VAP). Once cleanup complete a Covenant-Not-to-Sue (CNS) will be issued by the State

The manual provides an overly simplistic view of brownfield redevelopment.  Here are just some of the issues with this summary:

  1. Review of Phase I and Phase II Reports-  As discussed numerous times on this blog, it is very important to closely review any Phase I report received on a property to make sure it was done correctly (ASTM or VAP standards).  Also, it is not uncommon for different consultants to reach different conclusions as to whether something constitutes an issue to be identified in a Phase I report.  Finally, formulating the purpose and scope of Phase II testing is a critical component to the due diligence process. Phase II costs can range from $10,000 to $300,000 depending on the site and risk mitigation strategy to be employed.
  2. Alternatives to Full Cleanup-  There are alternatives available to property owners to mitigate environmental risk other than full cleanup of the property.  A very common approach discussed at length in prior blog posts is the Bona Fide Purchaser Defense (BFPD) under CERCLA. Depending on the Client's risk tolerance and the issues presented at the site, BFPD can be a much faster and less expensive option to the VAP to mitigate risk and address the more serious threats a property may present.
  3. Eligibility Issues in the VAP-  There are different types of contamination and sites that are not eligible for remediation under the VAP.  These include, but are not limited to: underground storage tanks (USTs), hazardous waste management units (RCRA closure), PCBs, (TSCA) and sites under federal or state enforcement.
  4. Environmental Insurance-  No where does the manual discuss the possibility of environmental insurance to address risks presented by a site.  Such insurance is commonly used in business transactions as well as brownfield redevelopment projects.
  5. Cleanup Design-  The manual suggests that a party can consult with Ohio EPA's VAP Technical Assistance program in developing its cleanup plan for a project.  While Ohio EPA's Technical Assistance program is an extremely useful tool, the manual does not indicate that a private party has a great deal of control over designing a cleanup to meet applicable standards.  Since the cleanup is the most expensive component, it is critical to evaluate the options available to meet standards (i.e. engineering controls, institutional controls and addressing exposure pathways).

Incentives Available

The manual discusses the following incentives available to assist with brownfield redevelopment:

  • Ohio EPA Targeted Brownfield Assessment- Ohio EPA program to pay for Phase I assessments and potentially Phase II activities using its Site Investigation Field Unit (SIFU).
  • EPA VAP Technical Assistance- Ohio EPA provides technical assistance on how to complete a VAP cleanup on the property.
  • Ohio Brownfield Fund- Loans up to $500,000 for Phase II activities and $5 million for cleanup
  • JobsOhio Revitalization Loan and Grant Fund-  Up to $200,000 for Phase II, $1 million in grant funds and $5 million in loan funds for cleanup activities.
  • Abandoned Service Station Fund Program-  Class C underground storage tank (USTs) cleanup fund for abandoned tanks.  Up to $100,000 for assessment and $500,000 for cleanup activities.

This list of available incentives provided in the manual is a good basic overview of the major state programs in Ohio.  However, the manual does not mention the fact there are a number of local brownfield incentive programs that will provide grant funds for Phase Is, Phase IIs and cleanup activities. In many instances, these local programs can be a better fit for a particular project.

Furthermore, each of the programs listed above have important eligibility criteria, limits on reimbursable costs as well as development or job creation requirements in order to secure funding.  It is critical for a party to understand these commitments prior to accepting grant or loan funding.


This post is not meant as a criticism of the Attorney General's efforts in putting together the manual.  The manual is a good place to start to get a basic understanding of various issues and programs that can impact economic development.  However, with complex issues like brownfield redevelopment, the redevelopment process is more of an art than exact science.  An over simplified view can result in failed projects or unnecessary costs.  

Transactions- State EPA Had No Duty to Disclose to Buyer

In a novel case, the Court of Appeals (Second District Montgomery County) held that Ohio EPA had no duty to disclose knowledge of contamination to a buyer of a contaminated property, even though the Agency had records in its files documenting additional contamination.  See, Ohio v. Republic Envrtl. Sys. (Ohio), Inc., 2015 WL 5783650 (Ohio Ct. App. Sept. 30, 2015).  

Key Facts 

Buyer purchased a property that was in the middle of a hazardous waste cleanup (RCRA).  Seller makes no representations regarding the condition of the property (agreement contains an "as is" clause). Buyer also agrees to assume Seller's cleanup obligations.

Prior to purchase, Ohio EPA approves a cleanup plan ("RCRA Closure Plan").  The Buyer purchased the property in reliance on the closure cost estimates in the plan.  After Buyer purchases the property, it is later discovered that additional contamination is present on the property which will result in a significant increase in cleanup costs.  Buyer asserts Ohio EPA knew the contamination was present based upon documents it had in its files.

Court Holds Ohio EPA Has No Duty to Disclose

Buyer argued that Ohio EPA had a duty to disclose all known contamination because the Agency had records in its files showing additional contamination.  Buyer asserted that the Ohio Administrative Code provisions related to approval of cleanup plans (RCRA Closure Plans) placed an affirmative duty on the Agency to inform the Buyer of everything it knew regarding the property.

Court disagrees, holding that the Agency simply oversee the cleanup process.  Owners or operators are responsible for identifying all contamination and cleaning up the property to meet standards.  

The Court noted that the Buyer did not perform any independent due diligence prior to purchasing the property.  The Court said, Buyer should not have relied only upon the Agency's approved cleanup plan cost estimate.


Key lessons from this case:

  1. The burden is on the Buyer to perform sufficient due diligence prior to purchase;
  2. Don't rely upon Agency approved cleanup cost estimates, Buyer should perform their own independent analysis of cleanup requirements; and
  3. Cleanup of environmental sites always involve the risk that additional contamination will be discovered during the cleanup process.  

Uncertainty in Valuing Contaminated Property Complicates Brownfield Redevelopment

A key issue in brownfield redevelopment relates to proper valuation of property that is contaminated.   As discussed below, Ohio does recognize that contamination is a relevant factor that should be considered in determining a properties value.  However, other than recognizing it is a relevant factor, Ohio has failed to develop a consistent and reasonable approach to reducing the value of property due to the presence of contamination.

The failure to have a clear cut approach makes brownfield redevelopment more difficult.  Inflated property values lead to higher property tax bills.  This can act as a major disincentive to purchasing brownfield property and can complicate redevelopment.

Ohio has attempted to partially address the tax issues associated with brownfield redevelopment by providing a tax incentive to those who properly cleanup such properties.  Ohio provides a 10 year property tax abatement for properties that are cleaned up in accordance with Ohio EPA's Voluntary Action Program (VAP). See, Ohio Revised Code 5709.87  

In prior posts, I discussed the practical timing issues that can arise in attempting to take advantage of this tax exemption.  However, perhaps the biggest difficulty with this law is that it assumes current tax valuations (which are to be frozen for 10 years) properly account for the presence of contamination.  

I have represented clients who have challenged current valuations as well as discussed this issue with others attorneys.  Those that represent property owners agree that Ohio's current process for properly accounting for contamination is uncertain and doesn't take into account the practical realities of contaminated property. 

Ohio Rejects the "Cost to Cure" Approach

Perhaps the most straight forward methodology for valuing contaminated property is the "cost to cure" approach.  Using this approach, the property is valued assuming it is clean.  This valuation is then reduced by the cost or projected cost to cleanup the property.  

The "cost to cure" approach has been recognized by other states.  The benefit of this approach is that it minimizes subjectivity.  The property is first appraised in the local market as if it were clean. Then expert testimony is presented regarding the total cost to cleanup the property to regulatory standards.  This cost is deducted from the value.  

When cleanup costs exceed the value of the property, the value for tax purposes is set at zero.  This recognizes market reality.  Most property that costs more to cleanup than its worth will simply sit idle until either property values rise or brownfield incentives, such as grant funding, can be used to offset costs.

Multiple Ohio cases have held that introduction of evidence regarding the cost of cleanup and a request to reduce the value by that cost is inappropriate. See,  Chem-Masters Corp. v. Geauga Cty. Bd. of Revision (Dec. 21, 1990) BTA Case No. 88-J-994, unreported; Society National Bank v. Carroll County Board of Revision, BTA Case No. 94-M-454 (April 19, 1996); Hufford v. Montgomery County Board of Revision, BTA Case No. 95-M-855 (May 2, 1997); McDonald Local School District Board of Education v. Trumbull County Board of Revision, Case No. 94-A-757 (1996).

Ohio Accepts Evidence on Impact of Contamination

Many of the cases referenced above also discuss the need for introduction of an appraisal which considers the impact of the contamination on the value of the property. For example, in Company at 34 v. Lake Cty. Bd of Revision (Mar. 25, 1994), 92-T-763, the BTA held that evidence must be submitted on the “diminutive effect the contamination has upon the value of the property.” Testimony from a consultant or someone familiar with the property will more than likely not be sufficient.

There have been a couple cases in which an appraisal was submitted that argued for a reduction in the value by deducting cleanup costs. In Alder v. Licking Cty. Bd. of Revision (Apr. 22, 1994), BTA Case No. 92-R-976, the BTA did not find an appraiser’s testimony and report credible because the appraiser did not have “personal knowledge surrounding the contamination…and had never appraised a parcel of contaminated real estate.”

Most Recent Ohio BTA- Battle of Appraisers

In May of 2015, the Board of Tax Appeals (BTA) heard another case that involved a dispute over the proper methodology to value contaminated property. See, FIP Realty Co. LTD v Franklin County Board of Revision (Case Nos. 2014-1120, 2014-1121). The case involved a 68.5 acre industrial property in the Columbus area.    The County assessed the property at $5,981,600.  Both the property owner and School Board presented testimony from expert appraisers to support their positions regarding valuation of the property.

The property owner appraiser, using an income approach, opined the property "clean" would be worth $2,785,000 at market rates.  As an alternative, the appraiser uses a sales comparison approach to arrive at a valuation, assuming the property to be clean, of $2,750,000.  The appraiser then reduced both methods of arriving a clean values based upon the amount to cleanup up the property ($2,215,000) using a discounted cash flow analysis.  The owner's expert arrived at an "as is" value of $570,000 under the income approach and $895,000 under the sales comparison approach.  

The owner's expert asserted that his methodology did not amount to a dollar-for-dollar reduction based upon cleanup costs because those costs were discounted based on the time value of money. The appraiser's testimony was supported by additional testimony from the environmental consultant responsible for the cleanup.

The School Board appraiser also used both the income approach and sales comparable approach to value the property. Under the income approach, the appraiser used a higher capitalization rate to account for environmental contamination (i.e. discounted the value of the property).  Under the sales comparable approach, the School Board's appraiser selected the lower range of comparable sales to account for environmental contamination.

The BTA rejected the property owners approach as still amounting to a "cost to cure" method.  The BTA accepted the School Board's appraisers methodology finding he had properly accounted for contamination.

However, the issue with the methodology endorsed by the BTA is that it is still not based in reality. The School Board's appraiser only chose the lower range of comparable sales from "clean" properties. With regard to the income approach, he chose a higher capitalization rate to provide  discount to account for contamination.  However, that capitalization rate was not based on real world examples of contaminated property.

The most recent BTA decision endorses a very subjective approach to valuing contaminated property.  The method did not compare sales of other brownfield properties or provide a clear methodology for discounting values based upon the presence of contamination.  Without such a clear methodology, property owners will be forced to speculate regarding the discounted value of their properties.  

Pennsylvania Supreme Court Decision on Valuation of Contaminated Property

On September 29, 2015, the Pennsylvania Supreme Court ruled that the presence of contamination is a relevant factor in determining the value of property. See, Harley Davidson v. Springettsbury Township, et al. Case No. 82 MAP 2014.  The Court also endorsed the concept of of reducing contaminated property due to the stigma caused by the presence of contamination.  Due to the unique circumstances of the case in which a pre-existing settlement covered full cleanup costs, the Court refused to decide whether the "cost to cure" approach was appropriate in Pennsylvania. 

Harley-Davidson owns a 229-acre parcel of industrial property where it operates a motorcycle manufacturing plant.  The property was previously used by the U.S. Navy for weapon manufacturing.  Approximately half of the property is contaminated and half is clean form prior use.  Under as settlement agreement, Harley-Davidson has been cleaning up the property.  The parties have agreed to split future cleanup costs.

Similar to the Ohio case, the competing experts arrived at two different valuations of the property based upon the contamination issues.  The taxing authority expert said the property should be valued as essentially two pieces- the manufacturing half and the vacant half.  Harley-Davidson's expert argued the whole property should be valued as industrial.

The "cost to cure" approach was rejected due to the existing of the settlement agreement under which all future remediation costs were the responsibility of the settling parties.

The Court held:

  • Relevant Factors- “[a]ll relevant factors having a bearing on the value of a property, including environmental contamination, must be considered in a fair market value determination, [and that] the potential impact of a settlement agreement regarding environmental remediation and ongoing limitations and maintenance as a by-product thereof, through a buyer-seller agreement, are relevant factors that must be taken into account.”
  • Stigma- “environmental stigma, although an inherently imprecise concept, may be relevant to determining fair market value of real estate for tax purposes.” The court opined that a 5% stigma discount to the value was potentially appropriate even though the expert provided little support for the 5% figure other than it was based upon his professional experience. 

It would have been helpful to have seen the Court weigh in on the "cost to cure" approach. Overall, the decision is similar to the recent Ohio BTA opinion in that does not provide a clear methodology for valuing contaminated property.  

Key Eligibility Issue Needs to be Decided for New Underground Storage Tank Fund

I previously posted about the new $20 million dollar cleanup fund created to address old gas stations.  The fund with be operated by the Ohio Development Services Agency (ODSA).  

The fund will provide up to $100,00 for sampling and $500,000 for cleanup of abandoned gas stations or underground storage tanks that are classified as Class C (i.e. the Bureau of Underground Storage Tanks has certified that the party responsible for cleanup is not viable).  

ODSA is currently developing program guidelines and is planning on having the program up and running some time this fall.  One major legal issue that needs to be resolved is who exactly is eligible to receive funding.  

The legislation states that the “property owner” for purposes of applying for the grant money must be “a political subdivision and an organization that owns publicly owned lands.”  The Legislative Service Commission (LSC) analysis for H.B. 64 states that a political subdivision must own the land but “publicly owned lands include land that is owned by an organization that has entered into a relevant agreement with such a political subdivision.”

What does “entered into a relevant agreement with such a political subdivision” mean? Does this mean that a private property owner (as long as they didn’t create the contamination) could enter a redevelopment agreement with a City similar to how Clean Ohio operated(i.e. the City applies for the funds, but a private entity can own the land as long as it has a redevelopment agreement with a public entity). Or, does this mean the organization must hold the property on behalf of the City for public purposes?

If ODSA ultimately decides only political subdivisions or entities that hold public land can receive funding, there may be a pretty limited pool of applicants for funding.  Such an interpretation would ultimately require a City or County to take ownership of the land in order to clean it up.   

First, many cities may not have the wherewithal to purchase or take ownership of such property even through foreclosure.  Second, many may be concerned with liability concerns since neighbors could still sue for releases of contamination.  These are the types of liability issues and costs that government typically relies upon the private sector to address.

How this issue gets decided in the coming months will be a major factor in how quickly funds are utilized and how effective the program will be in addressing these sites.

Brownfields: $20 Million Dollar Abandoned Gas Station Cleanup Fund Enacted

As part of the 2016-2017 Operating Budget for the Ohio Development Services Agency (ODSA), a new $20 million dollar cleanup fund was created in House Bill 64 to address old gas stations around the state.  The money came from remaining Clean Ohio funds.  

Abandoned or defunct service stations have always fallen through the cracks of brownfield programs and are a very significant problem in the State.  (See the Canton Repository story "Gas Stations' owners vanish, leaving possibly hazardous eyesores")

Gas stations were never deemed large enough issues to attract incentives.  However, many times these stations are located in key development areas within a municipality.  The new fund provides an excellent opportunity for municipalities and developers to address these problematic sites.

Here are the basics of the new program:

  • Up to $100,000 in grant funds for sampling
  • Up to $500,000 for cleanup
  • Political subdivisions can directly apply for funds
  • Organizations that enter into an agreement for redevelopment with a political subdivision can also apply
  • Must be a Class C site (i.e. State has certified that the party responsible for contamination is not capable of performing the investigation and cleanup)
  • Applications are filed with ODSA
  • Applicants cannot have caused or contributed to the contamination on the property

While $20 million seems like a lot of money, I predict that this money will be used up very quickly. A current list of Class C Abandoned Gas Stations maintained by the States shows approximately 500 such sites right now.  That list will surely grow now that funding is available to help cleanup these sites. With such limited funding given the scope of the problem, it is very likely this funding will be gone very quickly.

However, many of these sites still present impediments to redevelopment.  Many political subdivisions do not want to take title to abandoned stations due to liability issues, even if grant funding for cleanup is available.  

For potential private party redevelopment, many of these sites have further complications due to title issues or back taxes and liens on the property.   Also, the sites need to have strong redevelopment potential for private parties to take ownership as well as to compete for the limited funding.  ODSA will likely require a detailed information regarding redevelopment potential as part of its forthcoming grant application process.

Liability, redevelopment and other issues are common among brownfield sites.  However, when funding is available it provides a strong incentive for parties to get creative and overcome these obstacles.  

Budget Bill Contains Brownfield Service Station Cleanup Funds

The current version of the budget bill (H.B. 64) contains language to create a gas station cleanup fund. The funding for this initiative is left over Clean Ohio money.  It is estimated that $20 million in Clean Ohio funds were either unused or represent cost savings from completed projects.  

Rather than redirect the leftover funds back into the Clean Ohio program, the budget proposal seeks to create a new "Service Station Cleanup Fund" for abandoned gas stations.  The program would be run by the Development Services Agency.  

The current version of the bill would provide up to $500,000 in assessment grant funding and $2 million in cleanup funding to address these sites.   The funding could not be used by property owners that contributed to the contamination at these former service stations.  

The advocacy organization, Greater Ohio, testified in support of the proposal.  However, they suggested revisions to the available funding for assessment (reduce to $100,000) and for cleanup (reduce to $500,000). They also proposed expanding the costs eligible for reimbursement using grant funding to include acquisition, demolition and infrastructure costs.  

One of the issues associated with the proposal is the requirement that the abandoned gas station must be designated by the Bureau of Underground Storage Tank Regulation (BUSTR) as a "Class C" site.   To be designated as Class C the service station must meet the following:

  • Must be a release of contamination above BUSTR standards, if no information exists to determine if such a release has occurred, a limited Phase II assessment (Phase II sampling) would be necessary to document such a release;
  • The party seeking funds must not be responsible for the contamination;
  • No ongoing BUSTR enforcement action to cleanup the site may exist; and
  • No viable responsible parties may exist;

Currently, there are not a significant number of Class C designated abandoned service stations in Ohio. As the proposal currently stands, this designation will be a prerequisite to eligibility. 

If you are interested in the funding, it may be a good idea to investigate the site Class C status quickly and, if the facility is not a Class C site yet, consider seeking such a designation.  

This program is temporary due to the limited funding.  Once the remaining Clean Ohio funds are used the program will likely cease to exist. 

There are a number of abandoned service stations in Ohio.  Historically, it has been difficult to attract brownfield grant money to address these sites due to their limited redevelopment potential.  This proposal may present a very good, albeit limited, opportunity to address these sites.

I have heard some opposition to the proposal from those in the brownfield community.  Some believe the remaining funds should be redirected back in to the Clean Ohio Revitalization Fund (CORF) so that larger brownfield projects can be addressed.  However, it seems likely that the proposal will move forward in its current form.


Latest Environmental Due Diligence Case Highlights the Value of the "Innocent Landowner Defense"

There has not been a lot of recent case law applying the CERCLA Bona Fide Purchaser Defense or Innocent Landowner Defense.  Every time a new case emerges it is picked apart by the environmental bar trying to discern the value of the CERCLA defenses as well as pitfalls that will result in failure to establish the defense. 

The latest case is Viola Coppela v. Gregory Smith (Case No. 11-cve-01257-AWI-BAM, E.D. Cal., Jan 15, 2015).  The case involved contamination from dry cleaners.  Plaintiff owned a dry cleaner facility.  In 2011, the State of California issued an order requiring plaintiff to investigate and remediate contamination from its dry cleaner.

Defendant, Martin and Martin Properties, LLC ("M&M") owned a commercial center in close proximity to Plaintiff's property.  As it turns out, a former dry cleaner operated on Defendant's property from 1959 to possibly 1971.

Plaintiff learned about the former dry cleaner on Defendant's property likely because it was listed on CERCLIS (a federal database of properties that are suspected to have contamination).  Defendant's listing on CERCLIS was due to a 2006 investigation performed by the State of California .  In 2009, a site investigation was performed which did detect low levels of PCE in the soil.  EPA determined that no further cleanup was needed due to the low levels.

Once Plaintiff learned of the investigation of Defendant's property it likely believed it had an opportunity to claim releases from Defendant's property migrated onto its property.  Therefore, Plaintiff asserted Defendant should share responsibility in cleaning up its property.  This is very common with regard to dry cleaners and gas stations (i.e. parties try to deflect blame by pointing to historical releases that may have occurred on neighboring property).

Plaintiff sued Defendant under CERCLA as well as brought common law claims.  Defendant asserted the Innocent Landowner's Defense under CERCLA.  The defense allows parties to avoid CERCLA liability if it did not contribute to contamination, conducted proper due diligence prior to purchase and exercised due care with any contamination found.  The burden is on the party asserting the defense to establish it is entitled to the liability protection provided by the defense.

Court's Analysis of the Innocent Landowner's Defense

M&M moved for summary judgment on Plaintiff's CERCLA claim alleging to be an "innocent landowner."  M&M alleged prior to its purchase it had performed the following due diligence activities:

  • Reviewed prior environmental reports prepared for the prior owner;
  • Conducted a physical inspection;
  • interviewed the seller, neighboring business owners, and financial consultant's regarding the properties prior use

Clearly, the level of due diligence exercised by M&M would not be adequate under current standards (ASTM 1527-13). Defendant did not even retain its own environmental consultant to perform an independent review.  Rather, it relied on reports prepared for the prior owner- something not allowed under U.S. EPA current "All Appropriate Inquires Rule" (AAI) which recognizes ASTM 1527-13.

However, the property transfer took place in 1995- before U.S. EPA promulgated its AAI rule. Therefore, despite the fact Defendant's level of due diligence was inadequate under current standards, the Court was willing to rule mostly in favor of Defendant, concluding some of the key elements for the "Innocent Landowner" defense were satisfied.  To establish the innocent landowner defense you must establish the following:

  1. The party acquired the property after the disposal or placement of the hazardous substances occurred;
  2. At the time of acquisition, the party did not know and “had no reason to know,” i.e. made all “appropriate inquiries” in accordance with customary “standards and practices,” that any hazardous substance was disposed of or placed at the facility;
  3. The party did not actively or passively contribute to the “release” of the hazardous substance; and
  4. Once contamination was found, the party exercised due care with respect to the hazardous substance concerned, took precautions against foreseeable acts or omissions of third parties and the foreseeable corresponding consequences, and acted in compliance with land use regulations and governmental responders.

The Court determined that M&M satisfied elements 1, 3 and 4.  With regard to element 2, the Court noted that the M&M did not hire its own consultant and simply relied on reports prepared for the benefit of the prior owner.  With regard to the issue of whether M&M exercised "all appropriate inquiries" (element 2) the Court refused to grant summary judgment.

Frankly, I'm surprised how far the Court went in finding in favor of Defendant on elements 1, 3 and 4. Furthermore, Defendant still has the possibility of establishing element 2.  At trial, Defendant could produce evidence that it was common in 1995 (prior to EPA's AAI Rule) to rely on a prior owners environmental reports.  If successful, Defendant will still be entitled to the "Innocent landowner" defense.

I think the key takeaways from this case are the following:

  • Prior to EPA's "All Appropriate Inquiries" Rule, Parties may have wider latitude to argue what was standard industry practice and the accepted level of due diligence;
  • After AAI, the party should make sure it follows ASTM 1527-13 or it is very unlikely a party will meet its burden in establishing the defense;
  • There is a lot of value to the defense to fend off exactly this type of litigation- a property owner in the vicinity with contamination on-site who is looking to deflect blame or try and offset their own costs; and
  • Courts may inclined to protect parties that showed genuine effort to perform proper due diligence prior to purchase.


Environmental Insurance- A Top Broker Discusses Seven Key Aspects of this Specialty Coverage

I interviewed Rob Snyder of the Fedeli Group. (click link to Rob's contact information)  Rob has more than 20 years of experience as a broker of environmental insurance.   He has obtained everything from standard pollution liability insurance to brownfield insurance on highly complex cleanups.  He has familiarity with all of the major carriers that provide environmental insurance coverage in today's market.  I have worked with Rob for years and he truly is an expert in this highly specialized area.  

I interviewed Rob to get his thoughts on key aspects and considerations for businesses that may benefit from environmental insurance.

1.  What are the general categories of environmental insurance (e-insurance) you deal in?  

The term environmental is very broad.  Insurance coverage can mitigate risks associated with releases to the air, ground, surface water or ground water.  Coverage can be obtained for new releases and spills.  Or, in the brownfield context, coverage can be obtained for historical releases to the environment.  The most standard coverage is called "Pollution Legal Liability Insurance" or (PLL coverage).  The typical PLL coverage protects against new releases and third party lawsuits.  However, there is a wide range of possible coverage that can be obtained in the market.

2.  When does securing environmental insurance make sense?  

There are some common situations when securing e-insurance makes sense:

  • Contractors- When an owner or general contractor requires coverage;
  • Consultants- Professional liability insurance is standard coverage needed for engineers and environmental consultants;
  • Real Estate-  Acquisition or use of property can pose significant financial risk (real or perceived) to capital, lender and developer interests.  E-insurance can mitigate risk from historical contamination, new regulatory standards or third party lawsuits.
  • Transactions-  Reps and warranties insurance typically doesn't include e-insurance.  E-insurance can be a very cost effective tool to bridge the gap between Seller and Buyer in allocating environmental liability risk.  Small deals or major multi-national deals may both benefit from e-insurance.  

3.  What are some key considerations when choosing a carrier? 

The financial clearing house for insurance companies is the AM Best Company.  This independent source grades companies by size and performance.  A school like grading system is utilized, with grades of A+ (Excellent) to F (Failing).  Balance sheet size is ranked from I to XV with XV being the strongest.  In this grading format a carrier of A IX or better is considered acceptable. Most financial markets will require a size and performance ranking of this or better for financial underwriting.  In addition to size and performance, it is important that the carrier has a positive track record in underwriting, claims management and coverage offerings. 

4.  How does a business or individual decide on limits of coverage?

Liability limits are one way in which a policy holder can control premium.  Higher limits add more cost to the program.  Often times coverage limits are set by stakeholder interests relative to financial risk.  Limits may be set by regulatory laws, corporate risk management standards, loan value, cleanup assessment or defense costs and other costs associated with the environmental risk. In deciding what liability limits to procure, keep in mind that environmental exposure is more likely catastrophic than frequent in nature.

5.  What are some key things to look for in the policy terms and conditions?

Most third party liability coverage includes bodily injury, property damage and legal defense costs. E-insurance may include all of these plus cleanup costs.  Understanding the conditions and limits on coverage as set forth in the policy is very important.  Policy terms can often be negotiated. Therefore, it is important to not just accept the standard language in the policy. Other considerations include whether coverage is for known and/or unknown conditions.  Is it for only new or does it include pre-existing conditions.  Coverage may be extended to include transportation and offsite disposal of materials from the site.  Because environmental law makes liability for generators both retroactive and continual, coverage may be critical for off-site transportation and disposal of materials.  

6.  What are some common mistakes an insured makes when filing a claim?

The most common mistake is not reporting an incident quickly enough.  It is well known in the environmental consulting world that the cost of cleanup is directly related to the amount of time it take to clean something up.  Early reporting is the first  and most critical mistake commonly made. Another common reporting mistake is failing to report the claim within the same policy period in which the loss occurred.  Many e-insurance policies are claims made and reported forms of coverage.  Obtaining coverage becomes useless if you fail to report a claim within the limits specified in your policy. Another common mistake is lack of documentation as to the what, where, when and how regarding a release.  

7.  What are some key trends you see with regards to environmental insurance?

The insurance market place is maturing.  There are more carriers to approach with a risk.  Coverage terms and conditions continue to be all over the map.  No two carriers or policies are the same. Professional consulting services are still required to properly identify risk, match risk to market coverage and obtain competitive pricing.


Review of Compliance with Job Commitments in State Incentive Packages

The Attorney General's Office completed its review of compliance with job commitments the state received in exchange for various incentives.  Here is the summary of its findings:

  • Workforce Compliance Rate: 100% (49 of 49 awards in substantial compliance)
  • Grant Compliance Rate: 74.4% (29 of 39)
  • Tax Credit Compliance Rate: 62.4% (78 of 125)
  • Loan Compliance Rate: 57.1% (24 of 42)

The chart and figures show the break down of compliance by type of incentive.  The report also contains an appendix which identifies all of the specific incentive packages by company and the status of compliance.  

The report really doesn't provide much insight as to why some incentives have a greater level of compliance than others. One explanation for the 100% compliance with workforce development is that the commitment is really just a training commitment, not a job creation commitment.

The state not only reviews compliance with the job commitments in state incentive agreements, it takes enforcement against those companies that it deems are not in substantial compliance.  This from the Columbus Dispatch Article discussing the Attorney General's Report:

The state has taken action against many of the companies behind the 75 projects that were not in compliance. It demanded the return of some grant money, modified terms on loans and shortened periods in which the companies were able to collect the tax credits. In other instances, the state found the companies were mostly in compliance despite coming up short and ordered no remedial action.

Incentive agreements also contain an out clause in the event there is an economic slowdown which prevents the company from meeting its commitments.  


One type of grant not covered in the report are brownfield grants.  This is because under the Clean Ohio Program, the grant agreement required a commitment to cleanup the property to Ohio EPA's Voluntary Action Program standards, not a specific job creation commitment.  While job creation was a metric evaluated when projects competed for Clean Ohio funding, the pledges did not make it into the grant agreements.  

