Ohio EPA's New Guidance Raises Stakes on Vapor Intrusion

On August 24th, Ohio EPA released new guidance that incorporates an unprecedented approach to vapor intrusion.  Under the new guidance, Recommendations Regarding Response Action Levels and Timeframes for Common Contaminants of Concern at Vapor Intrusion Sites in Ohio, the Agency is for the first time demanding immediate action when contaminant levels exceed certain established "trigger levels."  In the case of one particular contaminant, trichloroethylene (TCE), the Agency expects action within days if the associated trigger levels are exceeded.  The guidance, as outlined below, has major implications for businesses, property owners, consultants and attorneys.

The guidance establishes specific trigger levels for sub-slab and indoor air.  With regard to TCE, it establishes trigger levels for groundwater in addition to sub-slab and indoor air.  Groundwater or sub-slab exceedances will require immediate indoor air sampling.  If indoor air trigger levels are exceeded, immediate action is required in the form of installation of a remedy and/or notifying regulators.  The response times for exceedance of indoor air trigger levels are set forth below.

Response Times for Common Indoor Air Contaminants

Exceeds Indoor Air Risk Standard
Chronic Response Resample or install remedy within 3-90 days
Accelerated Response Coordinate with appropriate state, local and health authorities on response action

 

* Common contaminants include: vinyl chloride, tetrachloroethylene, chloroform, carbon tetrachloride and naphthalene

 

Response Times Specific for TCE

Exceeds Indoor Air Risk Standard
Accelerated Early and interim response actions evaluated within weeks
Urgent Response actions evaluated within days. Consider relocation of residents/occupants
Imminent Immediately contact state, local and public health officials.  Relocate residents/occupants

The Agency made the following public statement following release of the new guidance:

The Division of Environmental Response and Revitalization (DERR) has developed a memorandum on action levels and response timeframes for sites that are being investigated for vapor intrusion of trichloroethylene (TCE) and other associated chemicals. These actions levels and time frames are based primarily upon the short term exposures to TCE and the potential for cardiac malformations in developing fetuses. DERR developed this guidance in consultation with USEPA and use these risk levels and response times when conducting Ohio EPA lead investigations for the CERCLA and RCRA programs. This guidance does not have the force of law, but Ohio EPA recommends its use to outside stake holders, including the Voluntary Action Program (VAP), in evaluating the concentrations of volatile compounds in ground water, soil gas or indoor air in residences and commercial buildings.(emphasis added)

What is unprecedented about this new guidance is the requirement to take immediate action, within days in some cases, based upon risk based screening values.  Historically, vapor intrusion risks were vetted through sampling and analysis, a process that could take a year or more before cleanup was implemented.

Guidance on TCE

TCE is a very common metal degreaser.  As set forth above, the response timeframes for exceedances of TCE trigger levels are particularly aggressive.  Ohio EPA bases its urgent call to respond upon a specific evaluation of the risks of TCE exposure:

“In September, 2011, [U.S. EPA] updated the toxicity assessment for TCE which concluded, in part, that women in the first trimester of pregnancy are one of the most sensitive populations to TCE inhalation exposure due to the potential for fetal cardiac malformations. Because the key steps for cardiac development occur within the first 8 to 10 weeks of pregnancy, exposure to TCE during early pregnancy is