That has changed under the JobsOhio Revitalization Program.  Under the new grant template being used by JobsOhio, companies are required to make specific commitments in terms of job creation, job retention and/or capital investment.  The JobsOhio agreement contains a specific deadline for meeting that commitment and the ability to require repayment of the grant in the event those commitments are not met.  

The JobsOhio agreement focus on job creation and investment  is similar to other State economic incentives.  It is an example of the shift in philosophy behind brownfield redevelopment in Ohio. Clean Ohio was focused on cleanup and redevelopment of contaminated property.  The JobsOhio Revitalization Program is focused on economic redevelopment.  


Local Governments, Land Banks and Brownfield Properties

One of the issues that has prevented local governments from being more aggressive in addressing brownfields has been liability concerns associated with existing environmental contamination.  Prior to 2009, some local governments learned the hard way that placing their name in the chain of title as an "owner" exposed the local government to liability under CERCLA (i.e. Superfund) or other environmental statutes. 

Ohio Passes Limited Environmental Liability Protection

Ohio attempted to address this gap in the law back in 2009.  Ohio Revised Code 5722.22 provides the following liability protection to County land banks:

R.C. 5722.22 Immunity of land reutilization corporation.
A county land reutilization corporation is not liable for damages , or subject to equitable remedies, for breach of a common law duty, or for violation of sections 3737.87 to 3737.891 of the Revised Code or Chapter 3704., 3734., 3745., 3746., 3750., 3751., 3752., 6101., or 6111. of the Revised Code or any rule adopted or order, permit, license, variance, or plan approval issued under any of those chapters in connection with a parcel of land acquired by the county land reutilization corporation.

This broad immunity provision appears to allow County land banks to assemble brownfield parcels without fear of exposing the entity to liability for pre-existing contamination.  However, what clearly is missing from the list of statutes in R.C. 5722.22 is a reference to CERCLA.  This is because a state cannot pass legislation that provides immunity from CERCLA, only Congress could create such an exception.   

Involuntary Acquisitions

Local governments are entitled to a liability defense if they acquire contaminated property involuntarily.  Pursuant to § 101(20)(D) of CERCLA, a unit of state or local government will not be considered an owner or operator of contaminated property (and thus is exempt from potential CERCLA liability as a PRP) if the state or local government acquired ownership or control involuntarily. This provision includes a non-exhaustive list of examples of involuntary acquisitions, including obtaining property through bankruptcy, tax delinquency, abandonment, or “other circumstances in which the government entity involuntarily acquires title by virtue of its function as sovereign."

While this provision is useful, there are times when a municipality or land bank would like to help facilitate brownfield redevelopment by proactively acquiring property.  In those circumstances, the local government will have to perform proper environmental due diligence just like any other buyer.

Municipalities and the Bona Fide Purchaser Defense

If a local government does not come into ownership of contaminated property involuntarily, it must proceed with caution in order to protect itself from liability.  In situations where a local government would like to acquire contaminated property voluntarily, it must act like a private party in order to establish CERCLA liability protection-  It must meet the requirements of EPA "All Appropriate Inquiries" (AAI) Rule in order to establish the Bona Fide Purchaser Defense (BFPD) to CERCLA.

EPA specifically identifies these steps in its CERCLA guidance document regarding local government acquisition of contaminated property:

While many abandoned properties that are of interest to land banks and redevelopment authorities are not likely to be contaminated, local governments should be aware that contamination and potential CERCLA liability may exist. A local government may increase the likelihood that the land bank or redevelopment authority is eligible for CERCLA liability protection by ensuring that the land bank or redevelopment authority conducts AAI prior to acquiring the property. Not only is AAI a critical requirement for obtaining most CERCLA landowner liability protections, but it also aids local governments in making informed property acquisition decisions. When acquiring abandoned contaminated properties, EPA encourages local governments to obtain BFPP status prior to acquisition if it is unclear whether other exemptions, affirmative defenses, or liability protections may apply. 

Under the BFPD, the local government must perform an ASTM 1527-13 compliant Phase I environmental assessment prior to taking ownership.  If potential contamination is identified, then the local government will also have to take "reasonable steps" to prevent exposures or stop ongoing releases of contamination.

County Land Banks Focus on Residential Property

Despite the environmental liability risks, some cities have been aggressive in attempting to manage brownfield properties.  Municipal land banks, such as the City of Cleveland Industrial-Commercial Land bank, have assembled and even cleaned up some brownfield sites. 

As discussed above, pursuant to R.C. 5722.22, County land banks have greater immunity from environmental liability pursuant to state statutes or common law.  Despite these protections, County land banks have been less proactive when it comes to brownfield properties.

Right now, County land banks are much more focused on addressing vacant residential properties. A current review of property held by the Cuyahoga Land Bank shows a long list of residential properties:

With the foreclosure crisis, its logical that County land banks would be focused on the residential property issue.  

However, the reason the Ohio General Assembly inserted the environmental immunity provisions contained in R.C. 5722.22 was to encourage land banks to address brownfield properties.  

County land banks that perform a limited amount of due diligence in advance of taking ownership (i.e. BFPD), coupled with the state immunity provision in R.C. 5722.22, can be powerful allies in addressing brownfield properties.  We need to see more examples of County land banks working collaboratively to facilitate cleanup and redevelopment of these properties.

EPA No Longer Recognizes Old ASTM Standard for Phase Is

U.S. EPA has published in the Federal Register its action that removes the old Phase I standard (1527-05) from the "All Appropriate Inquiries" Rule (AAI).  Until this action, AAI recognized both the old standard and the new standard- ASTM 1527-13.  

The major differences between the old and new ASTM Phase I standard include:

  • Key legal definitions associated with contamination
  • Enhanced requirements for agency file reviews
  • As discussed below, new language highlighting the need to assess the potential for vapor intrusion

EPA delayed the effective date of the rule until October 6, 2015 to allow the continued use of 1527-05 until that date.  Going forward, any Phase I report issued after the effective date of the rule which is based on ASTM 1527-05 will no longer be deemed sufficient for meeting establishing the Bona Fide Purchaser Defense to CERCLA (BFPD).  The BFPD provides new owners and tenants of property a defense to liability under CERCLA if it completes due diligence in accordance with EPA's AAI Rule.

EPA action was not a surprise.  Perhaps the most interesting aspect of EPA action is the comment in the preamble related to vapor intrusion:

"The scope of the AAI Rule and the ASTM E1527–05 standard always included the
requirement to identify all indications of releases
and threatened releases of hazardous substances, or ‘‘recognized environmental conditions (RECs),’’ including indications of vapor migration or vapor releases. With the updates included in the 2013 version of the ASTM E1527 standard, ASTM modified the definition of migration to specifically include vapor migration and remove any confusion regarding the need to identify all RECs, or all indications of releases or threatened releases of hazardous substances, when conducting an AAI investigation." (emphasis added)

While EPA may believe it has always been known the vapor intrusion needed to be assessed, that certainly was not the case among consultants.  Many prepared Phase I reports that did not mention in anyway vapor intrusion.  I have read such reports in the past.

This issue is whether this type of statement from EPA provides grounds for professional negligence claims against environmental consultants who did not perform a vapor intrusion evaluation under an old Phase I which followed ASTM 1527-05.  

The most likely scenario would be someone who purchased a building and learned later that a vapor intrusion/migration issue existed on the property.  They obtained a Phase I environmental assessment prior to purchase, however, the Phase I did not review the potential for vapor intrusion.

As discussed in a prior post, a recent survey indicates that barely half of the Phase I reports being performed using the new ASTM 1527-13 standard analyze for vapor intrusion.   

Key Update on JobsOhio Revitalization Brownfield Program

Last week, we hosted a very successful seminar covering commercial and industrial property redevelopment.  I participated on a panel that included JobsOhio, the City of Cleveland and TeamNEO discussing brownfield redevelopment, in particular, incentives.  A major focus of the discussions was the relatively new JobsOhio Revitalization Program.  

I have worked with JobsOhio on brownfield projects and have experience with how the new program operates.  It is very different then the old Clean Ohio program which operated for over a decade.

Here are some of the key pieces of information that I learned either at the seminar or through my experience working with the program over the last year.

Available Grant and Loan Brownfield Incentives

  1. Phase II Assessment
    • Up to $200,000 in grant funds for Phase II sampling
    • Phase I must be completed prior to application
    • JobsOhio said a project "needs a high likelihood of job retention or creation, not certainty at this stage"
  2. Revitalization Loan Fund
    • Low interest loans up to $5 million, covering 20-75% of project costs
    • End user and job creation/retention
    • Industrial, commercial or mixed use w/office
    • Principal & interest free during construction (i.e. until certificate of occupancy)
  3. Revitalization Grant Fund
    • Up to $1 million in grant funds for cleanup and other eligible costs
    • Typically coupled with a loan where grant acts to fill funding gaps

Who and What is Eligible

The JobsOhio program has wider eligibility than Clean Ohio.  Businesses, developers and non-profits can all apply for incentives without going through a local governmental entity.  However, the entity cannot have been directly responsible for the environmental contamination (with some limited exceptions based on the structure of the deal).

Eligible Use of Funds

A wider array of costs are eligible for reimbursement under the JobsOhio program.  In fact, it was noted during the program that 50% of the projects JobsOhio has funded did not involve contamination.

Eligible costs include any of the following:

  • Phase II environmental assessments
  • Demolition and disposal
  • Environmental remediation
  • Building renovation
  • Site preparation
  • Infrastructure
  • Environmental testing & lab fees

Criteria for Evaluating Projects

JobsOhio utilizes three basic criteria when evaluating projects:

  1. Jobs (private sector)
    • Retained
    • Created
    • Wage rate 
  2. Investment 
    • Private v. public & JobsOhio investment
    • Capital investment in addition to site preparation
    • Priority for JobsOhio targeted industry projects
  3. Certainty of Completion
    • End user commitment
    • Completeness of redevelopment plans
    • Adequacy of project funding

Key Differences between JobsOhio and Clean Ohio

Having worked on multiple projects under both programs, it is fair to say there are very significant differences between the two programs.  Here is a list of key differences:

  1. No VAP Covenant-Not-Sue Required under JobsOhio- As discussed above, 50% of the projects don't even involve contamination.  All brownfield Clean Ohio projects involved contamination.  Even with sites that have contamination, JobsOhio says they will not require you to complete Ohio EPA's Voluntary Action Program in all cases.
  2. Application Costs and Timing-  The JobsOhio application process is significantly faster than Clean Ohio.  All applications can be filed on a rolling basis.  The amount of information required to find out whether you will receive an award is vastly different.  Under JobsOhio you can find out whether you will qualify for funding very inexpensively.  Under Clean Ohio it could cost $20k-$50k to find out whether you would be funded.  Also, funding under Clean Ohio was more of a political process that was largely determined by which projects were most favored locally.
  3. Flexibility-  JobsOhio provides greater flexibility in terms of the projects that can qualify.  Also, a wider array of costs are eligible for reimbursement under JobsOhio.  There is also greater flexibility to structure the incentives under JobsOhio to fit your project.  No rigid match requirements or artificial caps on certain costs.
  4. Confidentiality-  The Clean Ohio process was entirely public.  All applications and reports were public records.  Under JobsOhio, a company can keep deals confidential until a public announcement is made regarding the award.  There is even the opportunity to sign a Non-Disclosure Agreement with JobsOhio.  
  5. Funding- Unfortunately, JobsOhio does not provide the same level of grant funding as Clean Ohio.  For smaller, less contaminated sites this is not an issue.  For sites involving very significant contamination or complex cleanups, the $1 million in available grant funding may not be sufficient.
  6. Jobs Requirement-  All JobsOhio projects must involve either job retention or creation.  Under Clean Ohio, there was the opportunity to cleanup sites without firm job commitments in order to attract development to strategic areas.  
  7. Criteria for Award-  Clean Ohio had a published scoring system that could provide potential applicants some sense of whether they would qualify for money.  JobsOhio has the three criteria discussed above (jobs, investment and certainty of completion), but there are no hard and fast rules of when they will fund a project.



Only About 1/2 of Phase I Assessments Analyze for Vapor Migration Risks

Phase I Environmental Assessments (Phase I ESA) are the first step in the environmental due diligence process.  A Phase I ESA is a review of available information regarding a property to determine the possibility contamination may be present.  The assessment includes a review of environmental databases, file reviews, interviews with regulators/property owners and a site walkover by an environmental consultant.

To encourage more reuse of brownfields, Congress amended CERCLA to provide a liability defense to prospective purchasers of property who perform adequate due diligence pre-acquisition (i.e. the "Bona Fide Purchaser Defense" or BFPD).  In 2012, U.S. EPA made the BFPD potentially available to tenants who perform adequate environmental due diligence before signing a lease.  

U.S. EPA enacted the "All Appropriate Inquiries" (AAI) rule to specify the requisite level of due diligence necessary to establish the BFPD.  Under AAI, a purchaser/tenant must obtain an Phase I ESA prior to taking ownership or signing the lease.  The Phase I ESA must meet the standards set forth by ASTM 1527.  

There have been several versions of ASTM 1527.  Under ASTM 1527-05, consultant stated it was unclear whether the assessment must include the evaluation for potential vapor migration risk into buildings.  In order to make it clear, ASTM updated the standard, releasing 1527-13 in November of 2013.  

One of the most significant changes was the addition of specific language requiring the Phase I ESA to assess vapor migration risk.  In December 2013, U.S. EPA incorporated ASTM 1527-13 into AAI. Since December of last year virtually all Phase Is purport to satisfy ASTM 1527-13.

What is Vapor Intrusion?

Vapor migration occurs when soil and groundwater contamination can volatilize and migrate up through soil into buildings over or near the contamination.  Volatile Organic Compounds (VOCs) and Semi-VOCs are the most likely to cause vapor migration issues.  

Common sources of contamination that can cause vapor migration issues are gas stations, dry cleaners or other industrial sites (especially those that utilized solvents).  

Prospective purchasers or tenants of buildings with vapor migration risk can face issues regarding exposure of occupants to air deemed unsafe.  

ASTM revised the Phase I ESA to mandate an assessment of vapor migration risks due to the increased knowledge regarding the risk presented.

Survey Indicates a Large Portion of Phase Is Still Don't Evaluate Vapor Intrusion Risks

Environmental Data Resource, Inc. (EDR) surveyed over 100 environmental consultants who regularly perform Phase I ESAs.  Of those surveyed, only 55% indicated that they began to review vapor intrusion risks as part of their Phase I ESA when ASTM 1527-13 was finalized in November 2013.  

EDR stated that the survey results show the review of vapor migration risk has become "industry practice."  The number of consultants reviewing vapor migration risks had dramatically increased since it was adopted in November 2013.  However, nearly 1/2 of all Phase I ESA don't evaluate the risk.

With the amendment of AAI to reference ASTM 1527-13, every Phase I ESA should be reviewed to make sure vapor migration risk was evaluated by the consultant.

What is the Appropriate Methodology for Evaluating Vapor Migration?

With the dramatic risk in the number of consultants evaluating vapor migration risk, the issue has pivoted from whether to perform the analysis to the proper methodology for evaluating the risk.  In 2010, ASTM 2600 was published which provided a screening method for vapor migration risk. However, many deem ASTM 2600 too rigorous.

The EDR survey found that only 27% of respondents screened for vapor migration using ASTM E2600- the only industry recognized standard for screening brownfield sites for potential vapor migration.  Of those responding, 44% said they just review the data compiled by the Phase I to determine if further research is needed.

From a legal perspective, it is important to remember that the BFPD is a defense.  Meaning, a party who asserts the defense must demonstrate they met the requirements of the AAI.  Properly documenting what was done to evaluate vapor intrusion could be a critical issue in establishing the BFPD.  Therefore, Phase I ESA should be reviewed carefully to determine whether there is adequate documentation included in the report.

New Ohio EPA Public Records Procedures Impact Phase Is

More than one environmental consultant has reported that Ohio EPA has changed its public records review procedures.  Ohio EPA has centralized its document review process.  It has developed a new public records request form that it asks any consultant requesting records to fill out (click here for the form).

After files are compiled in response to the request, Ohio EPA will typically not release the records until the Legal Office completes a review.  The purpose of the review is to ensure attorney-client or other privileged documents are not released.  That is understandable.  However, the practical effect, as reported by more than one consultant, is that records are not being released or files made available for review as quickly.

Many times it can take more than three weeks before files will be made available.  This causes practical issues for consultants performing Phase I Environmental Assessments.

Under the new ASTM 1527-13, the consultant performing a Phase I is required to review records from pertinent regulatory files. The consultant must review files that are deemed "reasonably ascertainable."  With regard to records, the new ASTM standard defines reasonably ascertainable as a file review or copies made available within twenty days of making the request.  

More and more Phase Is will note that file requests were issued, but no response was made when the report was finalized.  While proper documentation in the Phase I does not render the report inconsistent with ASTM, it does create practical ramifications for the user of the report.

State EPA files are more often than not the best source for identifying environmental issues with properties.  Those issues could include information about prior releases of contamination, enforcement actions, permitting issues, etc.  

The more time it takes Ohio EPA to produce files, the more likely these critical reviews will not be completed before the Phase I report is finalized.  This leaves the purchaser or tenant who ordered the Phase I with significant risk that problems exist with the property that will not be identified until after the transaction closes.

Users of Phase Is are left with the choice of delaying their transaction while they wait for the files to be reviewed or moving forward without potentially critical information regarding the property.

Federal Vacant and Brownfield Properties Present Opportunities and Challenges

The federal government is the nation's largest property owner.  It holds over 900,000 buildings and structures totaling three billion square feet.  

In 2010, the federal government spent more than 1.5 billion dollars to maintain approximately 77,000 underutilized and vacant properties.  Another 14,000 properties are no longer used by the federal government and could be transferred to new owners.

With large federal deficits it is easy to see the sale of these vacant properties as an opportunity to save money.  The government can reduce maintenance costs as well as recover funds through the sale of these properties to the private sector.  According to a Republican report, $1 billion could be saved just by reducing vacant courthouse space.

Back in 2011, President Obama targeted the issue of underutilized and vacant federal properties as part of his budget.  This quote from President which appeared in an article in the Washington Post:

"Now, some of the savings will come through less waste and more efficiency," he said. "To take just one example, by getting rid of 14,000 office buildings, lots and government-owned properties we no longer need, we can save taxpayers billions of dollars." 

However, three years later little progress has been made in addressing the issue.  This despite the President's executive action and legislation to try kick-start the process.

Red Tape- The Biggest Impediment to Addressing the Issue

According to a 2013 Congressional Research Service Report, the single biggest impediment to efficient sale of these properties remains the federally mandated process.  As an initial step. a federal agency that no longer needs a property must go through extensive reviews just to declare the property as "excess" and move it to the GSA for processing.  Between 2010-2013 only 565 of the 11,600 underutilized properties transferred to the GSA.

One of those impediments is the extensive environmental reviews necessary to transfer properties.  With very little incentive to spend the manpower to navigate the complex environmental statutes, many agencies simply don't initiate the process to declare property as "excess."

If a property is declared "excess," it then moves to the GSA for final sale.  However, before the GSA can sell the property, it must be offered first to other federal agencies, then to homeless providers and other public entities, including state and local governments. Only after all of these stakeholders evaluate taking the property and decline can it finally be offered for sale.  This process can take up to three years for a single property.

Congressional Roundtable 

I have been asked by Congressman John Mica (R-Fla) to participate in a roundtable discussion on underutilized and vacant federal properties on July 24th.  Congressman Mica has assembled various experts to offer their opinions on how to streamline the process for selling such properties.

My comments will focus on leveraging the expertise of the private sector to evaluate environmental issues and mitigate their risks. The private sector can efficiently evaluate whether properties present environmental risks. If such risk are identified, multiple strategies exist that can be implemented to address or mitigate risks.  

I look forward to participating in the roundtable.  Addressing this issue presents a tremendous opportunity to save federal funds.  It also presents an opportunity to place these properties back into productive use.  


Practical Issues with Ohio's Brownfield Tax Abatement Law

I have written before regarding the flaws in Ohio's automatic ten year tax abatement for brownfield cleanups.  In my prior post, I discussed both timing issues and exclusion of new buildings/improvements from coverage under the tax abatement.

Over the years, as I have dealt with this law in practice for clients, another reality has come to light. Even if you do everything right in terms of timing, the law is really hard to take advantage of due to the bias against reducing property values in Ohio based on pre-existing contamination.

The Law

The applicable statutory provision is set forth in  Revised Code Section 5709.87 "Exempting increase in assessed value of realty cleaned of contamination." The key language is as follows:

(C)(1)(a) Upon receipt by the tax commissioner of a certification for property under division (B) of this section [i.e. a VAP Covenant-Not-to-Sue from Ohio EPA], the commissioner shall issue an order granting an exemption from real property taxation of the increase in the assessed value of land constituting property that is described in the certification, and of the increase in the assessed value of improvements, buildings, fixtures, and structures situated on that land at the time the order is issued as indicated on the current tax lists.

The way the law is supposed to work is as follows:

  1. Pre-cleanup, contaminated property has a reduced value due to costs to remediate and potential liability of the owner;
  2. Buyer expends the costs to take the property through the Ohio Voluntary Action Program (i.e. VAP- Ohio's brownfield cleanup program);
  3. Ohio EPA confirms the property meets VAP cleanup standards by issuing a covenant-not-to-sue;
  4. Ohio EPA sends certification to Tax Commissioner that the property has been cleaned up under the VAP;
  5. Tax Commissioner issues a order granting an exemption from the increase in value of the property post VAP cleanup.  The exemption (i.e. "freeze") is good for ten years.

The Real World Issue with the Ten Year Freeze 

The law assumes that the land and buildings have a reduced value due to the presence of contamination.  Once clean, the law assumes the values of both the land and buildings will likely increase significantly.  As an incentive to address costly brownfield properties, the law attempts to provide the Buyer an exemption from additional taxes attributable to the increase in value due to the cleanup.

However, the reality is that the tax value of the majority of brownfield properties do not accurately reflect their true value in the market place.  This is due to the fact that local governments have no ability to account for the contamination when assigning a tax value to properties.  As a result, the taxes assessed to land and existing buildings on brownfields, in reality, presume both are free of contamination.

What good is a "freeze" in the value if it simply freezes an over inflated valuation of the property?

To overcome this situation, any owner attempting to take advantage of the 10 year brownfield tax abatement, must first, successfully challenge the current tax valuation of the land and existing buildings so as to properly account for the presence of contamination.  While the Board of Revision process under Revised Code Chapter 5715 is seen as the opportunity for a owner to make such a challenge, the history of Board of Tax Appeal decisions (i.e. the most common administrative appeal tribunal) demonstrate the difficulty in making such a challenge.

Board of Tax Appeals Case Law Regarding Valuation of Contaminated Property

Dollar for Dollar Deduction is Not Appropriate

The easiest way to allow an owner of contaminated property to determine its value is to take the current fair market value and deduct the cleanup costs.  This method allows for the variation in levels of contamination.  The higher the cleanup costs, the bigger deduction, which seems appropriate.

Using this method, in some cases, the value of a property may be zero because the cleanup costs are higher than the current market value.  However, this is reality in the market place.  I have negotiated a number of deals in which a property transferred for one dollar in recognition of the costs and liability associated with contamination.

While the dollar for dollar deduction is the simplest method for determining value of contaminated property, unfortunately this methodology has been rejected in Ohio.  Multiple cases have held that introduction of evidence regarding the cost of cleanup and a request to reduce the value by that cost is inappropriate in Ohio. Chem-Masters Corp. v. Geauga Cty. Bd. of Revision (Dec. 21, 1990) BTA Case No. 88-J-994, unreported; Society National Bank v. Carroll County Board of Revision, BTA Case No. 94-M-454 (April 19, 1996); Hufford v. Montgomery County Board of Revision, BTA Case No. 95-M-855 (May 2, 1997); McDonald Local School District Board of Education v. Trumbull County Board of Revision, Case No. 94-A-757 (1996).

The dollar for dollar deduction methodology has even been rejected when an appraiser has endorsed the methodology as the best means of determining value of the property.  In Vogelgesang v. CECOS International, Inc., 85 Ohio App. 3d 339 (1993), CECOS challenged the property tax valuation. At the hearing, CECOS provided an appraisal report in which the appraiser deducted current and future environmental cleanup costs from the valuation. The Court upheld the BTA’s decision to reject this approach. The Court said deduction of the cleanup costs may reflect the effect these costs had on the company’s profitability, “but it fails to demonstrate their effect on the facility’s property value…” Therefore, the Court case rejected the approach of simply deducting cleanup costs from a valuation even in the context of an appraisal report.

Other Options for Determining Current Tax Value of Contaminated Property

The Board of Tax Appeals seems to favor the introduction of an appraisal which considers the impact of the contamination on the value of the property. For example, in Company at 34 v. Lake Cty. Bd of Revision (Mar. 25, 1994), 92-T-763, the BTA held that evidence must be submitted on the “diminutive effect the contamination has upon the value of the property.”   It appears the BTA wants to hear testimony from a property valuation expert.  Testimony from a consultant or someone familiar with the property will more than likely not be sufficient.

Based on the case law, the appraiser must utilize a different method for determining value other than dollar for dollar reduction based on cleanup costs.  But what other method is viable?

For example, a review of comparable sales of contaminated properties may be very difficult.  Each property is different and levels of contamination can very widely.  How an appraiser accounts for these variables in performing a market analysis would appear to be very daunting.  


The law in Ohio supports reduction in value of property based upon the presence of contamination. However, in reviewing the case law surrounding valuing property with environmental contamination, none of the cases discussed above provide examples in which the BTA or a Court validated a specific approach to reducing value based on contamination.

Courts and the BTA appear to endorse the use of an appraiser in determining the fair market value of contaminated property.  However, it appears no appraisal methodology has been specifically endorsed in Ohio.  

This leaves owners of contaminated property with no clear path toward reducing current tax values to reflect existing contamination.  Without successfully reducing current values to reflect pre-existing contamination, owners and developers of brownfield properties face a real challenge in capturing the value intended by the State's ten year tax abatement for cleanup of contaminated properties.

Due to the challenges facing redevelopment of brownfields, particularly in Ohio where such underutilized properties are abundant, incentives are critical to overcoming such impediments to redevelopment.  The ten year tax abatement was seen a major incentive, but in reality, it is has limited applicability and its difficult to fully take advantage of.

The ten year tax abatement in R.C. 5709.87 has been on the books for twenty years.  Perhaps its time to revisit the law to make it better conform to reality.


Ohio EPA Proposed Voluntary Action Program (VAP) Rule Changes

Ohio EPA is moving forward with substantial changes to the rules for the Voluntary Action Program (VAP) which governs the procedures and standards for voluntary cleanup of industrial sites and brownfields.  The Agency provided an overview of the changes and its response to public comments last week at the Ohio Brownfields Conference in Columbus.

The Agency describes the changes as mostly providing greater clarity or trying to streamline the processes.  However, many of the changes are significant.  Some of the more significant changes are discussed in this post.

Note:  A detailed overview by Ohio EPA of the proposed rule changes can be accessed here.

Process Changes- Faster Turnaround but Greater Risk of Surprises

Under the current VAP process, when the volunteer is ready to seek concurrence that the property meets VAP standards, they request their consultant submit a No Further Action Letter (NFA).  Under current process, the consultant must submit the NFA along with all of the supporting documentation.  This includes the Phase I property assessment, Phase II property assessment as well as any risk assessment work.  The supporting documentation can be hundreds, if not thousands of pages.

Under the proposed change, a volunteer would submit just the NFA letter (the executive summary of the Phase I and Phase II, operation & maintenance documentation and draft environmental covenant). After the covenant-not-sue (CNS) is issued, the Volunteer would be required to file the supporting documentation.  

While the supporting documentation must be submitted, the Agency would not review it immediately.  Rather, the documentation would be maintained in Ohio EPA's public files.  

Through this process change, the Agency is trying to speed up their review process by reducing the amount of paperwork that must be reviewed prior to issuance of a CNS.   Less review means faster turnaround.  This is good news for developers whose projects or transactions were slowed waiting for the CNS to be issued.  

However, as with everything, there are trade offs.  Ohio EPA is also going to revise its audit protocols.  A VAP audit is similar to a tax audit.  Under a VAP audit, the project is thoroughly reviewed by Ohio EPA, including the NFA and all supporting documentation.  The probability of an audit is highest after the first year the CNS is issued, but can occur anytime.  Under the process change, Ohio EPA proposes to increases the frequency of its audits.

If through the audit, Ohio EPA identifies issues with the investigation or cleanup, a notice is sent to the volunteer.  If those issues are not addressed, the volunteer could lose their CNS.

One outcome of this process change may be more surprises for property owners after they thought a project was finished.  For example, two years after the CNS is issued, Ohio EPA could audit the project, find deficiencies and require more investigation and/or cleanup.  This may come as a major surprise to a new owner who bought the property after the CNS was issued.

Revised Generic Cleanup Standards

The VAP rule change also proposes a major overhaul to the methodology for calculating VAP generic cleanup standards.  Ohio EPA is moving toward use of U.S. EPA Regional Screening Levels.  

In some cases the standards get more stringent and in other cases more lax.  At the Brownfield Conference, Ohio EPA stated the only dramatic change is to the cleanup value for trichloroethylene (TCE).  At the conference, the Ohio EPA stated it notified all sites it was aware were currently performing a VAP cleanup where TCE was a constituent of concern of the proposed change.

In order to have the current generic cleanup standards apply to your VAP cleanup, then the volunteer must submit a NFA to the Agency before the rules are finalized.

Urban Setting Designations- Expanded Use 

Urban Setting Designations (USDs) are an important tool under the VAP.  Cleanup of contaminated groundwater can often be the most costly portion of the cleanup.  Ohio EPA recognized that there may be little benefit to requiring cleanup of contaminated groundwater in urban areas where the population was served by public drinking water systems.  

Requiring cleanup of groundwater in those situations may result in avoidance of brownfield properties.  With a USD designation, a volunteer can avoid a costly cleanup of contaminated groundwater.

Under the proposed VAP rule changes, Ohio EPA is proposing to expand the eligibility of areas for USDs.  For example, a village that meets certain geographic requirements can request a USD.

Off-Property Cleanup Requirements

An area of uncertainty under the VAP program had been what cleanup requirements apply to contamination that may have already left the volunteer's property.  Under the proposed rule, Ohio EPA states it is clarifying the obligations to address off-property releases.

Ohio EPA states a volunteer is required, even under current VAP rules, to cleanup off-property releases of contamination that exceed VAP standards.  Under the proposed rule change, this requirement is being made explicit.  This may be viewed by some as a major program change.

The proposal does include new provisions to provide some flexibility in addressing off-property releases.  A volunteer can attempt to make a demonstration to Ohio EPA that it "used best efforts" to address the release, but something made it impossible or impractical.  Examples:

If a neighboring property owner uses a drinking water well and refuses access to his property to address the contamination, this may be grounds for an exemption from Ohio EPA.



A release from the property contaminates sediment in adjacent river that exceeds applicable standards.  The volunteer would need to address the sediment unless it can demonstrate it is contaminated from multiple sources.



However, it is important to note, if an exemption to address a off-property pathway is granted, the CNS (legal release) will not extend to that pathway (i.e. the volunteer could be required to clean it up in the future if circumstances change).

When a Property Must Meet VAP Standards

The proposed rule changes intend to clarify that a volunteer only has to construct the remedy prior to issuance of the CNS, so long as he/she demonstrates the property will meet VAP standards within five years (or some other time agreed to by Ohio EPA).  This allows flexibility where remedy involves ongoing treatment. 

Post CNS Changes to Remedy

The proposal also establishes a process for modification of a remedy post-CNS.  

  • For example, if institutional controls (ex: fence or protective barrier) is used to demonstrate the property meets standards, the Volunteer can remove those controls without the property losing its CNS status during implementation of the new remedy.

Sufficient Evidence- VAP Eligibility Post-Enforcement

A volunteer is eligible for the VAP until it receives notice of enforcement from Ohio EPA.  If a volunteer had initiated a VAP cleanup prior to receiving notice of enforcement, the volunteer can continue if it makes a so-called "sufficient evidence demonstration."  

The proposed rule changes clarify what must be demonstrated and how quickly the cleanup must be completed in order to avoid enforcement.  Under the rules, the volunteer must demonstrate initially that they

  • Completed a Phase I assessment;
  • Retained a VAP certified professional;
  • Developed a schedule of activities for completing the VAP

If the volunteer is deemed to have satisfied sufficient evidence, it must adhere to the schedule and complete the VAP cleanup within three years under the proposed changes.


Ohio EPA indicated the final rules would be filed with JCARR on April 15th.  JCARR jurisdiction would end on June 16th, with the final effective date being no sooner than July 1st.  

However, this assumes that significant objections are not raised during the JCARR process.  If such objections are made, the Agency could be forced to pull the rules resulting in delays. 

As a Buyer Can I or Should I Rely on an Old Phase I?

In real estate transactions it is not uncommon for the seller to provide the buyer a copy of prior a Phase I environmental assessment.  The seller either ordered a Phase I in anticipation of the transaction or one may exist from a prior transaction involving the same property.  Should the buyer be satisfied with this prior Phase I?

Purpose of the Phase I from the Seller's Perspective

In terms of records and site review, a Phase I environmental assessment essentially involves the following steps:

  • A review of environmental databases- records of known or potentially contaminated sites in the vicinity of the property, landfills, and other disposal sites, and underground storage tank records (for both leaking and registered USTs) 
  • A review of local regulatory files-  these could include the state EPA, local fire department or health department.
  • Aerial photos and sanborn maps- to review the history of the use of the property
  • Interviews- with a site contact or  someone with knowledge of the property
  • Site walkover by the consultant-  the consultant is looking for signs of potential releases of contamination (ex: distressed vegetation or oil stains)
  • No sampling- A phase I will not involve any actual soil or groundwater sampling even if issues are identified

If the seller has a Phase I, they may have ordered a Phase I to determine whether there are any environmental concerns that can be quickly ascertained.  However, keep in mind the seller and buyer's goals are not exactly in line with regard to environmental due diligence.

First, seller is not concerned with establishing any liability defenses because they aren't entitled to them if they perform a Phase I after already owning the property.  Second, if the Phase I identifies a potential issue, many sellers will stop their inquiry- they aren't interested in taking on the costs of addressing any issues that may be identified.

Buyer's Perspective- Establish the Bona Fide Purchaser Defense

CERCLA liability applies to "owners" and "operators."  Therefore, as the buyer, once you take ownership of the property you can be liable for any historical contamination that may exist, even if you had nothing to do with that contamination.  

In 2002, Congress passed the Small Business Liability Relief and Brownfields Revitalization Act (known as the "Brownfields Act").  The Act amended CERCLA to provide greater incentives for buyers to purchases and re-utilize brownfield properties.  The amendments established the Bona Fide Purchaser Defense (BFPD).  

Under the BFPD, a Buyer can establish a defense to liability under CERCLA if it performs due diligence prior to purchase in accordance with EPA standards.  A property does not need to be abandoned or vacant to be eligible for the BFPD, facilities still operating can qualify.

This post is not meant to be an exhaustive discussion of the requirements for establishing the BFPD. However, three key points to keep in mind from the buyers perspective with regard to prior Phase I reports:

  1. The Phase I must be performed within 180 days of purchase.  If a Phase I was performed within the last year, then a Phase I update can be performed. A Phase I more than one year old cannot be used to establish the BFPD;
  2. The buyer must be able to "rely" on the Phase I.  This means if the buyer wants to utilize the Seller's Phase I it must obtain either be identified in the Phase I update as a party that can rely on the Phase I or it must obtain a reliance letter from the consultant who performed the Phase I; and
  3. The buyer must make sure that the Phase I meets all the required elements set forth under EPA recognized standard for Phase Is- ASTM 1527-13 and EPA's "All Appropriate Inquiries" Rule (AAI).  (See discussion in prior post on the new ASTM standard).

Item 3 is of particular importance to the buyer.  I have reviewed plenty of Phase I reports that did not contain the required elements of the ASTM or AAI rule.  An inadequate Phase I will not allow the buyer to establish the BFPD.  

Therefore, it is of critical importance the buyer review any prior Phase I reports to ensure they are up-to-date, can be relied on and meet the required elements.  

Buyer May Want a Closer Look

If the seller's Phase I is "clean"- does not identified any "Recognized Environmental Conditions" (i.e. no indications of a release of contamination), then seller will be reluctant to allow any greater scrutiny of the property.  However, buyer should make sure the Phase I was adequate and no red flags are contained in the report.  

If the Phase I report does identify RECs, did the seller perform any additional investigation?  While AAI technically does not require sampling, it may be very difficult, if not impossible, to establish the BFPD without sampling to determine if a release did occur.  

If contamination is identified, then the buyer still can establish the BFPD if it takes "reasonable steps" to stop releases and prevent exposure to that contamination.  Under the BFPD, the buyer is not expected to perform the same level of cleanup as a liable party under CERCLA.

Beyond liability defenses, as the potential owner of the property, it is generally prudent to avoid taking on major headaches.  Therefore, buyers want to make sure sufficient due diligence was performed.  It is definitely in the buyer's interest to ensure they have a thorough understanding of the condition of the property.

For example, the BFPD is only a liability defense to CERCLA.  If other environmental regulatory obligations exist, such as underground storage tanks, the BFPD will not provide liability protection to those requirements.

Sellers may resist any questioning of the adequacy of a prior Phase I.  If the prior Phase I identified issues, seller may also be reluctant to allow further investigation.  However, as the buyer, you face liability exposure under CERCLA and potentially other environmental laws once you take ownership.

In conclusion, if a prior Phase I report exists, it it very important the buyer thoroughly review the report and take the necessary steps to protect themselves.  

Difference between "Classic" VAP and VAP MOA

In Ohio, the primary brownfield cleanup program is known as the Voluntary Action Program (VAP).  Volunteers can cleanup their site to commercial/industrial or residential standards.  Upon completing the cleanup the volunteer can receive a legal release from the State of Ohio (called a "Covenant-Not-to-Sue" or CNS).

The CNS under the VAP does not include a release of liability from U.S. EPA.  In order to attempt to provide an option for volunteers who desired some protection from U.S. EPA enforcement, Ohio created the VAP Memorandum of Agreement (MOA) track.

I have had a few clients in the last couple months ask about the differences between the "Classic VAP" and the VAP MOA.  The main reason they ask is because they are interested in the heightened liability protection that is available under the VAP MOA process.  However, is the extra cost and longer time frames worth it?

"Classic" VAP

Under "Classic" VAP, the volunteer hires an environmental consultant who is recognized by Ohio EPA as a "certified professional" ("CP") under the VAP.  The CP performs the investigatory and cleanup work at the site to VAP regulatory standards.  Once the cleanup is complete, the CP prepares a "No Further Action Letter" (NFA) certifying that the property meets VAP standards.  

The volunteer then decides if they want the CP to submit the NFA to Ohio EPA for review.  If the NFA is submitted to Ohio EPA and the Agency concurs the property meets VAP regulatory standards, then the Agency issues a "Covenant Not to Sue" (CNS).  This is a formal legal release of liability from Ohio EPA.

As outlined above, the VAP process is a private cleanup.  There is no public involvement and no records are public until they are submitted to Ohio EPA for review.  


MOA means Memorandum of Agreement.  The agreement is between U.S. EPA and Ohio EPA. (A copy is available here)  Under the agreement if a volunteer agrees to follow additional steps than necessary under the Classic VAP, it can receive "comfort" from the U.S. EPA that it won't pursue additional cleanup.  Those steps include:

  1. Notice of entry into the VAP MOA program;
  2. Publish notice in the local newspaper that the volunteer has entered the program;
  3. Create a document depository in the local library available to the public;
  4. Volunteer must publish the proposed work plan and allow for public comments (30 day comment period);
  5. Host a public meeting to discuss the work plan;
  6. All documents associated with the VAP cleanup must be placed into the library (includes the Phase I, Phase II, Risk Assessment Report, Remediation Work Plan, and the NFA letter); and
  7. Public can request additional public hearing during the cleanup process.

If a volunteer meets the various requirements outlined above, then U.S. EPA provides the following "comfort"

For sites or facilities that have completed the voluntary action in compliance with the MOA Track procedures...U.S. EPA Region 5 does not plan or anticipate taking action under CERCLA or RCRA while the facility remains in compliance with the MOA Track VAP requirements, except as provided in Section IV.B below.

The highlighted language makes clear that completion of the VAP MOA does not provide the volunteer a legal release from U.S. EPA.  Rather, the volunteer gets the assurance that EPA "does not plan or anticipate taking action."  Nothing prohibits such action.

In fact, the highlighted language at the end of the paragraph provides several instances when EPA can take action, including:

  • Newly discovered information after the CNS is issued indicates additional cleanup is needed;
  • Failure to comply with applicable VAP cleanup plans and Ohio EPA fails to take action to correct the situation;
  • The site presents an imminent and substantial endangerment to public health or welfare or the environment; and
  • Ohio EPA requests EPA help because the volunteer isn't make sufficient progress to complete the VAP MOA track

How Many Sites Have Gone Through the Classic VAP versus VAP MOA?

Currently, according to Ohio EPA tracking, 556 sites have submitted an NFA for review.  Not all of those sites have received a CNS.  29 NFAs were withdrawn before receiving a CNS.  

Only a total of 59 sites are identified as having entered the VAP MOA process.  Of those 59 sites, 22 sites actually submitted an NFA thus completing the VAP MOA process.  (Link to Ohio EPA list of VAP MOA sites)

What these numbers tell you is that very few volunteers have decided to spend the extra time and money to complete the VAP MOA process.  Some who even started, later left the MOA process.

Biggest Issue is Time

The biggest issue for many volunteers contemplating the VAP MOA process is the extra time involved.  Each plan is available for public comment.  A public hearing is required as well.  The extra time to complete the added upfront Ohio EPA review and public involvement can add many months on to a project. 

A review of the MOA track list shows that most projects took more than one year to complete once they formally entered the program.  Some took five or six years to complete.  It is unlikely Ohio EPA would allow a project to sit in process that long any more, but the track record clearly demonstrates the added steps will add significant time to the cleanup.

Risk Tolerance

As with many things environmental, whether to go Classic VAP or VAP MOA Track really depends upon your client's risk tolerance.  For some clients, the added comfort from U.S. EPA (even though its not a legal release) is enough.

[Photo courtesy Engineering at Cambridge]

EPA Takes Action to Recognize ASTM 1527-13 as the "Appropriate" Phase I Standard

On December 30th, the  Federal Environmental Protection Agency (EPA) finally took action trying to address the confusion it caused when it previously issued a final rule recognizing both ASTM 1527-05 and 1527-13 as appropriate standards for conducting Phase I assessment.  A proper Phase I assessment is a requirement  for establishing the Bona Fide Purchaser Defense under CERCLA.  (See prior post).  

On the second to last day of the year, EPA published a final rule in the Federal Register (78 FR 79319) recognizing the new ASTM E1527-13 phase I standard practice as an approved method for complying with the All Appropriate Inquires (AAI) rule.  EPA also provided new language in the preamble as well as a separate guidance document addressing comments EPA received.

Background on Prior EPA Actions

On August 15, 2013, EPA issued a direct final rule which recognized both E1527-05 and E1527-13 as appropriate standards for conducting environmental due diligence in accordance with the AAI. EPA received negative comments regarding its decision to continue to recognize both standards. Many felt it caused unnecessary confusion.  In response to comments, on October 29, 2013, EPA withdrew the final rule.  

As a result of EPA's action, there was a two month period where the most up-to-date standard, E1527-13, was not recognized by EPA as satisfying AAI.  This caused some attorneys and buyer/sellers of real estate  to request consultants to meet both standards.

With the December 30th action, EPA officially recognizes E1527-13 and also indicates it will soon issue a proposed rule removing AAI's reference to E1527-05.  

Vapor Intrusion Remains the Big Issue

 The biggest differences between E1527-13 and E1527-05 include:

  • Revised definitions of RECs, HRECs CRECs
  • Greater emphasis on reviews of regulatory files
  • Vapor intrusion

(See prior post discussing differences in greater detail)

It is the last bullet point that has caused the greatest confusion and controversy.  Some provided comments to EPA expressing their view that under the prior E1527-05 standard consultants did not have to evaluate vapor intrusion.   Those commentators view E1527-13 as establishing that requirement for the first time.

However, EPA makes clear in the preamble to the December 30th action that the language in E1527-13 pertaining to vapor intrusion is only an enhancement of the requirements under the old standard.  EPA specifically states that E1527-05 "already calls for identification of potential vapor releases or vapor migration."

EPA comments create issues for environmental consultants who did not include evaluation of vapor intrusion as part of Phase I assessments under E1527-05.  Failure to do so could be grounds to assert the consultant committed malpractice.  

In situations where no such evaluation was performed under an old Phase I, and the building later proved to have vapor intrusion issues, consultants face heightened liability exposure.

EPA action should provide greater clarity to the due diligence community.  




Which Phase I Standard Should Consultant's Use Right Now?

Over the weekend, there was a good blog post on Schnapf LLC Blog discussing which Phase I standard lawyers and consultants should use for at least the rest of 2013.  Due to an unanticipated reversal by U.S. EPA, there is a gap right now between the current ASTM standard and EPA's recognized standard for Phase I's for compliance with the "All Appropriate Inquiries" Standard (AAI).

On November 6th, ASTM officially recognized E1527-13 as the new standard for conducting Phase I environmental assessments.  As a practical matter, this means ASTM E1527-13 represents current best practice in the industry.  

However, as discussed in a prior post, U.S. EPA reversed course and withdrew a direct final rule that would have recognized both E1527-13 and E1527-05 as meeting AAI.  As a result, the only standard EPA currently recognizes as satisfying AAI is E1527-05.

The post discussed the quandary caused by the current gap between sanctioned standard and the most up-to-date standard: 

So what is a consultant to do for transactions requiring a phase 1 prior to EPA formally recognizing E1527-13? On the one hand, by publishing E1527-13, ASTM is essentially saying that the new version now represents good commercial practice. Thus, a consultant failing to use the most current version of E1527 could expose a consultant to professional negligence claim if, for example, the consultants fails to identify a REC because it did not do a file review or fails to evaluate the soil gas pathway. This would seem to tip the decision towards using E1527-13.

However, E1527-13 is not yet recognized as an acceptable method of satisfying AAI. Thus, if the purpose of the phase 1 is to comply with AAI, a consultant stating that its phase 1 complies with AAI could be subject to breach of contract or claims of misrepresentation since only E1527-05 is currently recognized in the AAI rule.

The biggest differences between the two standards is the more defined requirements pertaining to file reviews and analysis of the vapor intrusion pathway.  It is pretty clear the E1527-13 requires additional work.  Arguably, a Phase I that meets E1527-13 should also be consistent with E1527-05.

For an attorney, you will want the consultant preparing the Phase I report to state it meets the current EPA recognized standard- E1527-05.  Without such a reference it is possible your client hasn't satisfied AAI.  

A consultant will want to comply with the standard recognized in the industry as the best practice- E1527-13. Otherwise, one may argue the consultant isn't utilizing current best practice.

It may be best to discuss the issue with your consultant and see if they are comfortable stating in the report that the Phase I meets both standards.  That may be the best alternative until EPA officially sanctions E1527-13. 


JobsOhio Discusses New Brownfield Incentive Program

On October 22nd, Kristi Tanner, a managing director of JobsOhio presented regarding Ohio's new brownfield redevelopment incentive program which will replace Clean Ohio.  Many in the brownfield redevelopment community have been anxiously awaiting the roll-out of the new program.

According to Ms. Tanner, JobsOhio will start discussing potential projects now, but awards under the new program are not likely to be made until March 2014.  

Under the new program, the amount of funding available will be comparable to the Clean Ohio- approximately $43 million annually.  However, the State is making a major shift away from a grant based program under Clean Ohio to a low interest loan program through JobsOhio.

Review of Ohio's Prior Brownfield Incentive Program- Clean Ohio

Since 2002, Clean Ohio provided over $400 million in grants for brownfield redevelopment projects.  The Clean Ohio Revitalization Fund (CORF) was Ohio's centerpiece brownfield funding program with some of the largest incentives available Under Clean Ohio the basic program consisted of the following:

Clean Ohio
Revitalization Fund Assistance Fund
Competitive Pool- awards 1 or 2 times per year Non-Competitive Selection Process
Complete Application- Phase I, Phase II and Proposed Remedy Only available in eligible areas
Up to $300k for Phase II Assessments Up to $300k for Phase II Assessments
Up to $3 million in grants for cleanup  Up to $750k for Cleanup
Eligible costs = demolition, purchase, infrastructure and cleanup costs Eligible costs = demolition, purchase, infrastrucutre and cleanup costs 
Required to complete VAP Required to complete the VAP

Many liked the openness the CORF selection process which used a competitive pool where all projects were pitted against one another for funding.  Award were made either once or twice per year.  

Projects were selected was through the Clean Ohio Council with heavy involvement from the local communities.  One major drawback of the program was that an applicant could spend approximately $30,000 just to develop the application (assuming a Phase I and Phase II was already complete) with no guarantee of being funded.

Still, as one of the best brownfield incentive programs in the country, CORF/COAF allowed many projects to move forward that may not have occurred otherwise.  As discussed in a Dispatch Article, Clean Ohio provided funding for over 70 projects in just Northeast and Central Ohio alone. 

JobsOhio Revitalization Program

Under the new JobsOhio program, the State will be making major changes to the structure and process for selection.  Here are the basic elements of the the new program:

Incentives Available

  • Up to $200k for Phase II Assessments-  JobsOhio had commented that it felt $300k for Phase II's under CORF/COAF was excessive.  However, in order to qualify for the cleanup grant or loan, the developer is required to meet the applicable standards established by Ohio EPA's Voluntary Action Program (VAP).  Therefore, a Phase II must generate sufficient data to be deemed VAP compliant.  With reduced funding, some projects may not be able to satisfy Ohio EPA's rigorous Phase II VAP standards.
  • Up to $500k for Asbestos & Lead Paint-  This is a new component of the Ohio brownfield program which appears to target existing structures that may be idle due to asbestos and/or lead paint issues.  Under the proposal, the funds can be used for asbestos abatement, demolition, site preparation and disposal of universal waste.
  • $5 million cleanup loan with possibility of $1 million cleanup grant-  As the biggest change with the new program, JobsOhio has shifted from a grant cleanup funded model to a loan model.  Developers and companies looking to expand may have an opportunity to secure a $1 million cleanup grant if need is demonstrated and the grant is coupled with a loan.  Details on the requirements for securing a $1 million dollar cleanup grant were not provided.

 Selection Process

  • Open funding versus competitive pool-  JobsOhio has done away with the competitive pool process utilized by CORF.  Under the old process all grant applications were scored and the top projects were funded.  The positive aspect of this process was its transparency. The negative was that an applicant could spend a significant amount of money ($30k just for the application) without knowing whether they would receive an award.  The new process will be more flexible and less costly than Clean Ohio.  Projects can receive awards throughout the year and will not compete with one another.  Also, JobsOhio will likely notify an applicant it will receive an award before it has to put together the more detailed aspects of the application. 
  • Criteria for selection-  The JobsOhio selection process will utilize three basic criteria
    • Jobs- Retained or created with priority for projects with higher-than-average wage rate (generally must retain or create 20 jobs)
    • Investment- private versus public, capital investment in addition to site prep and priority will be given to JobsOhio targeted industry project
    • Certainty of completion-  must have an end user committed to the project, have redevelopment plans and sufficient funding to complete the project.


More details should be forthcoming regarding the program this fall.  However, JobsOhio has made clear that they will discuss prospective projects now.  However, awards will likely not be made until March 2014.  

The most likely users of the program will be commercial/industrial clients looking to expand onto brownfield properties.  With $200,000 available in grants for Phase II assessments and the possibility of $1 million in grant cleanup funds, the program offers very strong incentives. 

Due to the focus on job creation, cities looking to cleanup properties in hopes of attracting future development will have to look elsewhere for incentives.  Also, residential development projects will find it harder to compete without a jobs component.  

While there are good aspects of the new program, its overall success will depend upon whether loans will will be sufficient to attract redevelopment of contaminated properties.  

U.S. EPA Alters Plan on New ASTM Standard for Due Diligence

As discussed in a prior post, U.S. EPA had issued a direct final rule approving the use of the new ASTM Standard E 1527-13 "Standard Practice for Environmental Site Assessments:  Phase I Environmental Site Assessment Process."  The final rule was set to take effect on November 13, 2013.

If the rule had gone into effect, it would have allowed use of either ASTM Standard E 1527-13 or the old ASTM Standard E 1527-05 to comply with due diligence requirements associated with the "All Appropriate Inquiries Rule," (AAI), a necessary step to establishing certain affirmative defenses to CERCLA liability.  However, just prior to the September 16, 2013 comment deadline, adverse comments were filed by some influential practitioners.  

Concerns were expressed with regard to the practical effect of EPA's proposal to allow either ASTM standard to be followed.  E 1527-13  is believed to be more costly than the old standard because it enhances the requirement for environmental professionals to perform agency file reviews as part of the Phase I process.  It also contains more definitive language requiring evaluation of potential vapor intrusion migration pathways. In addition, each ASTM standard uses different definitions. Adverse comments expressed concern that the use of the different definitions will lead to confusion or inconsistent practices in the due diligence community by allowing two different standards to satisfy AAI.

It is still unclear what U.S. EPA will do in response.   The Agency issued a proposed rule at the same time as the final rule.  The proposed rule contains the same option to utilize either ASTM standard.  It is possible EPA could sunset E1527-05 when it finalizes the proposed rule.  Or it could address the adverse comments in the final preamble to the rule.

Right now there is no clear direction from U.S. EPA with regards to this critical aspect of due diligence. 

UPDATE:  On October 29th, U.S. EPA did officially withdraw the direct final rule.  Currently, E1527-05 remains the only officially sanctioned guidance to meet the "All Appropriate Inquiry Rule."

With the last $15 million of Clean Ohio Spent...What is next?

This past spring, the Kasich Administration put another $15 million in grant funding into the Clean Ohio program. (See prior post).  While a public announcement has yet to be made regarding grant awards for the remaining $15 million, it is my understanding that the money is allocated. Announcements may be made next week at the Ohio Economic Development Association 2013 Summit.

After this last $15 million has been spent, what is the future in Ohio for brownfield grant funding?  The Administration has discussed a possible rollout of a new program by year's end.  On multiple occasions, the Kasich Administration has indicated the new JobsOhio brownfield grant program will closely approximate the size of the old Clean Ohio program- roughly $43 million annually.

The changes made to the Clean Ohio program this past spring provide some indication of what a new program could look like.  

  • Streamlined application process where selection decisions are made before investing significant money in preparing detailed applications;
  • Selection criteria that will emphasis end use, job growth, job retention and enhanced tax revenue post development;
  • More involvement of local economic development organizations in the selection process; and
  • Continued use of Ohio EPA's Voluntary Action Program as the benchmark for determining whether a property has been adequately cleaned up

With the incredible success of the Clean Ohio program there is a lot to emulate when JobsOhio launches its new program.

The uncertain rollout date for the new program has hindered getting new brownfield projects in the que.  Projects can take months before all the pieces (end use, infrastructure, financing, incentives, etc.) can be fit together.  Hopefully, an announcement can be made before the end of the year so we don't lose any more momentum in this critically important area of economic development.

In the meantime are there other brownfield incentives available? 

Yes.  Many of the major and medium sized metropolitan areas have their own brownfield redevelopment programs.  They don't provide the same level of grant funding, but they can be attractive.  

Both the City of Cleveland and Cuyahoga County maintain their own brownfield incentive programs. They are similar in their approach.  Here are the key aspects of the Cuyahoga County Commercial Property Reutilization Program:

  • Phase I Funding: Up to $6,500
  • Phase II Funding: Up to $35,000


Cleanup Loans

  • Up to $1 million- 4% over 10 years
  • 40% forgiveness
    • 15% for VAP NFA
    • 15% job creation (1% per job over $44k per year)
    • 10% for use of vendors in the County
  • Wider eligibility for types of clean up costs covered by the program (i.e. BUSTR, RCRA, etc.)

Brownfield Redevelopment Tax Incentives

Ohio also has on it books tax incentives for brownfield redevelopment.  The automatic abatement described below has been widely used, but is tricky to navigate.  There was considerable debate following a determination that the automatic tax incentive didn't cover new buildings.  

Automatic Abatement (R.C. 5709.87)

  • 10 year Ohio Property Tax Abatement for Brownfield redevelopment
  • Abatement is on the increase in value of land and buildings post clean up
  • Abatement does not include new structures or fixtures after clean up (Caution: process for fixing abatement is complicated)

A more broad based tax incentive is available that does allow coverage for new structures as well as machinery.  However, do to the fact these incentives must be negotiated with local officials, the local tax abatement has not been utilized frequently.

Local Tax Abatement (R.C. 5709.88)

  • Tax abatement for real or tangible property(machinery and equipment)
  • Up to 100% abatement for increase in value in land or buildings(including new structures)

Are All Phase I's the Same?

The title of this blog post may make many in the environmental consulting and legal business laugh.  "Of course not..." most would certainly reply.  With Phase I's governed by two ASTM guidance documents and the EPA "All Appropriate Inquiries" Rule (AAI), how can there be such variations?

The answer is that a Phase I environmental assessment requires professional judgment.  Not all consultants will look at the same site conditions the same way.  As an example, take a look at the website in which environmental consultants debate various technical issues associated with due diligence. Read the debate over how to handle "dirty floors" or "old dry cleaners" when performing a Phase I. 

In both instances, the consultants couldn't come to total agreement as to whether these particular situations should be identified in the report as "Recognized Environmental Conditions" (RECs).  Of course, the REC determination is critical because it impacts the process for securing liability protection under U.S. EPA's Innocent Landowner or Bona Fide Purchaser Defenses.

Changed Definition of a REC

As discussed in a prior post, U.S. EPA published a rule that allows entities to utilize either ASTM E1527-05 or E1527-13 guidance in performing Phase I consistent with the AAI Rule. My prior post reviewed some of the key difference between the two standards.

In considering how professional judgment impacts Phase I reports, examine the proposed changes to the definition of REC.  The changes were intended to "clarify" the definition and promote greater consistency among environmental professionals in writing Phase I reports.

The old definition (E1527-05) defined REC as:

"The presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into ground, groundwater, or surface water of the property.  The term includes hazardous substance or petroleum products even under conditions in compliance with laws."

Comments received during preparation of the revised ASTM standard- E1527-13 were that the definition of REC was confusing or ambiguous.  The changes made to the definition were intended to add clarity.  

The revised definition of REC in E1527-13 is as follows:

"The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property 1) due to any release to the environment; 2) under conditions indicative of a release to the environment; or 3) under conditions that pose a material threat of a future release to the environment."

Let's take a closer look at some of the differences between the two definitions:

  • "Into structures on the property" versus "environment"-  I'm sure consultants could debate how these terms should be interpreted.  It appears that by removing the "into the structures" language relative to release means that there must be some indication contamination made it into either the soil, groundwater, surface water or indoor air.
    • For example:  simply having staining on a concrete floor may not be enough to conclude there was a release to the "environment." There should be evidence of drains or cracks that could serve as a conduit for contamination.  Of course, as evidenced by my link above, not everyone may agree. 
  • "Ground, groundwater or surface water" versus "environment"-  Some had debated under the old REC definition whether a Phase I included evaluation of releases to indoor air through vapor intrusion.  Most thought the old definition includes indoor air, the new definition and other changes in E1527-13 make clear the indoor air through vapor intrusion is to be considered.

Keep in mind, lawyers don't write the Phase I report.  They can provide comments or advise their client relative to the conclusions.  It is the consultant who exercises the professional judgment which includes the findings detailed in the Phase I report.

Be Comfortable with the Consultant Selected 

Regardless of changes in E1527-13 which were intended to promote greater consistency, there will still be big differences in how consultants write their Phase I reports.  You simply can't remove professional judgment when such vague terms are utilized.  

Why should you care?  The exercise of professional judgment could result in major difference in whether potential liabilities are investigated.  Or, such a difference could result in more expensive due diligence when a consultant is very conservative in how they view a site.  

Prior to engaging a consultant to perform a Phase I, it is advisable to go beyond just written proposals.  It would be prudent to interview the consultant to learn about their philosophy in performing Phase I's.  As the customer, you should be comfortable with that philosophy because it impacts your exposure and bottom line.

When performing such an interview, make sure you talk to the consultant who will actually be performing the Phase I, not just anyone in the company.  There can be wide disparities even among consultants in the same firm.

Quick Primer on Voluntary Action Program (VAP) Cleanups

Ohio EPA has established its own voluntary cleanup program for addressing hazardous substances and obtaining a legal release from liability- the Voluntary Action Program (VAP).  The VAP program has been on the books since 1995. 

When the VAP was created its purpose was to allow the private sector to address historical contamination at industrial or commercial properties.  The key word in the program's title "Voluntary" means that Ohio EPA does not order companies to complete the VAP.  Rather, the program offers an opportunity to either:

  • Address historical contamination at brownfield sites that may otherwise limit or prohibit redevelopment; or
  • Allow an operating company to address its potential liability for historical contamination at a property it is still utilizing.

In the nearly twenty years of the VAP, approximately 360 properties have completed the cleanup process and obtained an legal release. (You can visit a map of VAP properties here)   In reality, 360 VAP cleanups is not that many considering there are thousands of properties in Ohio with historical contamination.  


A complex set of rules and guidance documents govern VAP cleanups.  Those documents are accessible through Ohio EPA's website.  Here is a very brief overview of the process:

  1. Hire a Certified Professional (CP)-  In order to perform a VAP cleanup and receive a legal release from the State you must retain a CP.  A CP is an environmental consultant that has been certified by Ohio EPA has being technically capable of completing a VAP cleanup.
  2. "No Further Action" (NFA) Letter-  Unlike other regulatory cleanup programs, VAP is intended to allow a CP to complete a cleanup without Ohio EPA review of sampling and cleanup plans prior to initiating work.  The CP can develop a NFA without oversight by the Agency.  However, if a company wants a legal release from the State, the NFA must be submitted to Ohio EPA. The components of an NFA would likely include: the Phase I/Phase II assessment, a Risk Management Plan, an Operation & Maintenance (O&M) Plan, an O&M agreement and an Environmental Covenant.
  3. "Covenant Not to Sue" (CNS)-  If the company decides it wants a legal release from the State upon completing a VAP cleanup, it must have its CP submit the NFA for review.  If the Ohio EPA agrees that the NFA meets VAP cleanup regulations and the property meets VAP standards, it will issue the CNS. 

Issues/Considerations with VAP Cleanups

While the VAP has been a success, there are complex issues that must be evaluated prior to initiating a cleanup under the program.  Some of those considerations include:

  • Benefits-  Companies looking to address potential liability exposure, the VAP is worth considering. Performing a VAP to address contamination will make property more marketable as most major banks are familiar with the program in Ohio.  Furthermore, the VAP is a key tool for brownfield redevelopment in order to attract new tenants or users of the property who may otherwise be concerned with environmental liability or exposures associated with old industrial or commercial properties.
  • Limits on CNS-  The CNS does not release you from liability from third party property damage or injury lawsuits, including toxic tort claims related to exposure to releases of contamination.  Furthermore, the State takes the view that the CNS is also limited to the property itself, not contamination that has left the property. Finally, the CNS does not include a release from U.S. EPA (although you can obtain certain comfort that U.S. EPA won't pursue separate action once the VAP cleanup is complete).
  • Eligibility Issues-  Certain regulatory requirements must be addressed before a property can be deemed eligible to participate in the VAP.  Properties subject to State environmental enforcement may not be eligible.  Portions of the property required to be cleaned up under hazardous waste regulations (RCRA) are ineligible until cleanup is completed.  The presence of underground storage tank (USTs) can complicate VAP eligibility. 
  • Complex Cleanup Issues-  Each site cleanup is different.  However, it doesn't take much for a site to present complex cleanup challenges.  Existing buildings and structures may present vapor intrusion issues.  Off-property migration of contaminated groundwater may also need to be addressed.  Impacts to surface water or other ecological features may need to be evaluated.
  • Costs-  Again, each site cleanup is different.  However, the cost of cleanup can be expensive.  State and local brownfield grant programs can help mitigate those costs.  Even the costs of preparing and submitting the documents to Ohio EPA can be costly.  Due to such cost considerations, some businesses have decided to utilize the VAP standards to address historical contamination without submitting the NFA to the Agency for review. 

Options to Address Environmental Liability in Ohio

The VAP has been a very useful tool for addressing historical contamination.  However, the costs and complexities involved in completing such cleanups make it less attractive, particular for smaller sites with very limited contamination.

As discussed in prior posts, Ohio currently does not have a less formal means of addressing historical contamination, such as Michigan's Baseline Environmental Assessment Program.   This leaves may buyers or tenants with choosing between costly VAP cleanups or performing due diligence to try and establish the federal "Bona Fide Purchaser Defense."  

U.S. EPA Endorses New Phase I Standard

ASTM 1527-05 was the first ASTM standard recognized by U.S. EPA as meeting the requirements of the "All Important Inquiries Rule." (AAI)   AAI sets forth the standards and practices necessary for fulfilling the requirements to obtain liability protection (i.e. bona fide purchaser defense) under CERCLA section 101(35)(B).  Most Phase I proposals reference 1527-05.  

ASTM standards have a five year shelf life and a three year grace period.  After the eight year period, the standard can sunset or be renewed.  In preparation for the eight year period coming to an end on 1527-05, an updated version of the standard has been developed- ASTM 1527-13.  On August 15, 2013, U.S. EPA officially recognized the updated version of the ASTM standard for conducting Phase I environmental assessments as satisfying AAI.   

What are the Major Differences Under the New ASTM Standard?

It is interesting to note that the new ASTM is not being billed as really changing anything, rather it just clarifies requirements that were already part of the old standard  (ASTM 1527-05).  However, in my experience at least two "clarifications" will either change or modify practice among many environmental consultants.  Those two areas include:

  1. Vapor intrusion; and
  2. Agency file reviews

Vapor Intrusion

Some have debated whether consideration of vapor intrusion issues was part of ASTM 1527-05. Many attorneys view the definition of "release" to include vapor of contaminants.  However, some consultants took the view that ASTM 1527-05 classified "indoor air quality" issues as non-scope items. 

In my practice, I have reviewed many Phase I reports and discussed findings with a wide variety of consultants.  Many of the consultants took different views with regard to assessing vapor intrusion.

The new ASTM 1527-13 standard makes very clear that vapor intrusion issues are to be considered as part of Phase I environmental assessments.  First, the definition of "migrate/migration" was amended to specifically reference vapor.

"the movement of hazardous substances or petroleum products in any form, including for example, solid, liquid at the surface or subsurface, and vapor in the subsurface.”

The new standard also specifically states that non-scope indoor air quality issues are "unrelated to releases of hazardous substances or petroleum products into the environment." 

Finally, ASTM E2600-10, the Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions, is specifically referenced in the new standard.  It is not a requirement for a consultant to use E2600-10, rather the standard is recognized as an acceptable means of evaluating the potential for vapor intrusion.

There seems to be debate among consultants as to whether they will utilize E2600-10.  Some believe it is too onerous.  Regardless, consultants are going to have to evaluate the potential for vapor intrusion as part of Phase I assessments and include a discussion in their report. This does not mean vapor intrusion sampling is required, just that the consultant needs to consider whether site conditions dictate identifying vapor intrusion as a potential "Recognized Environmental Condition" or REC in the findings section of the Phase I report.

Agency File Reviews

The new standard adds a section on agency file reviews which basically states:

  • If the property or adjacent property is identified in governmental records search, the relevant records in the agency files should be the discretion of the environmental consultant;
  • If the consultant doesn't think the file review is warranted, then it must include its opinion in the final Phase I report;
  • A consultant can review information from other sources (e.g. on-site records, user provided records, local government agency records, etc.)
  • A summary of the information reviewed should be included in the report as well as an opinion as to the sufficiency of those records.

It is not always the case that regulatory files are reviewed.  Inclusion of this new guidance on file reviews will make it more common practice that such reviews take place.  

However, agency records are not always readily accessible.  Often there is a lot of time pressure on completing the Phase I report.  However, if that pressure forces the consultant to include a statement that records were not reviewed and the review was warranted, that could create a huge issue with the Phase I report. 


U.S. EPA still recognizes 1527-05 as consistent with the AAI rule.  However, if the new standard is deemed as simply a clarification, it begs the question as to why any proposal for a Phase I assessment would reference 1527-05 going forward and not 1527-13.  

After recognition of 1527-13 by U.S. EPA this month, vapor intrusion issues will become even a bigger part of due diligence going forward.  In addition, consultants will face increasing pressure to balance finalizing reports to meet client deadlines, with the need for comprehensive reviews of available records. 

Buyer Beware: Five Environmental Due Diligence Tips for Purchasers

Performing appropriate environmental due diligence prior to acquisition of any industrial or commercial property is a necessity. Due to expansive liability under environmental statutes, most notably CERCLA (i.e. Superfund), a purchaser of contaminated property can be held liable for all cleanup costs regardless of whether the purchaser caused the contamination or knew it was present. Therefore, taking the appropriate steps to understand what you are buying is critical. All purchasers should follow the simple “no surprises rule.”

Here are five tips for purchasers regarding environmental due diligence.

1. Avoid Low Cost Phase Is

Typically, the first step in the environmental due diligence process is a Phase I environmental assessment. A Phase I involves the review of records, government databases, interviews with those familiar with the property and a site walk over by the retained environmental consultant. The purpose of the review is to determine whether there is any information or visible signs to suggest a release of contamination may exist on the property. If the consultant determines such evidence exists, it will be identified in the Phase I report as a “recognized environmental condition” (REC).
Phase I environmental assessments have become the norm in virtually any commercial or industrial property transaction. Most financial institutions will require a Phase I report prior to agreeing to finance a transaction.

In this regard, Phase I's have become a commodity- A box that needs to checked off before a deal can go through. But buyer beware, while Phase I may be enough to secure financing, does the report provide a high quality review of the condition of the property?

There are a plethora of environmental consultants who perform Phase I’s. However, all consultants and Phase I reports are not equal. Performing a good Phase I involves ensuring a comprehensive review takes place, attention to detail as well as the exercise of professional judgment. At a minimum, the Phase I should meet the ASTM 1527-05 standard which is required in order to potentially qualify for the federal EPA liability defenses discussed below.
Be wary of consultants who are willing to perform a Phase I for less than the typical fee for your area. A low price can be a red flag that you will not receive a quality Phase I.

2. Be Mindful of Lurking Vapor Intrusion Issues

Vapor intrusion can occur when volatile chemicals from contaminated groundwater or soil enter an overlying building. Volatile chemicals can generate vapors that migrate from groundwater or soil through basements or foundations into indoor air similar to radon gas in homes.

Regulations and guidance associated with vapor intrusion are changing rapidly both at the state and federal level. It is likely that forthcoming revisions to ASTM guidance for performing Phase I assessments, which is expected this year, will include new guidance on evaluating the potential for vapor intrusion.

Given the potential legal liability and/or costs associated with addressing vapor intrusion, a purchaser should make sure that the environmental consultant properly evaluated the potential for vapor intrusion during the due diligence process.

3. Take Advantage of Potential Liability Defenses

Under federal law, purchasers can protect themselves from liability under CERCLA by performing proper due diligence, as established by EPA regulation and guidance. Proper due diligence is referred to by EPA as “all appropriate inquiries” (AAI).

If a purchase performs due diligence in accordance with AAI, it can qualify for liability protection known as the “bona fide prospective purchaser defense” (BFPD). AAI requires the performance of a Phase I that meets ASTM 1527-05. It also requires that the purchaser take reasonable steps to address any contamination that may be identified during due diligence.

In December 2012, EPA issued an update to its BFPD guidance which expanded the ability of tenants to qualify for the defense so long as the tenant performs AAI prior to leasing the property.

While it is well worth taking the steps to qualify for available liability defenses such as the BFPD, you should also understand the limitations of these defenses. For example, the BFPD does not cover petroleum related contamination. Also, federal liability protections such as the BFPD do not provide state based environmental liability protection.

4. Access and Confidentiality

Key issues that need to be addressed upfront with the seller include securing proper access to the site as well as obtaining copies of all key documents, such as permits and prior environmental reports. Typically, the parties will enter into a confidentiality agreement that sets forth the terms upon which information will be shared.

It is also critical to make sure you have secured the requisite access before you initiate your due diligence. You should make sure you have the legal right to access the property to perform any tests deemed appropriate. As the purchaser, you want to avoid battles over access once the due diligence process commences.

5. Beware of Issues Not Covered in the Typical Phase I

Typical Phase I’s do not cover whether the property contains wetlands, asbestos or endangered species. However, you can add them to the scope of the Phase I if you determine the conditions of the property justify such a review. For example, if you are purchasing an undeveloped tract of land it is critical to review for wetlands and endangered species. If you are purchasing a building that was built before 1980 then you should strongly consider having an asbestos survey performed.

A Revised ASTM Standard for Due Diligence to Be Issued

A task force assigned to review the ASTM standard for Phase I environmental assessments has completed its review of the current standard.  It has sent its recommendations to U.S. EPA who is expected to accept the recommendations. 

Any revisions to the ASTM standard for Phase I has big implications.  Phase I reports are a requirement of the "All Appropriate Inquiries" process to establish CERCLA liability defenses.  Most property transactions involve a Phase I assessment.

As reported on the Schnapf LLC blog, the revised standard will likely include the following changes:

  • definition of REC was tweaked to make it more understandable to environmental consultants;
  • A new term “Controlled REC” (CREC) was added which is intended to complement the HREC term. The latter applies to prior RECs that have been remediated to unrestricted cleanup levels while CREC applies to risk-based cleanups that have ongoing institutional or engineering controls;
  • creates a presumption that the environmental professional should perform a file review of agency records in determining the presence of a REC. If the environmental professional decides a file review is not required, it must explain why a file review was not performed;
  • the revised legal appendix clarifies scope of the CERCLA indoor air exclusion from definition of release and also discusses other CERCLA exclusions;
  • the revised legal appendix clarifies the role of that vapor intrusion in phase 1 reports (it is just like any other exposure pathway- (groundwater, air, soil). In most cases, there will be an underlying REC (contaminated groundwater or soil) that will already be a REC. However, there may be instances where there is an off-site source where there is potential for vapors to have laterally migrated through the soil gas to the subject property. In such an scenario, the potential for Vapor intrusion could be a REC. However, determining if the pathway is completed will usually beyond scope of the phase 1unless otherwise specified by the client;
  • a new Business Environmental Risk (BER) appendix describes the BERs that are commonly encountered for commercial properties and discusses factors that may be considered in determining if a client wants to include BERs in the scope of the phase 1.

A couple comments on these potential changes:

  1. REC Definition-  It will be interesting to see how the definition of REC is modified.   In my experience, there is a wide range of interpretations applied by environmental consultants.  Some will opine that any property that had industrial operations should be identified as a REC.  Others say there needs to be some information suggesting a release or at least the potential for a release to have occurred to be identified as a REC.
  2. Vapor Intrusion-  Adding specificity that vapor intrusion issues should be identified as a REC will add to the complexity of analyzing Phase I reports.  With the clarification discussed, it may lead to the vapor intrusion pathway being identified as a REC in more Phase I reports.  This has big implications for due diligence because the vapor intrusion pathway is often the most difficult to assess in a subsequent Phase II.  It doesn't help that U.S. EPA still hasn't finalized its vapor intrusion guidance and relies upon 2002 OWSER vapor intrusion guidance still labeled draft.

Tenants Can Now More Easily Qualify for Protection from Liability for Pre-Existing Contamination

Often times businesses only worry about performing due diligence (Phase Is and Phase IIs) when they are purchasing a building, factory or land.  In my experience, many tenants never think about the fact that they could inherit liability for pre-existing contamination just by leasing property.  However, tenants, particularly those that are leasing industrial space, should be concerned and protect themselves accordingly. 

Now, U.S. EPA has created an even larger incentive for performing proper due diligence as a tenant.  On December 5, 2012, US EPA issued new guidance that expands liability protections for tenants that could be held liable for cleanup and remediation costs at leased properties.  

Quick Primer on Tenant Liability under CERLCA

The environmental statute that has the most broad reaching liability for pre-existing contamination  is the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)- also known as Superfund.  Under CERCLA, any "owner" or "operator" can be held jointly and severally liable for cleanup costs at a site for even contamination that was present prior to their use or ownership of the property.

Tenants can be deemed an "owner" under CERCLA depending on the structure of the lease.  For example, they could be deemed a de facto owner if they have control over the entire property.

Tenants could also be held liable for pre-existing contamination as an "operator" if they store or generate hazardous substances on the leased property during the term of the lease.  There are varying tests for determining whether a tenant should be deemed an "operator" under CERCLA.  However, any tenant utilizing hazardous substances on a leased property should be aware that they could be deemed potentially liable for pre-existing contamination.

Tenants and the Bona Fide Purchaser Defense (BFPD)

In order to encourage re-use of brownfield properties, in 2002 Congress passed the Small Business Liability Relief and Brownfields Revitalization Act.  As part of the Act, Congress created the "bona fide purchaser defense" (BFPD) which allows purchasers that conduct proper due diligence and follow other requirements  to purchase property with knowledge of hazardous substance contamination without incurring liability as an "owner" or "operator." 

However, when the law was passed in 2002 it did not provide the same opportunities to tenants to qualify for the BFPD.  The only way a tenant could qualify for the protection is if they were deemed an "owner" based upon the lease terms or if the owner already qualified for the BFPD.  Tenants under traditional lease arrangements with an owner that never qualified for the BFPD fell into a gap.  They simply couldn't qualify on their own for BFPD protections. 

Finally, in December 2012, EPA recognized there was a gap in potential liability protection for most tenants and it issued a new guidance allowing all tenants to qualify for the BFPD if they meet certain conditions, including:

  1. Don't dispose of hazardous substances on the property;
  2. Conducts proper due diligence (known as "All Appropriate Inquires");
  3. Makes all legally required notices;
  4. Takes "reasonable steps" regarding releases;
  5. Cooperates with regulators;
  6. Complies with any use restrictions or controls designed to protect against exposure to contamination;
  7. Complies with administrative subpoenas and information requests; and
  8. Is not potentially liable for response costs or affiliated with a person who is liable for response costs at the facility.

It is worth noting that this is only enforcement discretion guidance and not statutory liability protection.  This means that EPA could still file a suit against a tenant if it felt the circumstances justified such an action.

Tenants Should Consider the BFPD and Contract Provisions to Protect Themselves

Due to the large liability exposure associated with leasing property that may have had some history of use of hazardous substances, tenants should take steps to protect themselves.  First, perform due diligence prior to signing the lease.  Second, insist on contractual provisions that release and protect them from liability associated with pre-existing contamination. However, contract provisions still don't prevent regulators from suing you.  Therefore, as a third step tenants should evaluate are the benefits of the BFPD as another means of mitigating risk.


Clean Ohio Council Approves Changes to Brownfield Funding

On March 6th the Clean Ohio Council approved major changes to the Clean Ohio program.  The changes are now effective and will govern the remaining $15 million in funding that was set aside in the last budget. 

After the $15 million has been exhausted, JobsOhio has indicated it will launch a new $43 million per year brownfield redevelopment program.  No word yet on what the details of that program may look like, however, it is safe to assume that the more streamlined structure and emphasis on jobs will be key aspects of the JobsOhio program.

Here are the major changes approved by the Council on March 6th:

  • Single incentive program- COAF and CORF Combined into one brownfield funding program:
  • Streamlined application process-  Requests for funding are now initiated by submitting a letter of interest to JobsOhio regional network.  This is a positive development for CORF projects that required applicants to invest $20,00 or more to file the application without knowing whether they will be funded;
  • All grants will be awarded on a rolling basis-  This replaces the CORF process of two rounds of funding with pools of applicants competing against one another.
  • Cleanup grants remain capped at $3 million-  The proposal had been to reduce them to $1 million;
  • Assessment grants are capped at $200,000-  compared to $300,000 under the old program.
  • Expanded eligible infrastructure costs under the grant
  • Eliminated the Redevelopment Ready Track- Grant applicants must have a committed end user of the property. 

Brownfield Redevelopment Incentives Back on the Table in Ohio

Last year the Kasich Administration announced that it was phasing out the Clean Ohio brownfield grant program.  The Clean Ohio program,which had been in existence for over a decade, had provided approximately $37.5 million per year in incentives for cleanup and redevelopment of brownfields. 

Last May, the Administration allocated a final $15 million toward traditional Clean Ohio programs for sampling and cleanup work.  JobsOhio took over administration of the program from the Ohio Department of Development.  (Click here for prior post discussing changes)

What has been somewhat unclear since the announcement regarding phase out of the Clean Ohio program is whether JobsOhio would replace it with a new brownfield incentive program.  As discussed in an article in the Crain's Cleveland Business magazine, it appears JobsOhio does plan on a sizable brownfield redevelopment incentive program to replace Clean Ohio.

About $43 million of the $100 million JobsOhio can spend annually for economic development programs will go toward revitalization projects, Mr. Minor said.

The planned allocation to land revitalization is a big change in the Kasich approach to economic development. The Kasich administration let the former program, Clean Ohio, die last year without assurances that it would be picked up by JobsOhio...

Clean Ohio offered communities as much as $3 million in loans or grants for remediation projects — a number JobsOhio might match, Mr. Minor said. But Mr. Minor said the new program will prefer to invest with companies that will occupy the cleaned-up properties.

What is clear from the comments of JobsOhio officials is that only projects that have a committed end-users after cleanup will qualify for the new brownfield incentives.  Also, the old scoring methods utilized by Clean Ohio will not longer be used to identify good projects.  JobsOhio will heavily emphasize the following factors in selecting projects:

  • number of jobs the project retains;
  • the number of jobs created; and
  • investment in redevelopment of the property and/or equipment.

Clean Ohio Council to Meet

The Clean Ohio Council will meet tomorrow to discuss changes to its policies for awarding grants.  However, whatever changes are made will likely only govern the remaining $15 million in funding.  After that money is spent, JobsOhio will initiate its own program with its own procedures and methodologies for selecting projects. 

Regardless of whether you like some or all of the changes to the process for selecting projects, it is very good news that a strong brownfield incentive program will exist post-Clean Ohio.  In a state with a rebounding economy it is critical to attract redevelopment to properties that may have historical issues tied to Ohio's strong industrial history. 

Big Changes Proposed for Ohio Brownfield Funding

On Friday, the Clean Ohio Council met to discuss proposed changes to the Clean Ohio program. As discussed previously on this blog, the Kasich Administration has repeatedly discussed completely revamping brownfield funding in Ohio.  The Administration previously announced its intention to shift the program's administration to JobsOhio along with the liquor profits that were used to payoff the bonds that created Clean Ohio.  The Administration also has indicated it wants to shift from a grant based program to loans.

JobsOhio is currently caught up in a legal challenge to the constitutionality of the semi-public organization.  As a result of the legal challenge, the Administration has not provided any details as to what brownfield funding will look like under JobsOhio.

Back in May, it was announced that $15 million in new funding would be allocated to the Clean Ohio program as a stop gap measure until the dust settled on the JobsOhio litigation.  Clean Ohio funding has previously been at $37.5 million per year. Many believed that the $15 million would be allocated using the similar Clean Ohio process and procedures that have operated for nearly a decade.

On Friday, staff from the newly created Development Services Agency presented revised policies for new procedures to be utilized in awarding the $15 million in new funding. The proposal presented represents  a seismic shift in how funding decisions will be made.

Here is a quick synopsis of the major changes:

  1. Major Reduction in Funding Available Per Project- The maximum available in funding for assessment grants was reduced from $300,000 down to $200,000.   The maximum available in clean up funding was reduced from $3 million to  $1 million;
  2. Overhaul to the Grant Selection Process-  Previously, there were two grant rounds per year.  Grant applications received during a round competed against one another for funding.  The Clean Ohio Council utilized a scoring process to evaluate each grant application.  The scoring criteria was a mix of points based upon the proposed development, amount of clean up occurring and importance to the local community.  The new proposal would do away with grant rounds and the scoring process entirely.  Under the new system, the Director of Development Services would make awards on a rolling basis utilizing Agency discretion.
  3. Premium on Job Creation-  While the application process is still somewhat murky because the forms have not been released, it appears from documents released Friday that the intention is to evaluate applications based on jobs almost exclusively.  The old scoring system provided placed higher value on clean up of highly contaminated sites as well as their importance to the local community. 
  4. More Funding for Infrastructure-  The new proposal increases the percentage of the grant that can be spent on infrastructure versus environmental clean up from a maximum of 10% up to 25%.
  5. Loans- While the policy changes incorporate the concept of loans, as it stands the new policy would retain the limitation that no more than 15% of funding shall be used for loans. (See, Section 6.02).  Therefore, the Administration, at least for now, wants to see the vast majority of funding in the form of grants versus loans

Concerns were expressed during the Clean Ohio Council meeting on Friday that there had not been any opportunity for the public to comment on the major restructuring of the program. In response, it was decided to allow a thirty day (30) public comment period on the policy changes. 

Click here to access the proposed changes to the Clean Ohio Fund Policies.  Instructions for submitting comments are also available on the web page.

Implications of the Policy Changes

It is pretty easy to acknowledge the Clean Ohio as we know will no longer exist if the proposed changes are adopted following the public comment period. The old program had two grant processes:

a) Clean Ohio Assistance Fund (COAF)-  Allowed for up to $300,000 for assessment and $700,000 for clean up.  COAF applications could be submitted on a rolling basis and decisions were made exclusively by the Director of Development.

b) Clean Ohio Revitalization Fund (CORF)-  Allowed for up to $3 million in clean up funding.  There were typically two rounds per year.  Applications were submitted and competed against one another in each round.  The project applications were scored using a mix of points for development, environmental clean up and importance to the local community.

The proposal presented Friday essentially does away with CORF and moves exclusively to a COAF like approach.  The advantage of the new approach is the speed as to which funding decisions will be made.  However, the disadvantages to this approach are as follows:

  • $1 Million Dollar Cap on Clean Up Grant Funding will mean Only Smaller Clean Up Projects will Get Funded-  The vast majority of the larger development projects involved $2 to $3 million in funding under the old CORF program.  By capping the available cap at $1 million, the larger brownfield redevelopment projects are far less likely to occur.  What could happen is that the only projects getting funded in future will be for asbestos abatement & demolition.  There simply won't be enough funds to deal with sites that have significant soil or groundwater contamination.
  • No Competition Makes it More Difficult to Ensure the Limited Funds Go to the Best Projects-  Because all grant awards will be made on a rolling basis it will be much more difficult to compare and contrast projects.  No objective scoring criteria will be implemented and the public involvement in selecting projects will be greatly reduced.


Delay in Clean Ohio Funding Doesn't Appear Connected to JobsOhio Lawsuit

The Kasich Administration has decided that it wants to put the legal challenges to JobsOhio to rest once and for all. Through legal maneuvering the Administration has put the ultimate question- is JobsOhio constitutional- before the Ohio Supreme Court.  At issue is whether transfer of liquor profits to JobsOhio violates the Ohio Constitutional prohibition on providing credit/funding to a private corporation.

As discussed in the Columbus Dispatch, David Goodman, Director of the Department of Commerce, has refused to sign the Franchise and Transfer Agreement which would transfer Ohio's liquor distribution operations to JobsOhio.  Director Goodman's refusal was in reality a legal maneuver to allow the Ohio Supreme Court to hear the legal challenges to JobsOhio.

Though I personally question the validity of these constitutional challenges, I believe my oath of office to uphold the Ohio Constitution precludes me from executing the Franchise and Transfer Agreement until the Ohio Supreme Court is given an opportunity to address the merits of these claims,” Goodman wrote in a letter this week to Mark Kvamme, interim president and chief investment officer for JobsOhio.

Implications for Brownfield Redevelopment in Ohio

The Kasich Administration has made clear that their ultimate goal is for JobsOhio to take over most of the economic development activities from the former Ohio Department of Development.  Those responsibilities would include control over brownfield funding and redevelopment.

JobsOhio officials and the Kasich Administration have hinted that the future of Ohio brownfield funding will be much different than the $40 million per year that has been handed out as grants over the last decade through the Clean Ohio program.  The most controversial aspect of changes to funding is the Administration statements that brownfield redevelopment funding will be more heavily geared towards loans instead of grants.

While it is clear that the legal fight over the constitutionality of JobsOhio has delayed any announcement regarding Ohio's future brownfield programs.  The Kasich Administration's midterm budget (H.B. 487) set aside $15 million in funding.  The availability of this funding does not appear to be in any tied to the legal fight over JobsOhio.

Here is the language from H.B. 487 regarding the $15 million in funding:

SECTION 301.21. The items set forth in this section are hereby appropriated out of any moneys in the state treasury to the credit of the Clean Ohio Revitalization Fund (Fund 7003) that are not otherwise appropriated.


C19500 Clean Ohio Revitalization $ 12,000,000

C19501 Clean Ohio Assistance $ 3,000,000

Total Development Services Agency $ 15,000,000

TOTAL Clean Ohio Revitalization Fund $ 15,000,000

The foregoing appropriation items C19500, Clean Ohio Revitalization, and C19501, Clean Ohio Assistance, shall be used in accordance with sections 122.65 to 122.658 of the Revised Code, and are subject to all provisions of Am. Sub. H.B. 482 of the 129th General Assembly that are generally applicable to such appropriations.

The budget language makes clear that the current Clean Ohio Revitalization Fund (CORF) and Clean Ohio Assistance Fund (COAF) will be used to administer the $15 million in funding.  The language also seems to suggest that the current process for awarding grants under COAF and CORF will be utilized.

While H.B. 487 passed in May, the Administration has yet to announce when the $15 million in funding will be made available. The need for this funding is great.  New brownfield projects are not entering the pipeline due to the lack of assessment money. 

A Phase II environmental assessment answers the biggest question with regard to a property- how much will it cost to clean up and is redevelopment feasible.  Unless a property is just perfect for redevelopment, most companies and re-developers are unwilling to pay for the cost of a Phase II assessment out of their own pocket. 

COAF funding for Phase II environmental assessment ended last December.   Since that time no new funding opportunities at the State level have been presented.

While the shape of the State's brownfield funding may be uncertain until the JobsOhio fight is resolved, the $3 million in COAF funds could be made available immediately so we do not continue to lose momentum on brownfield redevelopment in the State.

Indoor Air is in the EPA Spotlight for 2012

With regard to industrial properties and brownfields clean ups, perhaps no issue clean up standard has garnered more attention and increased scrutiny than indoor air.  It looks like 2012 could be the year when EPA finally updates its decade old draft guidance. 

EPA never finalized its 2002 draft guidance on assessing indoor air risks ("OSWER Draft Guidance for Evaluating the Vapor Intrusion to Indoor Air Pathway from Groundwater and Soils"). The lack of official guidance has left a regulatory void regarding clean up standards.  In 2009, the Inspector General sharply criticized EPA for failing to develop final guidance (IG Report).   EPA responded to the IG report by promising to finalize new vapor intrusion guidance by the fall of 2012.

What is vapor intrusion?

Chemicals in soil and groundwater can volatilize into the air and come up through basements and slabs into buildings.  For well over a decade, EPA has required clean up plans to include an assessment and evaluation of the risks posed by vapor intrusion into buildings.

The typical process for evaluating risk had been to plug soil and groundwater sampling data into a model ("Johnson & Ettinger Model") to predict indoor concentrations within existing and future structures at a site. If concentrations were too high in an existing building, EPA would require either additional clean up or a mitigation system (similar to a radon mitigation system) to reduce concentrations.  If concentrations were too high in soil and groundwater even where no current building existed, EPA could force deed restrictions to prevent future construction in those areas of the site.

Virtually all industrial and brownfield properties have the potential to present vapor intrusion risks including current and former manufacturing and chemical processing plants, warehouses, landfills, dry cleaners, and gas stations.

Why is new guidance on vapor intrusion such a big deal? 

When EPA guidance is updated, it will likely lead to more conservative assumptions.  More than likely, EPA will require more data gathering beyond just simple modeling.  For example, EPA already has moved toward requiring more subslab sampling to evaluate concentrations of chemicals directly beneath buildings.

Updated guidance could possibly lead EPA to re-open sites that had previously had their clean ups blessed by state or federal regulators. for example, Superfund (CERCLA) requires EPA to review site clean ups every five years.  Would updated guidance require re-evaluation of these sites?

New guidance could also lead to more toxic tort litigation if plaintiffs claim prior investigations were not adequate or assumptions become more conservative.  Or, it could impact development plans or financing. 

EPA Release First New Guidance

In February 2012, U.S. EPA's Superfund division released a new document titled Superfund Vapor Intrusion FAQs.  The new document isn't the final guidance EPA promised in response to the IG report.  However, it does provide some insights into what the new guidance will look like once its released.

Using the answers to questions in the new FAQ, one can gain insights into the direction EPA likely to head with new final guidance on evaluating vapor intrusion, including the following:

  • Evidence from sites since 2002 show that concentrations of pollutants in indoor air are difficult to predict by extrapolating from samples to modeling;
  • EPA recommends modeling only as a way to potentially screen out a site and will be more appropriate for evaluating future buildings on-site;
  • EPA will move to requiring more soil gas sampling and sub-slab sampling to determine vapor intrusion concentrations;
  • More conservative assumptions are going to be built into the model which will make it much more likely a site will fail screening values (for example, EPA will incorporate an assumption that it is about 10 times more likely vapors will move into buildings from deep soil-gas;
  • New screening values will be developed; and
  • At CERCLA and other regulatory sites, EPA is more likely to require community involvement in sites where vapor intrusion is being studied.


City Officials and Developers From Around the State Express Concerns Regarding Changes in Ohio's Brownfield Funding

The picture is still very murky with regard to what brownfield funding will look like in Ohio.   The program is being transferred from the Ohio Department of Development to JobsOhio.  The Kasich Administration has stated it believes the program needs to be overhauled.  (Click here for prior post regarding transfer to JobsOhio

Only sketchy details have emerged as to what brownfield funding may look like after the transfer.  Comments from JobsOhio officials have suggested the grant model will be tossed in favor of loans.  This has local officials from around the state voicing concerns regarding such a radical change to what has been viewed as a very successful program.

Articles have appeared in newspapers around the State discussing local official concerns over changes to the Clean Ohio program.  Below is a synopsis of recent articles.


On Monday, the Middletown Journal had a lengthy story discussing the potential impact on the City's efforts to address multiple brownfields.  The title of the article captures the concern among City officials "Middletown Clean Up Efforts May Reduce with State Change."  The concern expressed, which I have echoed in prior posts as wells, is that JobsOhio will be moving away from grants and more toward loans.

Middletown’s acting Economic Development Director Denise Hamet said there will be fewer applications in a year to clean up brownfields — which are defined as industrial properties that are either vacant or underutilized with environmental contamination to prevent reuse or redevelopment — if a loan policy is in place.

“I think you wouldn’t have a lot of projects penciled out if you have to repay remedial work because that’s above and beyond doing the normal work,” Hamet said. “It’s hard to get projects to pencil out beyond normal construction costs.”

Hamilton Economic Development Director Jody Gunderson agreed and said grants reduce risks.

“That’s why the grant system has worked so well,” he said. “You’re mitigating risk for property owners and the city when you bring in grant dollars.”


In an article from February 13th in Crain's Cleveland Business, titled Leaders fear stalled brownfield clean up cash, local official expressed concern regarding the lack of assessment money as well as a shift to loans from grants.

Tracey Nichols, Cleveland's director of economic development, fears the state under new rules will reject applications that can't identify a specific new property owner with plans to clean up and redevelop a property. The city often has used Clean Ohio money to clean up properties without committed end users so that the properties would be ready for use when prospective buyers or developers come along.

“Most companies aren't going to say, "I love that site and I'll wait two or three years until you're done cleaning it up,'” Ms. Nichols said.


On March 28th, the Akron Beacon Journal also had an article discussing the uncertainty around future brownfield funding.  I was interviewed for the story and discussed that the uncertainty means potential projects are in limbo until details emerge. 

The article was titled Future of Ohio Clean Up Program is Uncertain. The ABJ pointed out the tremendous benefit the City of Akron has received from the program. 

Over the years, the city of Akron got about $16 million in brownfield money from the Clean Ohio Fund. That includes grants for the Goodyear redevelopment, Bridgestone America headquarters, Canal Place, the Middlebury grocery store, the old Beech Street power plant and the Landmark Building.

The brownfield program has been in limbo for some time in Columbus with the change. The state earlier stopped accepting applications. The program is to be reactivated July 1.


On March 5th, the Dayton Daily News ran a story titled "Fund Change May Hurt Ohio Development."  The lengthy article detailed the number of projects in the Dayton area that would not have moved forward without Clean Ohio brownfield funding.  Local officials and developers also expressed serious concern with moving from a grant to a loan based program.

Downs said the cost of evaluating and rehabilitating old industrial sites would be too high for the city and most developers if Clean Ohio were a loan program.

“A loan program is certainly less attractive to us than what exists right now,” he said. “We couldn’t take advantage of it like we have the existing program.”


A series of letters to the Editor in the Toledo Blade have pointed out the strong benefit the Clean Ohio program has had in the Toledo area. 

  • Since its creation in 2000, public and not-for-profit conservation groups across the state have used the program to protect more than 26,000 acres of natural areas and 20,000 acres of farmland from development.- Steve Madewell is executive director of Metroparks of the Toledo Area. (click here for April 22nd letter)
  • Black Swamp Conservancy has been a regular participant in the farmland preservation program. Our land trust has helped farm families bring millions of dollars to our region's economy. The conservancy has helped protect more than 7,000 acres of northwest Ohio farm ground -- prime soil that always will be used for agriculture.-Kevin Joyce, Executive Director Black Swamp Conservancy Perrysburg (Click here for April 26th letter)


JobsOhio $1.4 Billion Dollar Deal Includes Sketchy Details on the Future of Clean Ohio

Details were released this week by the Kasich Administration on the establishment of its privatized economic development agency known as JobsOhio.  Many of the traditional job creation duties that fell to the Ohio Department of Development will be shifted to JobsOhio. 

Along with the restructuring of development duties, the Administration is shifting the State's liquor profits to help fund the Agency.  Last year the liquor profits took in around $700 million in revenue to the State.  In return for a 25 year agreement to fund JobsOhio with liquor profits, JobsOhio will make a one-time $1.4 billion dollar payment back to the State.  Details of how those funds would be utilized were discussed in the Plain Dealer:

The $1.4 billion agreement calls for Ohio to collect $500 million for its general revenue fund, money already factored into the current state biennial budget, $750 million to pay off existing liquor revenue backed bonds, and $150 million to continue "Clean Ohio" environmental programs for the next three years.

The reference in the Plain Dealer Article regarding Clean Ohio is a bit confusing.  Based upon an article in Columbus Business First, the $150 million is set aside to pay for the grants that were awarded or will be awarded by July 1, 2012.  In the future, funding will be set at $43 million per year.

The agreement, which will be reviewed and possibly voted on Jan. 30 by the state Controlling Board, includes a provision for the $43 million for economic revitalization projects as well as $150 million to cover Clean Ohio Fund projects approved by the state before July 1, 2012.

Impact on Clean Ohio

The transformation of the Ohio Department of Development and creation of JobsOhio has resulted in tremendous uncertainty regarding  the State's $50 million dollar per year brownfield redevelopment program. 

This fall, when the Administration made the announcement that liquor profits would be shifted, the Administration said it would look for a new revenue source to support Clean Ohio.  It now appears that the same revenue-a portion of liquor profits- will be used to support the program for the next three years. 

What remains uncertain is when that money will be available.  Currently, the Ohio Department of Development announced the end of funding for the Clean Ohio Assistance Fund (COAF) which pays for Phase II environmental assessment on brownfields.  Also, the Department announced the current round of the Clean Ohio Revitalization Fund (CORF) would be its last. Now that the funding source has been announced, the question is when will the State start accepting grant applications again?

Due to the fact the $150 million is being allocated pay for COAF and CORF grants in the pipeline and the last round of CORF, it appears no new funding will be available for Phase II work prior to July 1st.

Who Will Administer Clean Ohio in the Future?

What also remains uncertain is whether the current process for grant selection and administration will remain.  During yesterday's announcement, the Administration indicated that the current process will remain in place through the summer.  However, the Kasich Administration also suggested that legislation could be introduced this Spring to modify the program. 

What the Administration did make clear is that they want to see more direct economic development benefits for use of Clean Ohio funds in the future.  This means it is unlikely grants such as the Redevelopment Ready track of the Clean Ohio program will continue. 

The Redevelopment Ready track provided grants up to $2 million to clean brownfields that were primed for development based on their location but lacked a specific end use (i.e. development project).  Some argued that the Redevelopment Ready Track allowed areas outside Cleveland, Columbus and Cincinnati to better compete for the grant money. 

While this week's announcement seemed to answer the question as to whether funding will remain in place for Clean Ohio in the near future, there remains three major questions:

  1. When will the grant process open up again:
  2. Who will administer the program- the newly created Ohio Development Services Agency or JobsOhio; and
  3. What will the grant application and selection process look like in the future?


State Halts Applications for Brownfield Grant Program

Yesterday, the Ohio Department of Develop put the following notice on the Clean Ohio Fund webpage:


Effective immediately: The Clean Ohio Assistance Fund is no longer accepting applications. If you have a project and would like to discuss other funding opportunities please contact us.

Back in October, Governor Kasich announced that he was redirecting the funding for the Clean Ohio program to his JobsOhio economic development program.  Funding would remain for one additional round of the Clean Ohio Revitalization Fund which provides up to $3 million in clean up grants for brownfield redevelopment.. 

In addition, funding for the Clean Ohio Assistance Fund (COAF) was thought to last through June 2012.  However when the announcement was made that funding was shifted to JobsOhio it cast doubt on the future of the Clean Ohio program.  As a result, the Department of Development was flooded with COAF applications in December.  No one wanted to risk missing what could the last of the Clean Ohio funding. 

Due to the rush of applications, all available funding was already allocated in December for the COAF program.  Several projects that were also seeking funding were told they were too late.

With the last round of CORF this month and the announcement ODOD is no longer accepting applications for the COAF program, the Clean Ohio program in Ohio is effectively closed.  This announcement is disappointing since the program was one of the most successful in the country in spurring revitalization of brownfield properties. 

In November, the Governor's spokesperson indicated the Administration was looking to find new revenue to continue the program.  No such funding has been identified to date.  The prospects for finding new revenue must be very uncertain because the Department is not even allowing developers to submit applications to form a line when funding does come available. 

Signs point that the Country and State's economy may slowly be turning the corner. If that is indeed the case, It would be nice to have the tools in place to direct new development to abandoned sites and contaminated properties which populate Ohio's urban core.


Kasich Administration Looking to Replace Brownfield Funding

The Clean Ohio Council awarded half the available funds for brownfield redevelopment for fiscal year 2012 two weeks ago.  As discussed in prior posts, available funding is running out in the next few months.

The future of State brownfield funding became uncertain when the Kasich Administration shifted funding from the state's liquor profits to JobsOhio.  I was interviewed for an article appearing in Gongwer last week discussing the future of the program.   It is clear from the article that the Administration is trying to replace the liquor profits with different funding to continue brownfield grants beyond fiscal year 2012. 

Ms. Sabatino said the administration has indicated the program will continue, although it has yet to identify an alternative source of funding. "I know they're actively working on it as we speak," she said.

Kasich spokesman Rob Nichols added, "Helping put brownfields back to work to create jobs is valuable and something Ohio will continue to do. As we transition from state-run job growth efforts to efforts run by the private-sector experts at JobsOhio, we're evaluating these programs to make sure we have the right
tools to serve job creators and to make sure taxpayers are getting a good return on their investment."...

The revitalization program provides reimbursements to communities working to clean up brownfield sites, and interest in the program has been high, DOD Community Services Division Chief William Murdock said. "There's more demand than there is supply, and that's a really good sign," he said.

Mr. Koncelik said, however, the few projects that were denied funding in this round could multiply should the future financial source be smaller than the previous one.
"A new revenue source may dramatically cut down the available funding, and won't have as robust a program, not as many projects will happen," he said, adding it could be half a dozen or more projects that are rejected in future rounds.

I am glad to see the future of the program is starting to get coverage in various publications.  It is an important public policy issue that deserves such coverage.

(Gongwer article provided with permission of publisher)

Loans Versus Grants to Spur Brownfield Redevelopment

Current Debate Regarding the Future of the Clean Ohio Program

The Kasich Administration has announced that it is re-evaluating the Clean Ohio program.  The next round of the Clean Ohio Revitalization Program (Round 12) will be the last.  Also, funding under the Clean Ohio Assistance Fund, which pays for sampling on brownfield properties, is likely to run out as soon as February 2012.

It appears the Administration is discussing other funding sources that may allow the program to continue.  (See Clean Ohio Funding End 2012....What Next?)  Last week, an article in Crain's Cleveland discussed the potential end of the program:

Ohio Department of Development spokeswoman Katie Sabatino said the state considers these successful programs, but is evaluating its options for assisting with the redevelopment of brownfield sites. Of the Clean Ohio Fund in particular, she said, “The Ohio Department of Development is working with the (Kasich) administration to chart a path to assist with brownfield issues....."

“It was supposed to end June 2014, but word out of Columbus is it will end sooner,” said one observer who asked not to be identified because he's shepherding brownfield projects still under review. “I'm very concerned about them pulling the rug out from under us.”

 In the article, it states that the Administration may be interested in moving towards loans instead of grants. 

In addition, Mark Kvamme, chief investment officer of JobsOhio, is said to prefer loans over grants, according to a half-dozen economic development professionals who work with the state's programs. He was not available last week for comment.

A similar change is under way at the Third Frontier Commission, which runs loan and grant programs for technology companies. Crain's reported in June that Mr. Kvamme was behind recommendations the commission is adopting to move to loans from grants.

Advocates of the change say loans not only stretch the reach of public funds, but also cause applicants to be more discerning about what they propose when they're on the hook to pay the money back.

Loans versus Grants

The problem with loans is that the require the developer or company considering a brownfield to pay for the entire cost of investigation or clean up.  Total clean up costs can range from $500,000 to $5 million or more.  This is the cost just to clean up the land, not the overall development costs. 

If developers and companies are required to utilize their own funding to pay for all the clean up and investigation costs, most will look to greenfield sites instead of re-utilizing urban properties that have pre-existing contamination.  Heavy industrial properties will simply sit idle unless the value of their location is so great it outweighs the clean up costs.  This is an unlikely scenario for the vast majority of brownfield sites.

Ohio already has a brownfield loan program that almost no one is currently utilizing- Ohio Water Development Authority's Brownfield Loan Program.  Under the OWDA program you can obtain a low interest loan for sampling (up to $500,000) or clean up ($5 million).  Despite the fact more sites are eligible for OWDA's program than Clean Ohio, OWDA has had trouble attracting interest in the program.

Under the grant program, applicants still have "skin in the game."  Under the Clean Ohio program, applicants are required to provide a 25% match.  Paying 1/4 of the clean up costs makes many for brownfield sites attractive to development. 

Future of Clean Ohio

Funding had been available for Clean Ohio to continue until July 2013.  However, as discussed in the Crain's Article funding has been shifted to other priorities. 

Word is the Kasich Administration is looking for a funding source to continue a brownfield redevelopment program.  The Administration may also be overhauling the program. Let's hope that what ever emerges provides a real opportunity for our urban core to attract development.

Miceli Dairy Project Highlights the Benefits of the Clean Ohio Program

Last Friday, I attended the Clean Ohio Council meeting with my client Miceli Dairy Products, Inc. (Miceli Dairy).  I had worked with Miceli Dairy over the last couple years on evaluating five parcels of property adjacent to their current facility on which the Dairy would like to expand its operations. 

The Dairy submitted an application to receive approximately $3 million in grant funds to assist with demolition, clean up and installation of infrastructure on the brownfield parcels.  The Dairy's application was competing with fourteen (14) other brownfield redevelopment projects from around the State. 

The fourteen projects were in competition for the available funding.  Each project is scored using various factors such as how much contamination is being cleaned up, number of jobs, etc.  In the end, the Miceli application was the number one project in the State and the Council voted to fund the application.  (Click here for press release from the Clean Ohio Council)

Miceli Dairy's expansion is a great story. Did you know that Miceli is the largest ricotta cheese manufacturer in the U.S.?  The Company has a wonderful Cleveland history that is best described in the Plain Dealer story profiling the Dairy's expansion plans. 

However, without the Clean Ohio program the expansion may never happened in the City of Cleveland.

Why the Project Wouldn't Have Worked without Clean Ohio

During the Clean Ohio Council meeting several comments were made the the Miceli project was one of the most complicated to every go through the program.  Here were some of the issues that complicated use of the brownfield parcels for expansion:

  • Two businesses operated on the parcels- a drum reclamation facility and plating operation;
  • Both businesses were the subject of environmental enforcement actions by the Ohio Attorney General's Office;
  • No environmental sampling has been performed prior to the project so it was impossible to know the levels of contamination present;
  • Liens were on the properties that exceeded $1 million dollars;
  • Hazardous waste units and drums were located on the parcels that needed to be cleaned and that work is ineligible for Clean Ohio funding;
  • Buildings in poor condition were located on site that made it difficult to obtain samples; and
  • Large debris piles were across the site.

All of these issues had to be addressed for the project to move forward.  It is clear that without funding through Clean Ohio the costs of sampling and clean up alone would have prevented expansion onto these parcels.  Without funding it was quite possible Miceli may have been forced to look outside Cleveland to expand its operations.

(Map:  From Cleveland Plain Dealer Article cited above)

New Ohio EPA Guidance Spotlights Challenges in Brownfield Redevelopment

In Ohio, the clean up program of choice for brownfields and industrial sites currently used is the Voluntary Action Program (VAP).  The program is designed to give a tremendous amount of flexibility to property owners and companies in terms of the nature and extent of clean up performed on their property. 

Instead of the traditional "dig and haul" method of cleaning up soil contamination or "pump and treat" contaminated groundwater, the VAP allows the use of both engineering controls and use restrictions.  Both can dramatically lower clean up costs. 

Engineering controls are barriers that prevent exposure to humans or the environment such as parking lots or buildings.  Use restrictions are deed restrictions (i.e. Environmental Covenants) that may prevent development in areas of high soil contamination, prohibit use of groundwater or restrict development to industrial/commercial use.

As long as the owner demonstrates the property meets VAP standards, Ohio EPA will issue a legal release ("covenant not to sue") which states no further clean up is needed. This legal release benefits both the current owner and is transferable to future owners of the property.

Clean Up for Anticipated Future Development

In planning a clean up, it is critical to understand up-front program requirements to obtain you legal release.  Under the VAP, a critical requirement is that the owner must implement some form of remedy for all exposure pathways which exceed VAP standards.  An "exposure pathway" can be any way a human may be exposed to unacceptable levels of contamination. 

Example of Exposure Pathway (Vapor Intrusion)- The most problematic exposure pathway is often vapor intrusion into buildings.  Vapors from soil or groundwater contamination can pass through building floors and expose the inhabitants to, what is deemed, unacceptable human health risks. 

Under the VAP rules, current and "reasonably anticipated" exposure pathways must be addressed through a remedy.  The remedy can be clean up of soil contamination, groundwater treatment, engineering controls or use restrictions. 

While the VAP program has been in existence for nearly 17 years, Ohio EPA continues to struggle with how to address anticipated development under the program.  The VAP requires the future use of the property must continue to be in compliance with VAP standards. 

How do you make that demonstration with regards to future development?

VAP calls future development "reasonably anticipated pathways."  Such a pathway would exist if a developer knows a building will be constructed on the site in the future in an area of the property that has contamination. 

The VAP rules requires that property owners to demonstrate inhabitants of that future building would not be exposed to unacceptable levels of contaminants.  If the area of construction will result in potential exposure above VAP standards, the owner must implement some type of remedy to address that exposure.

Ohio EPA released this week a VAP guidance document designed to assist in evaluating potential exposure pathways- "Reasonably Anticipated Complete Exposure Pathways"

Included in the guidance document is the following statement:

Because development plans are not always known in detail, the identification of a reasonably anticipated exposure pathway for potential development is not always easily done.

That is a gross understatement...even following the EPA guidance.  The VAP rules force the developer or property owner to make judgment regarding the potential size, location and configuration of future buildings.  These crucial development decisions can have dramatic implications for the amount of clean up needed at the site.

What Happens if Development Plans are Uncertain?

Site conditions at brownfields and other industrial properties can vary dramatically.  At some sites the issues of contamination remaining on-site in conjunction with future development can be  balanced.  At other sites, developers can be forced to make decisions regarding the extent of clean up prematurely.

In its second guidance document EPA tries to provide an administrative remedy to balancing the need for completing the VAP and avoiding expensive clean up before development plans are certain.  Ohio EPA suggests carefully crafted environmental covenants can be utilized to satisfy VAP rules, obtain your legal release and provide flexibility for future development.

The guidance is titled "Conducting Remedies in the VAP for Complete and Reasonably Anticipated to be Complete Pathways."


Both guidance documents are highly complex.  While the documents provide some level of flexibility to balance development with clean up, it is clearly a complex balancing act that developers must evaluate early in the process.


Kasich Administration To Transform Clean Ohio Brownfield Grant Program?

Rumors abound that the Kasich Administration is seriously considering totally overhauling the Clean Ohio brownfield grant program.  Multiple sources have indicated that the Administration is discussing internally making the next round of Clean Ohio the last for the program in its current form.

During the transportation engineers conference in Columbus, Governor Kasich made remarks that Clean Ohio would be reconstituted.  He said the program needs to improve upon providing funding projects that have the best opportunity to either create or retain jobs.

Back in April I wrote a post titled Clean Ohio Ends 2013....What Next?  In that post I discussed that the Department of Development was planning on four rounds for the competitive Clean Ohio Revitalization Fund (CORF):

  • Round 11 in November 2011 (applications have already been submitted)
  • Round 12 in Award in July 2012 (applications due in January or February)
  • Round 13 in November 2012
  • Round 14 in July 2013

In addition, to the Clean Ohio Assistance Fund (COAF) would receive new funding in July 2012 which would provide assessment (Phase II) funding through July 13.

The Kasich Administration may be planning on scrapping Rounds 13 and 14 and making Round 12 the final round.  If this happens it will make the final round highly competitive with many cities trying to cram projects in at the last opportunity. 

What Next?

There are no details that have been released publicly as to how the remaining funds (Rounds 13 and 14) may be used.  One possibility discussed was the Administration would proactively target sites rather than allow developers to join with cities in filing applications.  Another possibility would be to do away with the Redevelopment Ready and Sustainability Reinvestment tracks that do not require immediate development or jobs.

Its hard to comment on the merits of a new program when details have not been released.  However, there is no doubt the Clean Ohio program is extremely popular with all the cities as well as developers.  The program has been the key to allowing redevelopment on a number of highly contaminated and complex sites that would have otherwise sat idle.  In Ohio, where brownfields are too numerous, the COAF and CORF grants literally forced development onto underutilized or vacant properties. 

Because Clean Ohio was passed by the voters, it seems impossible for the Administration to redirect the money to other programs than brownfields.  However, the Administration does have the latitude to completely reshape the process for how sites get selected for funding. 

We will have to watch to see how it unfolds.  Regardless, it looks rather certain Clean Ohio as we know it will not look the same after the January Round. 


Underground Tanks and Hazardous Waste Units Can Be Big Impediments to Ohio Brownfield Redevelopment

In working on brownfield redevelopment projects, I find that addressing old underground storage tanks (USTs) or hazardous waste (RCRA) units can be one of the trickiest issues to address.

Why are these two issues tricky? Because they complicate the clean up process under Ohio's Voluntary Action Program (VAP)

Due to the flexibility under the VAP and the fact it provides for more cost effective clean up options than other regulatory  programs, the VAP program is a common way to address environmental liabilities at brownfield sites.  In addition, Ohio's premier brownfield grant program- Clean Ohio- requires the grantee to complete a VAP clean up as part of the grant agreement. 

How do USTs and RCRA issues complicate the VAP and Clean Ohio process?

  • Areas where USTs or RCRA units are located are ineligible for a VAP clean up until they are certified closed by the proper regulator
  • Clean Ohio grant programs will not pay for clean up of USTs regulated by the State Fire Marshal Bureau of Underground Storage Tank Regulation (BUSTR)
  • Clean Ohio grant programs significantly restrict the ability to uses funds to pay for hazardous waste unit (RCRA) closures

Understanding a Projects UST and RCRA Risks

Due to these limitations, property developers and companies need to front load in their analysis of a site's redevelopment potential the property's BUSTR and RCRA issues.  It is essential that a full blown examination of any outstanding UST and RCRA closure be performed as part of the Phase I/Phase II environmental assessment process. 

Key questions relatives to USTs include:

  1. Are there BUSTR regulated USTs remaining on site?
  2. Were BUSTR regulated USTs that were removed from the site properly closed in accordance with applicable regulations (i.e. did BUSTR issue a "No Further Action" letter)?
  3. If "No Further Action" (NFAs) letters do not exist for tanks removed, what does BUSTR consider is needed to properly issue such a certification?
  4. What will the costs be associated with receiving a NFA for each tank?
  5. How will the process to obtain an NFA impact the timing of your redevelopment project?

Key question for RCRA units on-site can include:

  1. What is the closure status of the RCRA unit?
  2. What is the size of the unit?
  3. What type of sampling is needed to determine the clean up requirements for the unit?
  4. What will Ohio EPA require in terms of clean up for that unit?

USTs and RCRA issue do not impose a total barrier to development.  However, it is absolutely essential that in industrial property transactions and brownfield redevelopment projects that you gain a thorough understanding of the outstanding RCRA and UST obligations.

(Photo: Missouri Department of Natural Resources)

The Benefits of Clear Environmental Provisions in Sale or Lease Agreements for Industrial Property

The contractual language appearing in purchase or lease agreements for industrial property is critical.  I have seen a number of contracts that were fraught with vague terms or even silent on liability allocation.  Those contracts now define the company's liability exposure.   Protections the company thought they may have are either non-existent or in question.  

That is why it is so important to pay very careful attention to the environmental provisions in the contract for sale or lease of property.  Particularly important are the representations, indemnity and release provisions.  On an industrial property with a legacy of environmental issues, these provisions can often be the most difficult to negotiate because they shape liability risks for years to come. 

A recent federal court ruling provides further proof of the importance of paying careful attention to contract provisions allocating environmental liability.   The Court in United States v. ARG Corporation, Case No. 10-3111 (N.D. Ind. 2011) dismissed a complaint filed by the seller which sought to recover $841,000 in response costs incurred by U.S. EPA in performing clean up activities at the former industrial site.  In dismissing the complaint, the Court found that the purchase contract contained a clear allocation of environmental liability.  In essence, the purchaser avoided nearly $1 million in clean up costs based on the contractual provisions it negotiated prior to purchase.

The contract language at issue stated as follows:

The Seller shall remain solely financially responsible for the Remediation Activities arising from the Seller’s ownership, use or operation of the property prior to the Closing Date, provided however, that the Purchaser covenants not to execute against the Seller’s assets to satisfy the Seller’s financial responsibilities for remediation of pre-closing environmental damage except for the proceeds of recoveries under the general liability policies issued to the seller prior to closing.

The Purchaser shall be solely financially responsible for the Remediation Activities arising from the Purchaser’s ownership, use or operation of the property after the Closing Date.

"Remediation Activities" shall mean investigation and remediation activities, including but not limited to installing, operating, and maintaining all monitoring wells; collecting soil and/or groundwater samples; measuring groundwater levels in measuring wells; soil removal; groundwater treatment; and performing other related assessment activities, necessary to investigate and remediate environmental damage caused by the release of hazardous substances in accordance with any environmental laws.

The Court held that

"this language unambiguously states that ARG is solely responsible for remediating hazardous substances on the property arising from ARG’s ownership, use, or operation prior to the closing...South Bend is solely responsible for remediating hazardous substances on the property arising from South Bend's ownership, use, or operation after the closing date.

The Court also held that if South Bend believes ARG is responsible for cleaning up pre-closing hazardous substances, it will only seek recovery from ARG's insurance policies.  The court found the contract did not indicate South Bend would indemnify ARG if ARG was forced to pay the Government for remediating hazardous substances.

This case is a good example of the benefits of clear contractual language when allocating environmental liabilities.  Due to the high costs involved with clean up, there is a strong incentive for the party on the losing end to put forth creative interpretations of the language in an attempt to pass on or mitigate their liability.   Clear and unambiguous terms can be your best defense in such an instance.

New Funds Available in Clean Ohio Brownfield Grant Fund

As of July 1st, the Clean Ohio Assistance Fund (COAF) has been injected with new funding.  Below is the update recently sent out by the Ohio Department of Development.

I have heard that the 25% set aside for clean up projects has already been accounted for fifteen days into July.  Obviously, there must have been projects in the que that took up that funding immediately.

Remember, a key difference from the way the COAF has operated over nearly the last decade is that COAF will require 10% match on all clean up projects. 

Also, check out the revised Priority Investment Map to see if your project would qualify for COAF.

Clean Ohio Assistance Fund Update

Additional $10M for the COAF program is now available (effective July 1, 2011). The majority of funding, 75%, will be utilized for projects requesting $300,000 or less. This includes both assessment and cleanup projects. The remaining 25% of funding will be set aside for cleanup projects requesting more than $300,000. Additionally, all cleanup applications are required to provide 10% matching funds. Application documents have been revised and are available online. Be sure to download the new version – COAF Application.

The Priority Investment Area map has been updated for the July 2011 – December 2011 term. To be eligible for the COAF program, projects must be located within an area designated on the Priority Investment Area map.

Are You Losing Out on Federal Tax Incentives for Clean Up Expenses?

Are you performing a Voluntary Action Program Clean Up?

Are you cleaning up contamination for a release from a petroleum underground storage tank (BUSTR)?

If you answered yes to either of these questions you may qualify for a significant federal tax incentive which allows you to deduct the clean up costs incurred this year as well as years past. Under the tax incentive, certain environmental cleanup costs at targeted sites may be fully deducted by eligible taxpayers in the year in which they are incurred, rather than having to be capitalized and spread over a period of years.  

What types of expenses could be deductible?

  • Site assessment and investigation;
  • Site monitoring;
  • Cleanup costs;
  • Operation and maintenance costs;
  • State voluntary cleanup program oversight fees; and
  • Removal of demolition debris.

Amended Returns to Capture Costs Spent in Previous Years

Even if you incurred such expenses in years past, but failed to take advantage of the tax incentive you may still be entitled to the deduction.   The excerpt below is from the U.S. EPA tax guide describing the potential to amend prior year returns:

"The Brownfields Tax Incentive is not frequently used, despite its great potential to support property cleanup and reuse. A key reason for the limited use of the incentive may be uncertainty over its availability over an extended period of time. The tax provision has never had long-term authorization and Congress allowed the provision to lapse five times since it was first introduced in 1997. However, retroactive reauthorizations allowed coverage to be available throughout the entire time period from the incentive’s introduction in 1997 until today. In December 2010, the incentive was reauthorized for two years and is retroactive to January 1, 2010. The incentive will remain in effect through December 31, 2011.

Site owners may want to consult their state program or a tax attorney to determine activities that may be considered qualified expenditures. If a taxpayer decides to claim the incentive in future years because cleanup was completed during one of the periods in which the incentive’s authority lapsed, an amended tax return can be filed up to three years after the original return was filed. An amended tax return must be filed within two years if a refund is sought.

Requirements to Qualify for the Tax Incentive

  1. Ownership- The property must be owned by the taxpayer incurring the eligible cleanup expenses, and be used in a trade or business or for the production of income.
  2. Contamination- Hazardous substances or petroleum contamination must be present or potentially present on the property.
  3. Brownfield Property- Taxpayers must obtain a statement from a designated state agency (typically, the state’s environmental agency overseeing the state’s voluntary cleanup program (VCP)) that confirms the site is a brownfield and therefore eligible for the tax incentive. Participation in a state VCP satisfies this requirement.  In Ohio, the VCP is known as the Voluntary Action Program (VAP).

U.S. EPA Resources on Available Federal Tax Incentives

The federal tax incentive for clean up of brownfield properties is not the only tax incentive that may be available for brownfield redevelopment projects.  U.S. EPA has released its 2011 Tax Guide which summarizes a variety of tax incentives for various brownfield and renewable energy projects.  Possible tax incentives include:

  • Brownfield Expensing Tax Incentive:
  • New Markets Tax Credits
  • Low Income Housing Tax Credit
  • Historic Rehabilitation Tax Credit:
  • Energy Efficiency Tax Credits:
  • Renewable Energy Tax Credits

U.S. EPA Brownfield's Tax Incentive Web Page also contains additional resources which describe various tax incentives for brownfield clean up and revitalization.

State Modifies Clean Ohio Brownfield Grant Program

The State has announced the latest modifications to the Clean Ohio Assistance Fund (COAF) policies which provides up to $300,000 for Phase II environmental assessments and up to $750,000 for brownfield clean up.  The State released its COAF policy update last month.

Unlike the Clean Ohio Revitalization Fund (CORF), COAF grants are given out on a rolling basis as long as the State had money during the funding cycle. COAF has traditionally been used to obtain funding for Phase II assessments on brownfields.  The use of the COAF for clean up has been less frequent due to limited funding available and the larger clean up grants available under CORF (up to $3 million). 

The changes to the COAF program this time include:


The policy now explicitly states that abatement of asbestos are eligible clean up costs.  See, 3.06

Matching Funds- 

For the first time, the State is requiring a 10% match for use of COAF for clean up grants.  This means for a max clean up grant, the applicant will need to supply $75,000 toward clean up. While its understandable the State wants to see the applicant have some "skin in the game,"  the no-match component of COAF was one element that made it more attractive than CORF. 

Another issue is that the policy says the match must be spent by the "project approval date."  The policies don't define this term, but it would appear to be the date the Controlling Board approves the issuance of the grant.  This timing seems odd in that applicants would need to spend the 10% before they knew for sure they were getting the grant.

Jobs Commitment-

Perhaps even a larger change than the 10% match, is the requirement that COAF clean ups for industrial or commercial use must generate or retain at least 10 jobs.  See 6.09  Not every project has a job component at the get go. 

The State previously recognized that some brownfields may not have redevelopment committed but are located in prime locations for future development.  This is why for the CORF the State created the "Redevelopment Ready Track."  Perhaps the limited amount of COAF clean up funds available is driving the State to use the money only for projects that have a job component.

No Longer a "First Come/First Serve" Program-

In the e-mail to interested parties providing notice of the changes to the COAF policies, the Ohio Department of Development also stated the following:

"During the month of July, cleanup applications will be reviewed and approved based on project merits rather than a first come/first serve basis."

While the indication is projects will be evaluated on their merits, there were no other changes to the policies which shed light as to how they will be evaluated on their merits.  Unlike the CORF application process there is no defined scoring methodology for projects.  This statement from ODOD can probably only be interpreted to mean the Director retains discretion to reject your clean up project as not worthy of COAF funding. 

Policies Released on Brownfield Loan Program

The Ohio Department of Development working with the Ohio Water Development Authority (OWDA) has released their policies for use of the revamped low interest brownfield loan program.  Under the program, private companies (among others) can get a low interest loan up to $500,000 for performing sampling (assessment) and up to $5 million for clean up.

As discussed in my prior post announcing changes to the loan program, the single biggest change is that the loan program now allows companies that own contaminated property and caused or contributed to the contamination to qualify for the program.  Any company that caused or contributed to contamination is not directly eligible for Clean Ohio funding.

Here are some key requirements that are spelled out in the new policies governing the program.

  • Clean Up Loans- Must already have done all the assessment and have designed a remedy to qualify for a clean up loan. 
  • Redevelopment Requirement?-  The ODOD website says the project must involve redevelopment for the property to be qualify for the loan.  Therefore, it would appear an existing company with no expansion plans cannot qualify for the loan if they simply want to address historical contamination issues on property they own.  As discussed below, the actual wording of the policy may provide greater flexibility.
  • Eligible Costs- assessment, demolition, remediation and consultant costs
  • Payment Term- below market interest rate over a 10 year term

Biggest Disappointment

The most disappointing aspect of the policies governing the new loan program is the requirement for redevelopment of the property.   The loan program will have a very limited appeal to only existing companies responsible for historical contamination wishing to expand. 

However, the actual wording of the policy says projects are eligible "where expansion or redevelopment is complicated by known or potential releases of hazardous substances.”  This is far more open ended that requiring a demonstration actual expansion or redevelopment will occur.

Hopefully, ODOD and OWDA will allow a more expansive interpretation of this language. Why not give the benefit of the low interest loan to companies who simply want to address historical contamination on their property?  Certainly the State could justify rewarding these "volunteers" because the policy explicitly make clear any company that is under a legal mandate (order or permit requirement) to clean their property is ineligible. 

 Policy 1.03 CERCLA Limitation for Eligible Borrowers:

Policy 1.03- Borrowers must be exempt from Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), as amended CERCLA liability for hazardous substance cleanup applications.

I don't know what "exempt from CERCLA" really means.  Is this a reference to Bona Fide Purchaser defense?  There are very few exemptions from CERCLA for companies responsible for existing contamination.  Policy 1.03 could use further clarification.

Will There Be Interest?

Whle the greater flexibility provided by the new policies make the program more attractive, it will be interesting to see whether it garners any interest.  Even with the changes, the program will appeal to a small subset of companies looking to address historical contamination.  Any other party that has no responsibliity for contamination has a far better option under the Clean Ohio program.

Clean Ohio Program Ends 2012...What's Next?

In 2000, Ohio originally voted to approve the Clean Ohio Fund as a $400 million dollar bond program. In 2008, the Clean Ohio Fund was reauthorized through a ballot initiative known as Issue 2. The ballot initiative was overwhelmingly approved in all 88 counties which extended the Fund with another $400 million dollars.

Clean Ohio is probably the most successful brownfield redevelopment program in the Country.  Approximately $400 million of the $800 million in funding went to brownfield projects in the last twelve years.  Here is an outdated chart from the Clean Ohio Fund Report which shows the number of projects and dollars used for brownfield revitalization just in the first four rounds of the program. 

Since the first four rounds that State has gone to two rounds per year.  We are now up to Round number 10. 

The Clean Ohio Fund Interactive Map provides the location and project information for over 1,200 projects financed through the Clean Ohio Fund, representing over $627 million in awards to date.

Four Rounds Left After July 

Round 10 is in July.  Then there is enough funding for Round 11-2 (Round 12 will be May 2012).  That is not a lot more opportunities to use the program if you have a project that you think would be a good match for Clean Ohio funding.  It takes around 6-8 months to get a project ready for a Clean Ohio Revitalization Fund (CORF) project.  Which means projects for Round 10 are basically getting ready to be finalized and Round 11 projects are already being discussed.

Will Clean Ohio Continue?

The Clean Ohio program has been wildly successful.  Funding projects across the State.  Many significant development projects simply would not have happened with out the grant funds available through the program. 

While perhaps a little premature, its time to start planning another ballot initiative if suporters are going to seek to renew the program.  Governor Kasich has not been asked his opinion as to whether the program should continue.  While the program is funded through bonds it still takes state revenue to retire those bonds.  With an $8 billion budget hole and a difficult budget process, the challenges facing renewal have never been greater.

What Happens if Clean Ohio is Not Renewed?

The major source of assistance in Ohio to spur brownfield redevelopment will disappear.  There are other federal and local programs, but none with the resources and successful track record like Clean Ohio.  Unfortunately, if the program is not renewed, many brownfield sites with significant contamination will simply be avoided.  New development will be pushed out to greenfields and perhaps away from our urban core.

With the number of brownfield sites remaining in the State, the need for the program remains as strong as it was in 2000.

Is the Voluntary Clean Up Program in Ohio Working?

In 1994, the State created the Voluntary Action Program (VAP) to promote voluntary clean up of industrial and commercial sites, including those currently utilized as well as brownfields.

By 1994 standards the VAP program was cutting edge.  It utilized certified professionals (CPs) who performed the investigation and implemented clean ups to meet standards established by Ohio EPA.  In this sense it was a privatized program.  Letting the company or developer ("volunteer") control the clean up process.

By allowing CPs to direct the clean ups to meet standards, costs would be reduced comparative to other clean up programs.  Rather than having sampling plans reviewed back and forth, the CP had to meet the rule.  Rather than debating appropriate remedies in documents back and forth, the CP designed the remedy and it was acceptable as long as it met VAP standards. 

There are many positive elements of the VAP program seventeen years later.  However, a look at just the numbers raises the question as to whether its enough or whether other programs need to be developed to get ahead of Ohio's growing brownfield problem. 

Here are the VAP statistics presented by Ohio EPA this winter: 

  • 422 No Further Action Letters ("NFAs") have been issued by CPs-  A NFA is the document that details the clean up meets VAP standards. 
  • 386 requests for Covenants not to Sue ("CNS")- There is no requirement that a volunteer h submit the NFA to Ohio EPA in order to obtain a CNS (the legal release)
  • 18 denied CNSs
  • 25 Withdrawn
  • 29 pending review 
  • 314 CNSs have been Issued

To summarize, to Ohio EPA's knowledge 422 NFAs have been issued by CPs in the seventeen (17) years the program has been in operation.  I say "to Ohio EPA's knowledge" because there is no requirement that you even disclose to Ohio EPA that an NFA was prepared.  In fact, many companies elect to simply obtain an NFA an never pursue the CNS from Ohio EPA due to the added administrative costs.

In seventeen (17) years, 314 sites have received a CNS, meaning Ohio EPA has verified the site meets VAP standards and issued a legal release. 

Brownfields-  Ohio Needs More Tools in its Tool Box

Focusing on brownfields, VAP is the only State tool to remove environmental legal liability with contaminated properties. (Click here for discussion of gaps in federal "AAI Rule")  To only have 314 sites addressed in 17 years has to raise the question whether we need other tools than VAP to address these sites in order to get ahead of a growing inventory of brownfield properties.

For comparison, a 1996 study identified approximately 350 brownfields and 1,000, to 2,000 condemned structures in Cleveland.  I can't imagine these number improved following the recent recession.

If you broaden out to Cuyahoga County, the Cuyahoga County Planning Commission found that 40,000 acres, or 14%, of the County’s land, has at some time been devoted to an industry that has historically been known to be a higher risk for environmental contamination.

Those are staggering figures - 314 VAP sites in 17 years versus an estimated 350 sites in Cleveland alone.  This represents only one city and one county in Ohio.  Just looking at the statistics suggests the VAP alone isn't  enough to encourage reuse of brownfields sites in the State.

Questions Persist Regarding the Quality of Environmental Assessment

Phase I environmental assessments have become the norm in virtually any commercial or industrial property transaction.  Almost any financial institution will require a Phase I report prior to agreeing to finance a transaction.  

In this regard, Phase I's have become a commodity- A box that needs to checked off before a deal can go through.  But buyer beware, beyond securing your financing you may not truly know the condition of your property.  Or even worse, you may not secure the legal protections from environmental liability you intended by procuring your Phase I.

A recent U.S. EPA study evaluated the quality of 35 Phase I reports that were performed on brownfields in connection with federal grant funding.  The Phase I reports were evaluated against basic requirements necessary to secure protections under the "All Appropriate Inquiries Rules (AAI)" (a shield from CERCLA liability for innocent purchasers).

"All Appropriate Inquiries"

Under federal law, in order to establish a shield from liability under CERCLA, a purchaser must, prior to the date of acquisition, perform "all appropriate inquiries" into ownership and uses of the property.  In 2005, U.S. EPA finalized its rule establishing mandatory standards for conducting AAI to secure liability protection.

IG Evaluates 35 Phase I's

In the study, the Inspector General evaluated the 35 Phase I reports to see if they met the required elements of the AAI rule.  Not one of the reports met the U.S. EPA required elements (or alternative ASTM standard).  Worse yet, the missing components were simply formalistic elements necessary for a Phase I to meet U.S. EPA standards.  They did not evaluate the professional judgments in the reports which would be more prone to varying opinion.  Aspects evaluated included:

  1. Environmental Professional Qualification Statement- U.S. EPA AAI rule requires a boiler plate statement to be included in the report that the consultant meets the standards to be considered an environmental professional. 
  2. Signature-  The environmental professional who responsible for the assessment must sign the report. 
  3. Data Gaps-  The professional must identify any data gaps that may have impacted their ability to identify whether conditions at the property indicate a release or potential release occurred at the site.
  4. Opinion Statement-  The report must include a conclusion section that summarizes all "recognized environmental conditions" at the property.  Any areas where there were conditions identified on the property which indicate a release or potential release occurred.

In the opinion of the Inspector General, not a single one of the 35 reports evaluated adhered to all of the requirements set forth above. 

The report is another example of the risks associated with hiring an environmental consultant to perform a Phase I.  From my discussions banks don't often evaluate the quality of the consultant or even whether the report meets the ASTM or EPA rule requirements. 

What are the risks to the future property owners in the transaction?  The Inspector General summarized the risks as follows:

Improper AAI investigations introduce risk that the environmental conditions of a property have not been properly or adequately assessed. Consequently, decisions about appropriate uses of redeveloped or reused brownfields properties may be based on improper assessments. Ultimately, threats to human health and the environment could go unrecognized.

Beyond the risks of the unknown conditions, you also could be jeopardizing the legal protections available under the AAI rule.  The rule is very specific in mandating an ASTM or EPA regulatory compliant Phase I assessment before the legal liability protections kick in.  Years later, when an issue arises, you may find you have no shield from liability due to an inadequate Phase I.


  • If you want a true evaluation of the conditions of the property hire a quality environmental consultant.  Avoid consultants who are simply churning Phase I's to move deals forward.  Low ball pricing can often be a red flag regarding the quality of the report.
  • Review the Phase I for compliance with standards to secure liability protections.
Continue Reading...

New Interactive Map Highlights Ohio Brownfield Projects

The Clean Ohio program has released a new interactive tool called the"Project Location and Information Map" which provides an interesting overview of brownfield and greenfield projects that have received grant funding under the program. 

You can search by type of grant funds for all projects across Ohio.  You can also search by specific county and see all the projects in that area that received funding.

The project information is pretty limited once you select a specific site.  It basically has a picture of the site and a description of the type of funding received (the picture above was taken from interactive map).  There does not appear to be any details on the type of development anticipated or description of clean up issues encountered.

The State is inviting the project developers to provide more description, so perhaps there is an opportunity to give more detail.  It would be helpful if the description on the map at least identified the parties involved on the project.  

Due to the limited information, the map does not have much utility other than highlighting the large number of projects that have received grant funding across the State. However, you do have other options to gain more information about projects listed on the map. 

Perhaps you are interested in a property in close proximity to a project that received funding.  You always have the option of making a public record request to find out more details on a specific project.  Under public records law you are entitled to see all the documents generated regarding the investigation and clean up associated with a project.

JobsOhio and Clean Ohio

The Governor's top legislative priority is the privatization of the State's economic development functions.  House Bill 1, known as "JobsOhio", has been introduced and a vote in the Senate may come yet this week. 

The Ohio Department of Development (ODOD) plays a critical role in the administration of the Clean Ohio program which provides millions in grants for brownfield redevelopment.  The Department's current role includes the following:

  • Review for Clean Ohio grant applications for completeness;
  • With the assistance of Ohio EPA, makes eligibility determinations;
  • Meets with applicants to discuss projects (known as "PRAMs");
  • Selects which projects will receive Clean Ohio Assistance Fund (COAF) funding which has recently become Phase II assessment grants;
  • Assists the Clean Ohio Council in evaluating projects for Clean Ohio Revitalization Fund (CORF) funding for clean up; and
  • Determines which projects can be reimbursed with grant funds.

On the brownfield projects I work on, the ODOD personnel are the key point of contact when evaluating projects and through out implementation of the project.  More than once, ODOD personnel have made absolutely critical decisions that impact the viability of projects or have made significant reimbursement decisions that cost  developers hundreds of thousands of dollars. 

With the privatization of economic development functions, ODOD's key role will almost certainly be absorbed by another state agency.  Most likely, Ohio EPA will pick up these functions, but its possible the functions could stay with the newly created non-profit corporate entity.

How far away are we from that transition? House Bill 1 is only the first step in privatization of the Ohio Department of Development and the associated transfer of existing functions to other state agencies.  The bill basically establishes the non-profit corporation to be known as JobsOhio.  The Bill then calls for a six month consultation process to evaluate transition of the other functions of ODOD. 

Here is the relevant section of H.B. 1:

Sec. 187.05. The director of development, as soon as
practical after the effective date of this section, shall, in
consultation with the governor, evaluate all powers, functions,
and duties of the department. Within six months after that
effective date, the director shall submit a report to the general
assembly recommending statutory changes necessary to improve the
functioning and efficiency of the department and to transfer
specified powers, functions, and duties of the department to other
existing agencies of the state or to JobsOhio, or eliminate
specified powers, functions, or duties
. The recommendations shall
be submitted in writing to the speaker and minority leader of the
house of representatives and the president and minority leader of
the senate.

After submitting the report, the director, in consultation
with the governor, shall continue to evaluate the department and
make additional recommendations on such matters to the general

We are probably at least a year away from seeing any of ODOD's responsibilities transition to other agencies or to the JobsOhio entity.  For now it will be the status quo.  But in the near future a crucial decision will be made as to who will administer ODOD's critical Clean Ohio responsibilities.

Ohio Bill Introduced to Give Tax Credit for Site Remediation

The Ohio House has introduced a bill that would provide a tax incentive to clean up contaminated properties.  House Bill 10, if enacted, would provide an exemption from penalties as well as a tax credit to encourage companies to voluntarily remediate property.

Similar to other existing tax incentives, the bill encourages companies to remediate property under Ohio's Voluntary Action Program (VAP).  As discussed in my previous post, the VAP offers a much better option for addressing historical contamination on-site than traditional environmental clean up programs such as CERCLA.

One Year Exemption from Penalties

The bill as introduced, would provide any person or company to which a covenant not to sue (CNS) under the VAP was issued, a one year exemption from any fees or civil or administrative penalties that would be imposed under any environmental law. 

The bill is vague as to how the exemption would operate in practice.  For example, does it exempt penalties associated with violations that occur in that one year period? Or does it exempt the company from any and all violations, including historical violations, if an action is brought during the year following the CNS?

The other component that will likely be tweaked once the bill goes through hearings is the broad nature of the exemption.  It would exempt a company from all penalties, even those totally unrelated to the clean up of the property.

Tax Exemption for Site Remediation Costs

The exemption would cover remediation costs to clean up vacant land as well as property returned to commercial or industrial use.  The tax credit essentially doubles if the property is used for "productive use" which is defined as any trade or business. 

The tax credit applies to the commercial activity tax or the applicable income tax.   The credit would not apply (expire) to any remediation expenditures paid or incurred for a VAP clean up initiated after December 31, 2017.  A VAP is deemed "initiated" if a Phase I is performed.


Any tax exemption is going to be monumentally difficult to pass when the State of Ohio faces a $8 billion dollar budget deficit.  So, the prospects of this bill may not be bright. 

The bill's goal of spurring voluntary clean ups at industrial properties is admirable.  After the recent financial crisis, Ohio and the entire Midwest saw exponential growth in abandoned properties with contamination.  Creating incentives to address these properties is good for the State.

However, rather than a tax credit for remediation costs it may be a more prudent approach to look at expanding the tax exemption for new development on brownfields. (See prior post discussing issues with current brownfield exemption).   The tax impact on revenues would be less dramatic and even could be neutral.

Regardless, it is good to see Legislative policy debate regarding more incentives for voluntary remediations and brownfield redevelopment.  After the financial crisis, Ohio needs to get much more proactive to address its ever expanding portfolio of brownfield properties.

Ohio Revamps Brownfield Loan Program

The Ohio Water Development Authority (OWDA) has long had a revolving loan fund to help finance brownfield clean up projects.  However, the OWDA program has rarely been utilized because of two factors:

  • Clean Ohio Program-  Offers grants up to $3 million for clean up and remediation of sites (i.e. why take a loan when there is significant grant money available?)
  • Non-competitive interest rates

At this week's Ohio Brownfield Conference, the State announced that they soon would be revamping the OWDA program to make it more attractive.  The two major changes to be made are:

  1. Responsible Parties-  OWDA will allow companies that have legal responsibility for contamination to be eligible for loans so long as the company is not under enforcement orders. Responsible parties (PRPs) are not eligible for Clean Ohio or other federal grant funding.
  2. Competitive Interest Rates-  The State did not announce the exact interest rate.  They simply stated the the new rates would be competitive.

The biggest change is allowing responsible parties to be eligible for loans.  Now companies have a new financing option if they want to address historical contamination on their property to eliminate liability risks.  Companies can utilize the Ohio Voluntary Action Program (VAP) in performing their clean up.

Clean up under VAP is a far better option than clean up under traditional enforcement or regulatory programs like RCRA (hazardous waste regulatory program).  VAP clean ups are:

  • Cheaper- the program allows use of institutional (i.e. deed restrictions) and engineering controls (physical barriers) as an alternative to more costly removal/disposal of contamination
  • Companies have much more flexibility in how to perform their clean up-
    • Residential versus industrial/commercial standards can be selected
    • Buildings and parking lots can be used to contain contamination versus digging and hauling material off-site
    • Companies private environmental consultant oversees the clean up and selects remedies versus the regulator

The OWDA program may provided needed financing to companies wishing to take advantage of the VAP program.

We will need to see the details for the changes to the program once the State rolls them out.  I was told that would occur in the next few weeks.  However, these changes appear to make the OWDA Brownfield Loan Program much more attractive.

(See extended entry for the current program guidelines which will soon be changed)

Continue Reading...

Clean Ohio Council Creates New Option for Sustainable Reinvestment

Clean Ohio Council has expanded the types of eligible projects that can receive funding under the Clean Ohio Revitilization Fund (CORF).  Parks, urban waterfronts, solar and wind projects are now eligible for funding so long as these projects take place on a brownfield. 

This change will create greater competition begining in Round 10 of the program.  

Three Grant Tracks Under CORF

  1. Known End Use Track- $3 million for projects with a use of the property identified as part of the application.
  2. Redevelopment Read Track- $2 million for projects on land believed to be primed for redevelopment, but with no specific end use identified. 
  3. Sustainable Reinvestment Pilot Track- $1.5 million for sustainable Infrastructure, which includes certain park projects and green infrastructure, urban waterfronts, and cleanfields and brightfields (Wind and Solar projects).

The CORF program has funded very good projects which have always been classic brownfield redevelopment projects, such as the following:

  • Construction of new commercial or industrial facilities on a brownfield property
  • Expansion of existing industrial and manufacturing facilities onto contaminated land
  • Refurbishment and/or renovation of existing structures for reuse

The classic redevelopment projects with known end users have become less frequent in recent rounds.   In order to increase the number of applicants, the Clean Ohio Council decided to create the Known End User Track.  This allowed clean up of brownfields in key locations in hopes of attracting development on these parcels.

Perhaps because the State fears future reductions in applications submitted for CORF, the Clean Ohio has decided to expand eligible projects far beyond the classic brownfield redevelopment project.

Sustainable Reinvestment Pilot Track

In Round 10 of the program, there will be up to $8 million available for these projects.  Here are some of the key aspects of the Sustainable Reinvestment Pilot Track:

  • Can only get a maximum of $1.5 million in funding
  • Must be on a brownfield
  • Can spend the grant funds on demolition, clean up and infrastructure activities
  • Infrastructure expenditures are capped at $400,000
  • For this track, the definition of "infrastructure" is expanded to include:
    • pathways
    • structures used to manage stormwater
    • wetlands
    • stream restoration
  • 25% Match is required, and the following can be used as match:
    • park amenities
    • plants, trees, landscaping, urban gardens
    • solar panels and components
    • wind turbine components
    • green roofs
  • Projects must meet the following for infrastructure or new construction:
    • Follow sustainable best practices
    • LEED
    • Green Infrastructure Guidelines
    • Local ordinance mandating all future construction on the project property meet LEED guidelines for a period of 10 years

Parks and Waterfront Restoration Projects Now Eligible

Under the new track, parks and urban waterfronts redevelopments can also be projects.  This subcategory is called the Signature Parks, Sustainable Infrastructure and Urban Waterfronts category.  All park and waterfront projects must meet the following:

  •  80% of area must be greenspace or public space
  • max 20% of area can be used for parking
  • deed restrictions good for 10 years
  • commitment for maintenance and stewardship
  • Signature Parks or Sustainable Infrastructure must be a minimum of 1.5 acres
  • Urban Waterfront projects must be a minimum of 1.0 acre

Cleanfields/Brightfields (Wind and Solar)

Nothing is provided in the Round 10 CORF policies regarding restrictions on this subcategory of the Sustainable Reinvestment Track.  However, if you review the scoring methodology the Council will use to evaluate these projects, the following a key considerations:

  • project site has grid access with a participating electric company; or
  • project will result in net-metering for an existing entity
  • the electric generation site will be a minimum of 25 acres

Impact of New Track

Clean Ohio has not increased funding by $8 million.  Rather, the Council decided to make up to $8 million of the total $23 million available in CORF Round 10 available for the new Sustainable Reinvestment projects. For future applicants, this change likely means increased competition. 

While grant funding for wind, solar, parks and urban stream restoration is understandable, the Clean Ohio program is moving away from classic brownfield redevelopment projects.  The core of the program has always been to remove the barriers to commercial and/or industrial reuse of contaminated land.  In essence, with more competition less money will be available for these classic clean up projects.


Applications are due to your local library by January 14, 2011 as a part of the scheduled Round 10 of the Clean Ohio Revitalization Fund. Approved applications will be announced in May 2011. 

U.S. EPA Solicits Proposals for Brownfield Assessment and Clean Up Grants

U.S. EPA has released its fiscal year 2011 request for proposals (RFP) for brownfield assessment and clean up grants.   There is a relatively short window of opportunity to file your application- the deadline is October 15, 2010

[Click here for access to U.S. EPA's RFP for the brownfield assessment, clean up and revolving loan]

There is a total of $92.9 million available.   While the RFP allows for greater funding under certain circumstances, the basic limit is $200,000 per site for assessment or clean up.  EPA is required to expend 25% of the total amount available for sites contaminated with petroleum. 

Ohio is lucky to have one of the best state brownfield grant programs- Clean Ohio.  Often Clean Ohio is a better option than pursuing the U.S. EPA grant funding because U.S. EPA's program is a national competition.  However, there are certain circumstances that make the U.S. EPA brownfield grant program potentially a better option than Clean Ohio.

COAF Clean Up Funding Exhausted for this Fiscal Year

The Ohio Dept. of Development announced that it is no longer providing funding under the Clean Ohio Assistance Fund (COAF) for clean up of brownfields in fiscal year 2011.  However, assessment funding remains.

COAF can provide provide up to $750,000 in funding for clean up of brownfields.  Projects are evaluated and grants awarded on a rolling basis. 

Clean Ohio Revitalization Fund (CORF) is still available to fund clean up.  It provides up to $3 million in funding per site.  However, a 25% match is required and there are only two CORF rounds per year which typically are competitive.  Therefore, for smaller clean up projects looking for funding in the next year, U.S. EPA's program may be the better option.

Abandoned or Vacant Gas Stations

Under the Clean Ohio policies, removal and clean up of BUSTR (Bureau of Underground Storage Tank Regulation) regulated storage tanks and remediation of leaks from such tanks are not eligible costs under either the Clean Ohio Assistance Fund (COAF) or the Clean Ohio Revitalization Fund (CORF).

For local governments that are trying to deal with abandoned or vacant gas stations in their communities, the U.S. EPA brownfield grant may be their best option.  Communities can seek money for sampling of the site to determine if contamination exists. 

The fear of the unknown (whether contamination exists) acts as a strong deterrent to purchase and redevelopment by private parties.  Once sampling data has been generated, it removes one more impediment to purchase and redevelopment of the site.

Of course if sampling reveals contamination, this can act as a major obstacle to redevelopment.  However, communities can secure clean up funding for these sites under the U.S. EPA program.

Community Assessment Grants

U.S. EPA's program may also be better for communities that are interested in creating a brownfield inventory of various sites within their jurisdiction.  Also, U.S. EPA's program is great for local communities that want to create and fund their own local brownfield assessment programs. 

For example, in Northeast Ohio, the Northcoast Brownfield Coalition was created using U.S. EPA funding.  The Coalition is made up of  the Cuyahoga County Board of Commissioners, the City of Cleveland, the Cleveland-Cuyahoga Port Authority and the Northeast Ohio First Suburbs Consortium.  The Coalition makes provides local grant funding for brownfield projects in Northeast Ohio in amounts up to $30,000.

Below are the applicable limits for assessment grants under the U.S. EPA program:







(Photo:  everystockphoto peasap)

Eligible Areas for Clean Ohio Assistance Fund Reduced

Ohio has one of the best state brownfield grant programs in the country.  There are two pots of money available at the state level:

  • Clean Ohio Revitalization Fund (CORF)- Grant that offers up to $3 million to reimburse clean up and some redevelopment costs.  Requires a 25% match.  Typically awards are made twice a year and applications for projects compete against one another for limited funding.
  • Clean Ohio Assistance Fund (COAF)- Grants are awarded on a rolling basis so long as money remains available in the grant cycle.  COAF pays up to $300,000 in assessment costs (Phase II) and $750,000 for clean up.

A year ago, the Ohio Department of Development (ODOD) announced a major change to COAF-greatly expanding areas eligible to submit COAF applications.  ODOD has just released the 2010 Priority Investment map which shrinks the eligible areas back down the "normal" coverage under the program.

Properties eligible to request COAF funding are those located in a "inner city area", a "labor surplus area" or a "situational distress area" as defined by O.R.C. 122.65(H). Each year the Ohio Department of Development releases a map of the State that identifies which areas fall under one of the three categories and could apply.

ODOD also announced a freeze on COAF clean up grant requests because the number of applications in the pipeline already exceed available funds for FY 2011.  You can still submit an application, but you will not receive clean up funding in FY 2011.  This is in part because ODOD decided to prioritize Phase II grants last year thereby reducing available funding for clean up.


Important Ohio EPA Updates on Brownfield Redevelopment

Recently, Ohio EPA released its newsletter directed toward those interested in brownfield redevelopment (SABR News).  The July 2010 newsletter included some important recent developments at the federal and state level.

Federal Brownfields Legislation

The Federal Brownfield Re-authorization Bill was introduced in May 2010.  If the bill passes it could include some important reforms to U.S. EPA's brownfield programs, including:

  • Increased funding- From $350 million in 2011 up to  $600 million in FFY 2016.  While an increase in funding helps spur brownfield redevelopment, one has to question whether such an increase is at all likely given the state of the federal deficit.
  • Increase in the cap on federal grants-  Move from $200,000 to $750,000. This is obvious change because the cap was woefully low compared to real word sampling and clean up costs at brownfield sites. Compare it to the Clean Ohio program that has a cap for property assessment work of $300,000.  Over and above the assessment money, you can also get a maximum of $3 million in clean up funding under Clean Ohio. 
  • Locally owned properties eligible for federal funding-  Under current law, any municipality who takes ownership of a parcel through foreclosure is considered a PRP under CERCLA and is ineligible for federal brownfield funding.  The legislation would remove this prohibition. This is a very important change.  Cities often take properties because of health or safety issues presented by their current conditions.  We shouldn't penalize cities for being proactive.

Background Soils Workgroup

The newsletter provides an update on Ohio EPA's effort to create a background soil database.  Native Ohio soils can contain various contaminants.  For example, Ohio farm soils are known for higher natural arsenic content. 

At clean up sites, consultants are often asked to perform an analysis to determine if detected levels of contamination are "above background."  If levels are at or below background, then remediation is not necessary. 

The site specific background evaluations can become time intensive and costly.  Hopefully, by producing an Ohio background soil database these types of evaluations will be streamlined and can be performed in a more cost effective manner.  A draft of the database may be available by this Fall.

New Guidance on Vapor Intrusion

In May 2010, Ohio EPA released its new guidance document for sampling and evaluation of potential vapor intrusion associated with contaminated soil and groundwater.  The technical guidance document provides information regarding how Ohio EPA will determine whether soil or ground water contamination would potentially result in unhealthy indoor air exposure to occupants of buildings. 

Vapor intrusion is getting much more attention nationally.  Previously, Ohio EPA simply referred to U.S. EPA's OSWER guidance on vapor intrusion.  Now, Ohio EPA has developed their detailed guidance. 

From discussion with some environmental consultants, they indicate that the Ohio EPA guidance seems to tilt the scales toward sampling in addition to just modeling.  Regardless, it is an important guidance document on an issue that will be receiving heightened attention.

Private Party Environmental Assessments Need to be Encouraged

A recent article in the Columbus Dispatch, authored by Spencer Hunt, paints a sensationalistic depiction of environmental contamination on a former manufacturing site.  The article suggests toxic contaminants were hidden from the State EPA.  While it may be interesting to write a story about contamination on the new casino site in Columbus, the portrayal misses some key aspects of brownfield redevelopment.  Here are some excerpts from the story:
Hush-Hush Hazards
State kept unaware of environmental dangers at casino site
Delphi spent about a year identifying toxins at the West Side manufacturing plant it closed in 2007 but never told the state about what it found. It wasn’t required to. New owner Penn National Gaming has shared Delphi’s 3,000-page report with the EPA and plans to clean up the site before opening a casino in 2012... Prospective buyers have a right to know about any potential problems, said Tiffani Kavalec, the agency's (Ohio EPA) cleanup and reuse-section manager.

"If they had any expectations of selling the property, they would have had to do this," Kavalec said.

But what might be surprising is that companies don't have to share their findings with the government.

The story misses several key issues regarding brownfields.

  1. Surprise..old manufacturing plants have contamination- It is expected that a plant that operated for 70 years is going to leave behind some residual environmental issues.  The plant pre-dated most of the modern environmental regulations.
  2. Companies routinely perform assessments of their properties-  The privatized system works in the sense companies are encouraged to evaluate and assess their properties. Phase I and Phase II environmental assessments have become routine in any private party real estate transactions.  Any sophisticated purchaser will demand a due diligence period to understand the issues associated with the property they are considering purchasing.
  3. Regulations contain reporting obligations-  Many environmental regulations, including hazardous waste regulations, contain mandatory reporting requirements.  Companies that violate these provisions would still be open to enforcement.  Its the historical contamination issues that generally fall outside these mandatory reporting requirements.
  4. Mandatory reporting would discourage evaluation-  If companies were required to submit every environmental assessment they performed to Ohio EPA, it would act as a strong deterrent to performance of assessments.  These are voluntary assessments after all.  Companies perform them to get a better understanding of potential liabilities as well as facilitate transfer of the property. 
  5. A brownfield redevelopment success story-  Penn Central is purchasing and redeveloping a contaminated brownfield that is currently owned by a bankrupt company.  Without the redevelopment, this brownfield, like many in the State would remain contaminated.  Without the environmental assessments, Penn Central may have been unwilling to take the risk of buying unknown liabilities. 
  6. State and local grant programs pay for assessments-  In recognition that the lack of information regarding contamination on property can act as a deterrent to redevelopment, there are State and local brownfield grant programs that will pay for these assessments.  The biggest and best program is Clean Ohio, which will pay for up to $300,000 in assessment costs.  Clean Ohio has been a huge success by overcoming impediments to private party transactions involving brownfields, including assessment and clean up costs.


We should be encouraging private parties to perform environmental assessments of their properties.  Only by understanding the levels of contamination can a clean up cost be calculated.  Potential buyers must know that number to be comfortable with moving forward with the transaction.

If private parties are discouraged from performing assessments there will be a greater need for federal, state and local grant funding to pay for these costs. Most prospective purchasers are unwilling to pay a few hundred thousand dollars to perform sampling unless there are very strong business reasons for doing so.


Addressing the State Liability Gap in the Federal "Innocent Landowner Defense"

Liability for pre-existing contamination acts as a strong deterrent to re-use of brownfield properties.  Prospective purchasers simply do not want to expose themselves to potential liability especially when they had nothing to do with the contamination.

At the federal level, there has been an attempt to address liability exposure in order to provide prospective purchasers some level of liability protection.  However, even though tools exist at the federal level, potential exposure to state environmental liabilities can act as its own deterrent. 

While Clean Ohio may be one of the best brownfield grant programs, not every redevelopment or re-use of a brownfield is right for Clean Ohio.  Given the number of vacant and idled brownfield properties in Ohio, perhaps its time Ohio looked to strengthen protections for innocent purchasers to encourage re-use and prevent urban sprawl.

Federal "Innocent Landowner" Defense

CERCLA (otherwise known as the Superfund law) establishes joint and several liability to a variety of parties, including property owners, for releases of hazardous substances.  Liability can attach regardless of whether you generated or brought the contamination to the property.

The 2002 Small Business Liability Relief and Brownfield Revitalization Act (“the Brownfield Amendments”) amended CERCLA to provide for protections for purchasers of property.  Under the Brownfield Amendments a person can receive liability protections when purchasing contaminated property, it the person meets certain requirements. This is commonly referred to as the “innocent landowner defense.”

Under federal law, in order to establish the innocent landowner defense the purchaser must, prior to the date of acquisition of the property, perform “all appropriate inquiries” into prior ownership and uses of a property. In 2005, U.S. EPA finalized a rule which establishes mandatory standards for conducting all appropriate inquiries ("AAI Rule").

If the investigation (a Phase I assessment) spots no issues, then the legal protection attaches if procedures are followed set forth in the AAI rule. If the investigation of the property reveals the likelihood that a release has occurred, the AAI rule requires reasonable steps be taken to address the release or contain it before you receive liability protection.

But what about State environmental liability?

State environmental statutes provides separate authority to bring actions for historical contamination on brownfield properties.  While there are certain limitations on that authority, I have had clients express concern regarding this liability exposure.

The State of Ohio does not have a regulation or even a policy that recognizes the "innocent landowner" defense.  Meeting the AAI rule will not establish a legal defense against state statutory environmental liabilities.  While the State may exercise enforcement discretion, some clients don't have the risk tolerance to live with that potential exposure.

Should Ohio adopt some kind of "innocent landowner" protection to attract re-use of brownfields?

At a minimum, some formal recognition of the AAI rule by the State would at least provide some level of comfort.  However, given the number of brownfield sites in the State, something stronger is warranted. 

One potential model is the Clean Michigan Initiative.  Under this law, the State provides liability protection to innocent purchasers similar to the federal AAI rule.  Here is a quick synopsis of the program:

  • Baseline Environmental Assessment (BEA)- A BEA is performed which is a simpler, streamlined alternative to full blown clean up of the site.
  • Establish the Baseline- BEA is used to gather information about a contaminated property when the owner or operator changes so existing contamination can be distinguished from any that might occur once a new owner or operator acquires the property.
  • Timing- the BEA must be performed prior to or no more than 45 days after the date of purchase, foreclosure, or becoming the operator, whichever occurs first; 
  • Disclose -  the results of the BEA must be provided to the Michigan Department of Environmental Quality (MDEQ) and subsequent purchasers and lessee operators.
  • Due Care Responsibilities- Purchasers need only take actions sufficient to ensure that their use of the property: 1) does not allow an unacceptable exposure to contamination, 2) does not worsen the contamination, and 3) protects against the reasonably foreseeable actions of third parties such as contractors or trespassers.

Very similar to the Federal AAI rule, Michigan's BEA serves as a good model to address State liabilities at contaminated properties.  Such protection could further encourage re-use of industrial sites that remain idled or vacant.

Changes to Clean Ohio Policies Impact Brownfield Projects

The administration of the Clean Ohio program is largely governed by the policies developed by the Clean Ohio Council. Separate policies have been generated for the Clean Ohio Assistance Fund (COAF) and the Clean Ohio Revitalization Fund (CORF).

Over the life of the Clean Ohio program, the Clean Ohio Council has routinely updated the program policies to address issues and provide additional clarification to applicants. The policies govern critical components of the brownfield grant program including eligibility, evaluation of projects and administration of grants.

The policies are used as a mechanism to address many of the more common issues that arise and to modify the program. Every brownfield project is different and on most Clean Ohio projects issues will arise that are unique to that project or that are not clearly addressed by the policies. However, it is important to pay attention any time the Council updates their policies.

On March 19, 2010, the Clean Ohio Council approved changes to the policies that govern projects seeking funding under the Clean Ohio Revitalization Fund (CORF). CORF funding is awarded on a competitive basis semi-annually by the Clean Ohio Council. The new policies were placed on the Clean Ohio web page today and are effective immediately.

An Ohio EPA newsletter states the changes were made based upon recommendations received from the Ohio Department of Development (ODOD), Ohio EPA, grantees and other interested parties. While the changes do adjust some of the administrative procedures, there are no changes on the scale of past policy updates. Prior changes included creation of the Redevelopment Ready Track and the addition of extensive conflict of interest provisions.

Here is a quick summary of the changes made:

Eligible Grant Costs- Costs incurred responding to Ohio EPA comments are now eligible. However, costs associated with re-issuance of a No Further Action letter are not eligible. Clarification was provided that costs incurred in preparing an application are not eligible.

Clarification of Eligible Infrastructure Work- To be eligible as match, infrastructure work must be performed on or at the project property. Infrastructure work used as match must be completed prior the end of the grant. The 10% limit on use of grant funds for infrastructure costs was maintained. A new definition of what constitutes “infrastructure” was added which states:

            o “Infrastructure” means technical structures that support society, including but not limited to roads, bridges, water supply, sewers, power grids, and telecommunications, but excludes vertical structures, such as buildings and parking garages. The exclusion of buildings and parking garages is the most important clarification of this added definition.

Requires a Project Resource and Advisory Meeting (PRAM)- The PRAM meeting includes ODOD and Ohio EPA at the Site. This is where any issues identified with the clean up or proposed project can be discussed early on with the State Agencies. While these meetings have been routine, the policy update makes clear that the meeting is mandatory and must be conducted prior to placing the grant application in the library for public comment.

• Integrated Rankings- Under the policy revisions, if an Integrating Committee ranks multiple projects, and a project is withdrawn prior to the Clean Ohio Council award meeting, lower ranked projects will move up in ranking. This is an important change because projects do routinely drop out of the process and some areas of the state (including Cleveland) typically have multiple projects submitted. The Integrated Committee related points are crucial you’re your application is in a competitive grant round.

Initiation and Completion of the Project- New requirements were added regarding funding projects. Applicants are not required to open a Technical Assistance Account with Ohio EPA within 60 days of grant award. These accounts are used to discuss clean up issues with Ohio EPA. Work must commence on site within 12 months of the effective date of the grant agreement. Finally, projects must be completed within 48 months (including issuance of the Covenant Not to Sue by Ohio EPA) of the date the grant contract is executed.


Ohio Brownfield Tax Abatement Law Needs Improvement

I was interviewed for a story on the local NPR station in Cleveland about a Northeast Ohio company that nearly went bankrupt because of confusion over Ohio's brownfield tax abatement law.  The title of the story was "How a Poorly Worded Tax Rule Nearly Bankrupted Ohio's Oldest Company." Listen to the whole story by clicking here.

After reviewing the issue in preparation for the interview, it became readily apparent this was a law in serious need of a re-write.  A company's future shouldn't hinge on a vague tax exemption law.  I also learned that it was probably time to revisit some of the policy decisions made when writing the brownfield tax exemption law.

Background: Taylor Companies was debating whether to move out of Ohio.  It decided to remain in Ohio, in part, due to incentives it would receive for building on a brownfield site.  The principle incentive being a 10 year tax exemption for the increase in value of the property post-clean up.  Here are some excerpts from the story on NPR: 

The abatement was 87% less than what he expected. See, Taylor’s lawyers interpreted the state statute to mean that the tax exemption would cover the increase in value from before they did any clean-up to the new value after the company built and moved into its nice new building on what had been a brownfield. But Shelley Wilson of the Ohio Department of Taxation says they were wrong...

Instead of comparing the value of the land from its polluted days to its clean state…which seems most logical, tax officials compare the value of the land from one year before the tax abatement to its value after the improvements were made. The problem is that cleaning up the land and constructing a building may take longer than that narrow one-year time-frame. In Taylor’s case, he had already made most of the improvements by the time the tax commissioner made his assessment of the change in the land’s value. Shelley Wilson of the office of taxation concedes Taylor’s reading of the statute was probably the intent of the law.

Basically, the Ohio Department of Taxation responded to the controversy by saying- it may be the intent of the law to compare value pre-clean up to post-clean up, but that is not how the Ohio Legislature wrote the law.

At issue is the statutory provision set forth in R.C. 5709.87 "Exempting increase in assessed value of realty cleaned of contamination."  The key language is as follows:

(C)(1)(a) Upon receipt by the tax commissioner of a certification for property under division (B) of this section, the commissioner shall issue an order granting an exemption from real property taxation of the increase in the assessed value of land constituting property that is described in the certification, and of the increase in the assessed value of improvements, buildings, fixtures, and structures situated on that land at the time the order is issued as indicated on the current tax lists.

The Ohio Department of Taxation looked at the bolded language and determined the valuation comes from when the tax exemption order was issued, rather than looking back at the value of prior to when clean up commenced.  Triggering the exemption based on when an order is issued by Taxation really puts the squeeze on businesses redeveloping brownfield properties. Unless they time everything perfectly, they can lose out on potentially millions in tax abatement. (see example below)

The Department states this interpretation is supported by a decision issued by the Ohio Supreme Court- Columbus City School District v. Wilkens.   Here is how Ohio EPA describes the process in its guidance document dealing with the brownfield tax exemption:

For example, if the covenant not to sue is issued by Ohio EPA in September, 2007, and the Tax Commissioner issues the tax exemption order in October, 2007, the property tax exemption granted will be for the increase in value of the land and buildings on the property from the value of the property as of January 1, 2006, the tax lien date for tax year 2006. Since real property taxes are collected a year in arrears (i.e., the 2006 taxes are based on a value as of January 1, 2006, but collected in 2007), the 2006 tax list would be the most current list available for the Tax Commissioner’s October 2007 exemption order. The tax exemption would begin for tax year 2007 which would affect taxes collected in 2008.

Even if businesses line up things in the right way, they are still dependent on two government agencies- Ohio EPA and the Ohio Department of Taxation- acting on a timely basis.  One Cincinnati company lost out on a potential tax exemption on a $4 million dollar increase in the value of its property simply because paperwork was not issued by the government agencies in a timely fashion.  See, Hamilton Brownfields Redevelopment LLC v. Zaino, Tax Commissioner of Ohio.  In that case the Board of Tax Appeals states: 

"The General Assembly has mandated the exemption period begin in the year in which the order is issued.  The statute provides no latitude to consider or alter the commencement of the exemption."

It is time to fix the language in the tax exemption statute.  The entire purpose of the tax abatement law is to provide an incentive to clean up brownfield sites.  If we want to encourage redevelopment of brownfields versus building on greenfield sites, incentives must be significant and effective to overcome the increased costs of building on brownfield sites. 

The best fix would be to simply take the tax valuation of the property that was issued immediately before the clean up was commenced (a date identified in the papers filed with Ohio EPA) and compare it to the valuation after clean up is completed. 

New Construction- In or out?

The commencement of the tax exemption is not the only flaw in this law.  There is also confusion regarding the extent of the tax exemption as it applies to new construction.  As noted in Ohio EPA's guidance document:

The Department of Taxation interprets the exemption granted under ORC 5709.87 as limited to the increase in value of the land and the existing buildings on the NFA property, and not of new structures constructed at the NFA property.

Taxation has made it even a bit more complicated than simply limiting it to existing buildings at the property.  Taxation has gone on to limit improvements to existing buildings that were not features of the building prior to the clean up.  For example,

  • If you replace an old swimming pool with a new swimming pool, the increased value attributable to the new pool is exempt.
  • However, if the building never had a swimming pool, it would be considered a new improvement and not exempt.

(See, Seven Seventeen HB Philadelphia v. Franklin County Board of Revision)

Unfortunately, Ohio is blessed with thousands of brownfield sites.  If we are going direct development towards these sites, we need strong incentives.  Costs of cleaning up a brownfield can run into the millions of dollars. 

Is it really good policy to restrict the tax exemption in such a fashion?

We also need the law to be clear on its face.  Lets hope the last part of the NPR story is correct and the Ohio Legislature takes up fixing the brownfield tax exemption law soon. 


Basics of Brownfield and Pollution Liability Insurance

Whether you are redeveloping a former manufacturing site or you operate a business on a contaminated site, the liability risks associated with releases of hazardous substances are significant.  With the unknowns and surprises associated with environmental clean up the future of your business could be at risk without proper protections. There are a range of insurance products that can be essential to businesses looking to minimize such risks.  

Insurance products can provide coverage against neighbors claims that contamination has migrated onto their property.  Products can provide protection against cost overruns on clean up projects.  They can also protect service providers against liability for negligence or mistakes in providing services on clean up projects.

This post provides a basic overview of various environmental insurance products.  In purchasing such products close attention should be paid to the specific terms of the policy offered.  In other words, know and understand the limits of your coverage so there are no surprises should an issue arise in the future.

Pollution Liability Policies

These are the most widely used brownfield insurance products.  They provide a range of protections typically triggered after you have successfully cleaned up a property (signified by regulatory agency signoff on you clean up).  The potential protections in such policies include:

  • Third party bodily injury and property damage tor liability claims that arise post clean up as a result of remaining contamination
    • Potential tort claims brought by neighboring property owners who claim could damages based upon bodily injury, property damage, diminution in property value or business interruption based upon pollution from your property migrating off-site
    • Tort claims for on-site property or bodily injury  caused by pollution remaining at the site
    • Pollution released during transport of clean up related soils and materials
  • Costs of additional clean up and other related expenses in the event there is a finding of new contamination or a regulator later decides they want more clean up
    • additional clean up of known contamination which regulators had believed did not require remediation
    • clean up of previously unknown contamination
  • Legal defense costs associated with the first two types of coverage

When seeking pollution liability insurance careful review of the proposed policy terms is essential.  What items are excluded from coverage?  What risks are so remote they could be excluded and bring down the cost of the policy? Typically, there is a "base policy" that provides some level of standard coverage.  The base coverage is then modified through addition or exclusion of specific coverages (referred to as "endorsements"). 

Different insurance products will offer varying standard terms, those that must be added (special endorsements) and those that are simply not offered.  Some possible special endorsements or  exclusions may include:

  • lead-based paint in buildings
  • asbestos in soil or buildings
  • mold in buildings
  • low level radioactive materials
  • natural radioactive materials (ex: radon)
  • unknown underground storage tanks

It is important to understand the limits of a policy to make sure you are receiving coverage for the most important and largest risks attributable to your site.

Coverage can typically range from anywhere from $1 million to $50 million in protection.  Common policy limits can range between $5 million to $10 million in coverage.  Deductibles can be as low as $10,000 or as high as $1 million or more depending on the coverage sought.

Cost Cap Policies

Cost cap insurance is purchased to protect against the event that the clean up of the site becomes far more costly that initial estimates.   Cost cap insurance is typically expensive and for that reason its less common.  Typical types of events that can be covered include:

  • Clean up involved either higher volume or higher concentrations of known pollutants that was anticipated when developing the clean up plan
  • Newly found pollutants that were not known during development of the clean up plan
  • Additional investigation required as a result of newly found contamination
  • Increase costs due to changes in regulatory requirements or standards
  • Failure of the proposed remedy for the site

There are even less standard terms in cost cap policies that pollution liability policies.  Business must carefully review the terms to understand their limits of coverage. 

For example, often the clean up plan can be incorporated into the policy.  Coverage may be limited to only those activities set forth in the plan.  If some other activity is required that was not discussed in the clean up plan, there may be no coverage  for increases costs associated with that activity.

As noted, the premiums for cost cap insurance can be expensive.  One study of brownfield insurance products found that premiums ranged anywhere from 10% to 25% of the estimated cost of clean up or the limit of coverage. 

Other Brownfield Insurance Products

  1. Pre-funded Programs- these products involve prefunding expenses at a clean up site.  Depending on the type of policy, the insured pays the premium and expected clean up costs upfront.  If clean up is less than anticipated, depending on terms, the insured may get a portion of the prefunded expenses back.  If costs are higher than anticipated, the insurer will pay the cost overruns pursuant to the terms of the policy. 
  2. Secured Lender Policies- These policies protect against loses due to pollution on a property that is subject to secure a loan.  The coverage that could be provided includes: a) reimbursement of principal left on the loan due to borrower's default; and b) third party tort claims for bodily injury or property damage after foreclosure on the property.  The purpose of this coverage is to give your lender comfort by minimizing their risk in financing your project.
  3. Contractor's Pollution Liability- policies issued to general contractors and others who handle remediation, transportation of hazardous substances, or other aspects of the clean up.  The product will protect against property damage, bodily injury and environmental clean up claims that could arise from working on a clean up sites. 
  4. Professional Liability Insurance- purchased to protect against mistakes or negligence of engineers, consultants, labs or other professionals providing services or advice on clean up sites.

Ohio Voluntary Action Program- Insurance Discount

Ohio EPA's Voluntary Action Program (VAP) is the state clean up program addressing brownfield and other voluntary clean ups.  VAP has developed a new component of their program that provides discounts on environmental insurance products.   The Environmental Insurance Program (EIP) began on July 20, 2009 and allows VAP volunteers (and others with an interest in the brownfield property) the ability to obtain Pollution Liability Insurance at a 10% discount off the standard premium rate. 

More Information on Brownfield Insurance Products is a site that was developed with funding from the US Environmental Protection Agency (EPA) to assist those seeking information and assistance with insurance products that mitigate environmental liabilities associated with brownfield properties. The site contains papers and studies discussing various environmental insurance products.  It also has information regarding professional services.  It is a good basic resource to educate yourself on environmental insurance products. 


Federal Tax Incentive For Environmental Clean Ups Provides Advantages Through End of 2009

Any business spending money on an environmental investigation or on clean up at property they own examine closely a federal tax incentive which is set to expire December 31, 2009.  The incentive allows environmental clean up costs to be fully deductible in the year they are incurred, rather than having to be capitalized and spread over a period of years. 

Some businesses may not look closely at that tax incentive because they don't think they own a "brownfield" property.  Many conjure images of falling down and abandoned manufacturing buildings when they think of a brownfield.  However, the incentive, known as the Federal Brownfields Tax Incentive, is very broad and inclusive as to what constitutes eligible properties.  Properties in full productive use with contamination can be eligible.

Until 2000, the Federal Brownfield Tax Incentive did include restrictions on which properties could be eligible.  The law included requirements on specific land use, geographic and contamination requirements for determining eligible properties.  However, most of these limitations were removed in 2000. 

Section 198 of the Internal Revenue Code contains the requirements for expensing environmental remediation costs.  Section 198 defines "qualified contaminated site" as the following:

The term "qualified contaminated site" means any area-

(A) which is held by the taxpayer for use in a trade or business or for the production of income, or which is property described in section 1221(a)(1) in the hands of the taxpayer, and

(B)  at or on which there has been a release (or threat of release) or disposal of any hazardous substance.

(Note: sites on the National Priorities List are excluded from eligibility)

The two requirements set forth in Section 198 are not very limiting, potentially allowing any property to be eligible that is held by a business upon which contamination is present.  Any business looking to qualify their property as eligible must obtain a statement from the designated state agency (typically the State EPA where the property is located) that there has been a release, threat of release, or disposal of a a hazardous substance at or on the property. 

Clean ups at former gas stations or  those involving underground storage tanks containing gasoline now also potentially qualify.  In 2006, the tax incentive was further expanded to include contamination from petroleum products (e.g., crude oil, crude oil condensates, and natural gasoline). 

What types of expenses are deductible? Generally speaking, any expenses incurred in connection with abatement or control of hazardous substances, including:

  • Site assessment and investigation;
  • Site monitoring;
  • Clean up costs;
  • Operation and maintenance costs;
  • State voluntary cleanup program oversight fees; and
  • Removal of demolition debris

While the incentive was extended at least three times since 1997, it is set to expire on December 31, 2009.  If the incentive provides advantages to your business it may make sense to consider managing your clean ups in the remaining months to maximize its benefits before it expires.  Also, note that it is possible previously filed tax returns can be amended to include deductions for past clean up expenditures.

U.S. EPA has a very useful fact sheet and answers to frequently asked questions on their website that provide further guidance on the incentive. 

[Disclaimer: You should consult your environmental counsel, CPA and tax counsel to determine whether your specific circumstances would qualify for the Federal Brownfield Tax Incentive]

[Photo: in Van Nuys]

Land Banks Offer Unique Strategy to Address Brownfields and Abandoned Residential Properties

There has been much discussion regarding the use of Land Banks to assist in addressing the aftermath of the foreclosure crisis.  Here is an excerpt from the Cleveland Plain Dealer discussing the County's recently launched non-profit corporate land bank:

Formally launched by the county in April, the new, nonprofit land bank is the first of its kind in Ohio.It could soon turn Cleveland into the nation's biggest urban laboratory on how a declining industrial city with a comatose real estate market can downsize gracefully -- and prepare to rebound in the future. The impact on the city as a whole could be far greater than individual projects such as the proposed medical mart and revamped convention center downtown.

Ohio recently passed Senate Bill 353 which allows a two year trial period for Counties to create a separate county land reutilization corporation for purposes of acquiring abandoned and tax delinquent properties.  By allowing creation of a separate corporation, the law addresses the issue of liability- a major short-coming of Ohio's existing land banking law set forth in Ohio Revised Code 5722.  The law also allows for an expedited foreclosure process. The Federal Reserve Bank of Cleveland released an good analysis of the new legislation titled "Understanding Ohio's Land Bank Legislation."

Why create a land bank?  Obviously, thousands of abandoned properties bring down property values across the board and create blight.  Abandoned properties also present other risks. Here is a quote from a University of Michigan study of its Land Bank program:

The U.S. Fire Administration reports that over 12,000 vacant structure fires are reported each year in the U.S., which results in $73 million in property damage annually.  In addition, abandoned properties tend to attract crime. A 1993 study of 59 abandoned properties in Austin, Texas, found that 34 percent were used for illegal activities and of the 41 percent that were unsecured, 83 percent were used for illegal activities.

While the focus of the recently enacted Land Bank Legislation has been as a tool for addressing abandoned residential properties, its utility should also be examined for application to brownfields. Land Banks can serve has effective means of addressing the complex legal and environmental issues that face brownfield properties. 

As an example, the Franklin County Land Bank was used successfully to address tax liens on the former Bedford Landfill which overcame a significant barrier to redevelopment.  The Bedford Landfill became a successful Clean Ohio project receiving a $3 million grant from the State of Ohio.

Today, I attended a presentation by members of the City of Cleveland's Economic Development Department on the City's Industrial Land Bank Program.  Nate Hoelzel and David Ebersole provided an interesting overview of this unique effort by the City to address large brownfield's for redevelopment.

The City of Cleveland's Industrial/Commercial Land Bank was launched in 2005.  The creation of the Cleveland Industrial Land Bank was preceded by an academic study by Cleveland State University.  The purpose of the bank is to try an assemble large tracks of abandoned property in areas identified by the City for priority commercial/industrial development.  Criteria include looking for properties of at least 20 acres in size and near key infrastructure.

In a relatively short time period (less than 4 years), the Land Bank has acquired 100 acres of brownfield property.  Thirty-seven (37) acres are currently on the market for industrial or commercial redevelopment.  The adjacent picture is from Economic Development Department's web page shows the location of 3 tracks currently held by the Land Bank.

The industrial/commercial land bank is designed to overcome the unique aspects of  contaminated urban property that prevents major development.  Representatives for the City of Cleveland estimated it cost approximately $300,000 per acre to address urban brownfield property.  Such a staggering costs often drives development to greenfields and promotes urban sprawl.  The factors that drive such staggering costs include:

  • liability for contamination
  • assessment costs for investigating the extent of contamination
  • demolition costs for vacant buildings
  • property title issues including tax liens

Land Bank's can overcome many of these barriers by providing public funds for costly environmental assessment, removing title issues and even potentially addressing liability through clean up of the property.  A property returned to the market may be free of tax liens and have received a full release from the State of Ohio for environmental contamination.

While successful for its relatively short existence, Cleveland's Industrial Land Bank could be improved if provided additional flexibility.  The Land Bank relies upon the traditional legal framework for its activities.  The legal authority for municipalities to purchase underutilized land exists at the State level in Ohio Revised Code 5722 and at authority for the Industrial Land Bank is located in Section 183.021 of the City of Cleveland Code. Under these authorities, no separate corporation can be created which means the City can face significant liability exposure under federal Superfund laws (CERCLA) for owning contaminated property. 

During the presentation, the presenters mentioned the City's effort to amend federal law during the effort in 2006 to reauthorize U.S. EPA's brownfield program.  While amendment of federal law to allow municipalities or counties to acquire property without fear of CERCLA liability makes sense, it may be an uphill climb.  It may be more practical to allow for expansion of Ohio's new Land Banking Legislation to specifically allow for political subdivisions to acquire brownfield properties through a separate corporation.  This would provide City's a layer of liability protection for being active in purchasing these complex properties.

Clean Ohio: New Conflict of Interest Prohibitions Shape Parties Involvement at Brownfield Redevelopment Projects

On May 18, 2009 the Clean Ohio Council finalized new policies that will govern future rounds of the Clean Ohio Revitalization Fund (CORF).  A major change has been incorporated into the policies that will impact developers, consultants and contractors who work on Clean Ohio projects.  For the first time the Council has included conflict of interest prohibitions. 

The conflict of interest prohibitions are directed primarily at consultants who have previously acted as both developer and environmental consultant on a project.  Contractors are also prohibited from taking any interest in the development if they want to received Clean Ohio funds to perform work on the project. 

Another important prohibition applies to consultants and prohibits participation as both consultant for the developer and a company who caused or contributed contamination at the property.  This has occurred at projects because it appeared to create continuity on the project.   Some public entities saw it as a positive to continue to involve the consultant who has the most knowledge about the challenges presented by contamination at the property.

If you are involved in Clean Ohio projects, this new provision carries important implications that could shape future involvement at brownfield redevelopment projects.  It will also be important to monitor your partners in a project because a conflict of interest could hold up the whole project. 

Here are the new provisions:

10.02 Entities paid for with Clean Ohio Revitalization Fund grant dollars on a funded property must avoid conflicts of interest. A conflict of interest occurs when an individual or organization involved in the cleanup project has an interest that might compromise their ability to execute the project in a manner consistent with the intentions of the Clean Ohio Revitalization Fund program. A conflict of interest may exist even if no proven illegal act results from it, and will include an appearance of impropriety that undermines confidence in the individuals or organizations involved in the project. To avoid a conflict of interest and ensure that proper checks and balances exist, the following restrictions are placed on funded properties:
    • The Certified Professional may not act as the developer or an investor in  the development on the funded project.
     • The selected environmental consulting firm or their employees may not act as the developer or an investor in the development on the funded project.
     • The selected contractor or subcontractors may not act as the developer or an investor in the development on the funded project.
      • The selected environmental consulting firm and the contractor or subcontractor for the funded project may not be the same firm or related firms.
     • The selected environmental consulting firm may not be engaged in concurrent service agreements for the grantee and the party that caused and contributed to the contamination on the funded project.

(Photo: Patriarca12/

U.S. Green Building Council Launches LEED v3- Bike Racks v. Brownfields

On Monday I passed the LEED AP exam for New Construction after about a month and half of studying.  I can't tell you how relieved I was when the computer screen at the testing center had the word "PASS" on it.  After the U.S. Green Building Council's  (USGBC) launch of LEED v3, I am already known as a "Legacy AP" even though my accreditation is a mere three days old.  Even though the ink hasn't dried yet on my AP credentials, I'd like to make a few observations of LEED v3. 

USGBC  launched LEED v3 on April 27, 2009.  The new version includes changes to the scoring system for projects, the LEED accreditation process and the LEED on-line tools for administering projects.   There were three major changes made to the scoring process under v3:

  • Harmonization- the new prerequisite/credit structure tries to take the various LEED rating systems (Core & Shell, New Construction, etc.) and equalize requirements for obtaining certain credits under each structure
  • Weighting of Credits- greater priority was given under the scoring structure to energy efficiency and climate change
  • Regionalization- new bonus points are awarded if your project achieves certain credits that are deemed priorities in the region the project is located

Bike Racks v. Brownfields

For new construction and major renovation projects, LEED NC v2.2 (old system) scored projects on a 69 point scale. Under LEED NC v2.2 achieving most credits you were awarded one point, which led to a great deal of criticism of the old scoring system. For example-

  • Putting up bike racks- if you put some bike racks in front the building = 1 point
  • Redevelopment of a brownfield- if you redeveloped a former brownfield with hazardous substance contamination that cost $4 million to address = 1 point

It was my hope that LEED v3 would address such inequities in the scoring system.  Unfortunately, it appears those still persist.  Perhaps I am partial to brownfield redevelopment, but I simply don't understand why LEED v3 still only gives 1 possible point for achieving this credit.  To me this was the single biggest oversight in the revamping of the LEED scoring structure.

With the release of LEED v3 USGBC tried to give greater weight to energy efficiency and climate change.  As examples, EA Credit 1 Optimize Energy Performance went from 10 total possible points to 19.  EA Credit 2 On-Site Renewable Energy went from 3 possible points to 7. 

I understand the prioritization of climate change and energy efficiency which really impact the overall life cycle of a building.  However, I come at this from an environmental perspective given my background.  To me we should be encouraging addressing thousands of historically contaminated sites that liter our urban landscapes.  Due to the significant costs and liability issues associated with brownfields, many developers stay away from these projects all together.  

LEED v3 offered an opportunity to better promote brownfield development.  My recommendation would to have been to provide at least 4 possible points for brownfield redevelopment.  This would be equal to the new scoring system available points for WE Credit 1 Water Efficient Landscaping. The points could be awarded based up on the remediation costs associated with the property.  There is a correlation between remediation costs and levels of contamination, which would mean projects addressing more extensive contamination get more points.


Perhaps my focus on brownfields stems from living in the industrial Midwest where numerous abandoned factories occupy our cities.  LEED v3 also incorporates a new bonus point pool to recognize regional prioritization.  A project can achieve up to 4 bonus points for achieving certain LEED credits.  This would mean brownfield redevelopment could get 2 points instead of 1.  Still not enough in my mind, but at least 2 is greater than just 1. 

USGBC has created a spreadsheet first separated by State and then by zip code for virtually the entire U.S.  You can go into the spreadsheet and look up the zip code for your project and there will be six credits that have been prioritized by local USBBC Chapters.  For example, in the Cleveland area here are the six prioritized credits:

  1. Sustainable Sites Credit 6.1- Stormwater Quantity- reduction in rate and flow of stormwater post development
  2. Sustainable Sites Credit 6.2- Stormwater Quality- implementation of controls to capture 90% of the flow and remove 80% TSS
  3. Energy and Atmosphere Credit 2- On-site Renewable Energy- provide a minimum of 3% of energy needs from on-site renewable energy
  4. Water Efficiency Credit 2-  Innovative Wastewater- reduce generation of wastewater by 50%
  5. Materials and Resources Credit 2- Construction Waste Management- achieve reduction of 75% of C&D waste
  6. Materials and Resources Credit 6- Use Rapidly Renewable Materials- 2.5% of the cost of materials used on the project should be from rapidly renewable construction materials

I scratch my head at these regional priorities for the Cleveland area.  I am certainly okay with promoting renewable energy, but there are other critical issues that face Cleveland.  Why not prioritize these credits?

  1. Sustainable Sites Credit 3 Brownfields- The Cuyahoga County Commissioners Department of Development provides the following statistics about brownfields:

    [Based on a US EPA funded study]- Approximately 4,623 acres of brownfields in Cuyahoga County with the majority of that land located in the City of Cleveland and its surrounding inner ring suburbs. Cleveland, alone, has approximately 350 brownfields and an estimated 1,000 to 2,000 condemned structures. Additionally, the Cuyahoga County Planning Commission found that 40,000 acres, or 14%, of the County’s land, has at some time been devoted to an industry that has historically been known to be a higher risk for environmental contamination.

  2. Sustainable Sites Credit 5 Protect and Restore Habitat and Maximize Open Space- it is really tough to find remaining greenspace in Cleveland.  It is estimated that 95% of the land in Cuyahoga County has been developed. The lack of open space/greenspace creates other issues such as flooding and stormwater control.  This would seem like a prime credit to be prioritized in the Cleveland Region.

Major Expansion of Areas Eligible for Ohio Brownfield Grant Program

These are great times to investigating potential brownfield projects in Ohio.  The State has two pots of money available under its Clean Ohio brownfield program.  1)  the Clean Ohio Revitalization Fund (CORF); and 2) the Clean Ohio Assistance Fund (COAF).  CORF is a competitive grant process where applications are pooled into rounds and the top projects in that round receive funding.  Under COAF, projects are evaluated on an individual basis and decisions are made by the Director of the Department of Development.

COAF- Areas Eligible to Apply for Funding is Greatly Expanded











This month, the Ohio Department of Development announced a major change to COAF-greatly expanding areas eligible to submit COAF applications.  Properties eligible to request  COAF funding are those located in a "inner city area", a "labor surplus area" or a "situational distress area" as defined by O.R.C. 122.65(H).  Each year the Ohio Department of Development releases a map of the State that identifies which areas fall under one of the three categories and could apply. 

On May 1, 2009, the Ohio Priority Investment Area Map was modified to reflect the recent changes made to the Federal Labor Surplus map. Under the old map 41 counties and certain cities were designated "priority investment areas" based on one of the three categories.  The new map designates 83 counties in Ohio as Labor Surplus Areas. This includes all of Cuyahoga County and most of the surrounding Counties. 

All areas designated on the Priority Investment Map are therefore eligible to file applications for the Clean Ohio Assistance Fund for assessment grants of up to $300,000 and cleanup grants of up to $750,000. COAF will have approximately $12 million for new grants in the coming year. Applications can be submitted on a rolling basis (no deadline). 

The Ohio Department of Development also modified the policies governing COAF.  One notable change is the prioritization of Phase II Environmental Assessment projects.  Here is what the Department said about this change:

In order to maximize assistance to distressed communities during the economic crisis and meet a critical need to prepare sites for cleanup and redevelopment, the Clean Ohio Assistance Fund will now reserve 75% for funding Phase II Environmental Assessments grants and 25% for funding cleanup grants.

CORF's - Redevelopment Ready Track

If you are looking at a project with much higher clean up costs than $750,000, then CORF is still a great option.  The State recently provided more flexibility to the program.  Last summer, the Ohio Department of Development made a major change to the CORF program by adding the "redevelopment ready track." Before this change an applicant for CORF had to identify in its application a committed end user post clean up. Under the "redevelopment ready track" an applicant could qualify for up to $2 million in grant funds to pay for clean up costs even without an end user.

A significant amount of cleanup funding is available in the upcoming rounds of CORF. Funding for Round 7 (deadline July 25th) and Round 8 will total $48 million in the coming year ($24 million per round), which is the largest amount the program has experienced in its history.

Unlike other States, Ohio has a lot of funding available for brownfield investigation and clean up.  Over the last year the State has increased the flexibility in the program and expanded areas within the State eligible for funding.  While the economy is down, it is a great time to explore development options for brownfield sites.  As the economy comes back the competitiveness of these programs will increase. 


Ohio looks for "Shovel Ready" Brownfield Sites for State Share of Stimulus Money

Hurry up and get your site in line by Monday March 30th with the State of Ohio for possible additional federal brownfield money to support your project.  The State is only looking for "shovel ready" sites.  This means the types of brownfield sites that may be able to secure the $200,000 federal brownfield stimulus money are limited. 

Check out the Ohio Department of Development's fact sheet to see if your brownfield site may be eligible.  If it is then you need only fill out a simple form to get your site in line. 

The State has been sending out the following notifications:

Dear Brownfield Stakeholder:

The American Recovery and Reinvestment Act was signed into law by President Obama on February 17, 2009. The Recovery Act purpose and goal is to “to jumpstart our economy, create or save millions of jobs, and put a down payment on addressing long-neglected challenges so our country can thrive in the 21st century.” (

The American Recovery and Reinvestment Act allocated $100 million in additional funds to the United States Environmental Protection Agency (EPA) for the Brownfields program. This is a nationally competitive program for the assessment and cleanup of brownfield properties. Government entities and non-profit organizations may apply directly to EPA for these funds. It is anticipated the EPA will release a notice into the Federal Register detailing guidelines regarding application submittals this week. The timeline for distribution and administration of these dollars is very short. Additional information is available on EPA’s brownfield website:

The Ohio Department of Development will be applying to the EPA to support brownfield cleanup and redevelopment statewide. Our Urban Development Division has successfully received grants of this type in the past and is well positioned to request significant cleanup dollars and to work in partnership with the communities to have an impact around the state. In preparation, the Department needs to create a pipeline of potential projects given the criteria listed on the enclosed fact sheet. The Department, if awarded, will administer and target the funds for these particular categories of brownfield projects: asbestos abatement, hazardous substance projects in the Ohio Voluntary Action Program and petroleum projects regulated by the Bureau of Underground Storage Tank Regulations.

If you have a viable project in one of these categories, please read the enclosed fact sheet then fill out the web form available at so we may include your project in our list of projects by Monday, March 30, 2009 at 12 p.m. EDT.

Important Note: Although you may have already submitted a request on, it is necessary to provide your project information on the web form for the Department’s funding request to US EPA. Submitting information to either the site or on the web form does not indicate application submittal or funding approval. If the Department receives funding, projects will be prioritized for their readiness to proceed and creation/retention of jobs.

Thank you,

Urban Development Division

Future Grant Rounds and Improvements to Ohio's Brownfield Redevelopment Program

After reauthorization of the Clean Ohio program this November by Ohio Voters, the State has announced their intention to maintain two grant funding rounds per year going forward.  Hopefully this will allow the program to operate more consisentely.  In the past, project developers were often forced to try and rush projects because future funding rounds were uncertain. 

Round 5 was completed in December, with seven projects recieving around $12.7 million in funding.  This was less than the $17 million the state had available in that round.  This marks the first time less then the full amount of funding available was awarded. 

The State has already announced the schedule for the next two funding rounds:

Round 6- Unless your project is already been listed on Ohio's Brownfield Inventory, you are too late to qualify for this round.  The deadline for filing the form to be listed in the inventory was December 5th.

- Grant applications are due January 9th

- Awards will be announced in May of 2009

Round 7

- No deadline for listing a property with the brownfield inventory has been announced to date.  Typcially, the deadline is 30 days prior to the deadline for filing a grant application.

-Grant applications are due July 25th

-Award will be announced in November of 2009

The Ohio Department of Development (ODOD) who administers the program also announced other enhancements to improve the program.  These include:

  • Clean Ohio Assistance Fund applications will be processed in 10 days instead of 30 days
  • Disbursement requests can be made every 30 days instead of 60 days
  • Information regarding public bidding of work associated with Clean Ohio projects will be made available to small and minority owned businesses

The announcement to make the program more consistent should be great news for everyone who works with the program.  This will allow project developers and governments to tee up projects when they are truly ready versus trying to rush the project to meet the funding deadline. 

With the overall lack of development occurring in Ohio right now due to the poor economy, this is a great time to develop Clean Ohio projects because the next few rounds will likely be less competitive.  This was certainly true for Round 5 in which the State did not even award all the money that was avaiable.

Ohio Brownfield Redevelopment Program Leaves Grant Money On the Table

To quote a consultant I work with..."Times must be tough in Ohio when there is free money left on the table" for redevelopment. 

Today, the Clean Ohio Council met to evaluate the project proposals for Round 5 of the Clean Ohio Revitalization Fund.  There was $17 million in grant funding available.  In the previous 4 rounds, CORF was so competitive many projects were left without funding.  As perhaps an indication of the economy, Round 5 was the first time ever all of the money available was not awarded. 

Here is the typical process at the meetings where the Clean Ohio Council makes its decisions about which projects to fund- There is a brief presentation made to the Council about each project. The Council can asked questions to better understand the project or raise concerns.  After the presentations, the members of the Council vote on the project and each project receives an overall score.  The Council breaks for lunch and afterward the Staff of the Ohio Department of Development reveal which projects will get funded.

I used to sit on the Clean Ohio Council and experienced very competitive grant rounds where a number of projects did not get funded.  Due to the time and effort to put a application together, you could hear the audible sighs in the audience from those left out of the money.  No such sighs were heard today....

At today's meeting, Council broke with tradition and did not even bother scoring all the projects.  The total request for all eligible projects was only $12 million of the $17 million available.  Therefore, the Council simply passed a resolution to award all eligible projects the funding they requested. 

I worked on one of the projects that was selected for award.  The project is a great story of a closed manufacturing site getting cleaned up and returned to productive use.  The Clean Ohio program has had many success stories like this in the years it has been operating.  I hope the next round of funding sees renewed interest, it would be a shame to leave "free" redevelopment money on the table that could be put to good use. 


How the New Policy on Prevailing Wage Impacts Brownfield Projects

With very little fanfare, the Department of Commerce put on their web page two documents that change the policy interpretations of the prevailing wage requirements. The "policy interpretation" is controversial.  As reported in the Cleveland Plain Dealer, the Republican controlled House and Senate will likely be discussing ways to block the change.

What are Prevailing Wage laws? To offset the low bid public contract requirement,  the ""prevailing wage" law requires wages commonly paid to construction workers in a particular region will determine the minimum wage paid to the same type of workers employed on publicly funded construction projects. (For additional background view the extended entry below)

The Strickland Administration is claiming that the release of the Commerce Department's new guidance document on prevailing wage is a "simple clarification" of existing law.   The spokesman for the Governor said the law was simply "misapplied" to two situations, one of which is brownfield redevelopment projects.  However, many view it as a broad expansion of the applicability of prevailing wage that could drive up construction costs. 

Strickland Administration Frames the Debate: "In recent years there has been no clear approach used by the Department when determining whether publicly-funded construction activity is so intertwined with private construction activity that the activity constitutes a single "project" (triggering prevailing wage) and when they are sufficiently "separate and unrelated" that they constitute separate projects, one publicly supported (which triggers prevailing wage) and one privately financed (which does not trigger prevailing wage).

THE ISSUE: When a Clean Ohio grant pays for remediation work and demolition but the rest of the project development is privately financed, then what portion is covered by prevailing wage?

FROM ADMINISTRATION'S NEW POLICY STATEMENT:  Whenever a public entity contributes funding or other direct support (e.g.-public land) to a project, even an otherwise privately-financed project, prevailing wage must be paid to the workers on the project.

RAMIFICATION ON BROWNFIELD REDEVELOPMENT PROJECTS:  Under the Administration's new policy, prevailing wage will apply to all construction work at a site receiving Clean Ohio funds whenever an end-user is identified.  Therefore, if the Clean Ohio grant application includes a commitment to use the site by a new tenant or developer, prevailing wage applies to all construction at the site work.  If no end-user is identified in the application, prevailing wage only applies to remediation work at the site.

DISCUSSION:  It simply is a false distinction to apply prevailing wage on the basis of whether an end user has been identified.  Under Clean Ohio guidelines, grant funds can only pay for :

  • environmental remediation (including asbestos abatement)
  • demolition
  • a portion of the purchase cost of the property (optional under end user track). 

The Clean Ohio guidelines forbid expenditure on building improvements or infrastructure improvements.   If it is illegal to use to program funds for this work, how can prevailing wage be deemed to apply?

Developers will have to run the numbers.  By choosing the "development ready track" (no end-user), applicants can only seek $2 million in state funds versus $3 million for end-user projects.  Developers will be calculating whether overall project costs exceed the extra $1 million available if prevailing wage applies.  Some may say that's acceptable, but if makes less brownfield projects viable that is not a good result for Ohio's cities.

It seems questionable that the Administration can make such a broad change in application of the prevailing wage through a simple "policy interpretation."  Legal challenges or legislative action seems inevitable.

Continue Reading...

Brownfield Redevelopment Could be Covered by Ohio's Prevailing Wage Law

This picture may be one of the last of the "big three" (Strickland, Husted, and Harris) holding hands over Clean Ohio. Governor Ted Strickland's administration is proposing to mandate prevailing wage for all construction that occurs on land for which the State has funded environmental remediation.  A key political debate is shaping up as to how this change will affect projects funded using brownfield grant funds through the Clean Ohio Program


To provide answers a few points must be addressed:

  • Which type of Clean Ohio grant funded the project?
  • Which costs are at issue?  Remediation costs or construction costs post-clean up?

Clean Ohio recently created a new "redevelopment-ready" grant track.  This is in addition to the "known end-user track."  Apparently, under the proposed policy how much work at a brownfield is covered by prevailing wage will depend upon which grant track your project was funded.  

Under the proposed prevailing wage policy, if your project receives Clean Ohio funding under the "known-end user track" the use of grant funds will "presumptively subject all construction on the entire project to prevailing wage."  However, if the state were to fund the cleanup at the brownfield under the "redevelopment ready track" (i.e. there is no identified end-user of the property), then only the remediation work is subject to prevailing wage. 

According to the Columbus Dispatch,  Speaker Jon Husted expressed concern that application of prevailing wage to brownfield development could drive people to using green space or farmland for development.  What type of cost increases would decrease the attractiveness of public-subsidized redevelopment of brownfield sites?

A Legislative Service Center (LSC) study of the exemption of school projects from prevailing wage concluded it reduced costs by around 10% and saved $487 million.   The conclusions of the LSC study were challenged, so it is difficult to really know whether similar cost increases could occur at brownfield sites.

Here is my take:

  • Environmental remediation is an expensive business, application of prevailing wage may not impact the costs associated with this type of clean up work. However, it may be different when dealing with the redevelopment of the site post-clean up (i.e. pure construction work).  It is possible that construction costs at a brownfield could increase by a comparable amount (10%) as was found in the LSC study. 
  • A 10% increase in costs is probably unlikely to make most projects that are premised upon receiving public subsidies no longer attractive.  However, why diminish the cost effectiveness of a grant program designed to spur redevelopment in neglected areas. 

(August 08) Ohio Environmental Regulatory and Incentive Update

PTIO Program is Launched-  Effective June 30, 2008 Ohio EPA finalized this new permit program which combines the Permit to Install (PTI) and Permit to Operate (PTO) into a single permit for non-Title V facilities.  Facilities will no longer have to apply for a separate PTO.  This program is intended to deal with Ohio EPA's backlog of PTOs which is in the thousands.  Ohio EPA's new PTIO application is up and must be used for new permits.

Electronic Reporting through Air Services- Effective June 30, 2008 Ohio EPA transitioned from its STARship electronic air reporting software to Air Services.  Air Services is part of Ohio EPA's larger effort to transition to more web based business interaction with the regulated community.  Following the release of the Air Services software, both Title V and Synthetic Minor Title V facilities will be required to use the eBusiness Center: Air Services for all emissions reporting, Title V Annual Compliance Certifications, Title V and other permitting applications.

Electronic Reporting of Surface Water Reports-  If you are using paper reporting or SWIMware to submit monthly-operating-reports (MORs) for NPDES permit compliance you need to quickly transition to Ohio EPA's new electronic reporting system.  Ohio EPA indicates it expects to cease accepting MORs by "end of the  summer". SWIMware has been replaced by the new online system called e-DMR, Electronic Discharge Monitoring Reporting System. The term, MORs (Monthly Operating Reports) is now being referred as DMRs (Discharge Monitoring Reports). The new reporting system is entirely web-based and accessible via any internet connection.

Ohio Diesel Grant Awards Announced-  On July 29th the Ohio Department of Development announced the recipients of the grants for diesel retrofit and repower projects for vehicles and fleets.  The award recipients originally submitted applications back in February.  The implementation of the Diesel Emission Reduction Grant (DERG) program was plagued with a number of issues that resulted in the rejection of a large number of applications and delay in announcing awards.  The Ohio Diesel Coalition is working in conjunction with the various State agencies to improve the grant process in the second round.  The Department of Development is expected to release the second request for proposals (RFP) in August. 

Brownfield Redevelopment- Clean Ohio Assistance Fund (COAF)-  As of July 1, 2008 the Ohio Department of Development has begun accepting applications for COAF grants to pay for Phase II site assessments (up to $300,000) and clean ups (up to $750,000) of brownfield properties.  ODOD has approximately $11.4 million to award.  To qualify the property must be in a designated priority investment area (see map).

Brownfield Redevelopment: Clean Ohio's New Grant Option

On June 4, 2008, the Clean Ohio Council approved two new grant rounds (Rounds 5 and 6) to encourage brownfield redevelopment through its Clean Ohio Revitalization Fund (CORF).  As noted in a recent stakeholder report on the Clean Ohio Program, the CORF is "seen as a significant national model that other states strive to replicate."  If you are not familiar with the program, I urge you to take the time to learn about the benefits. 

While the main benefit of the program is that it allows participants to offset clean up costs associated with industrial and commercial properties, there are also significant tax and legal advantages to participation. Attached is a client note that I prepared that provides more detail regarding the program. 

The most significant change made to the program is the creation of a new grant option called the "development ready track."  Now applicants have two options, they can elect to participate in the "known end use track" or the "development ready track."  The major difference is that under the "development ready track" an applicant for grant funds does not need to identify an end user that has committed to the property post clean up and development. 

The "development ready track" favors properties that have potential to attract future economic development.  For example, properties that have existing sewer and water service or are in close proximity to transportation will receive higher scores using the new scoring methodology developed for this track. 

Under the "development ready track" the maximum amount an applicant can request is $2 million instead of the $3 million potentially available under the "known end use track."   You may not use any of the grant funds for acquisition of the property, whereas the "known end use track" allows up to 33% of your total grant request to go toward acquisition. 

Even with these differences, the "development ready track" presents a new opportunity to communities, businesses and developers.  For communities, it provides an opportunity to drive economic growth toward priority development areas.   For developers, it increases the number of properties that could potentially be viable projects.

The new grant application forms can be obtained from the Ohio Department of Development's web page.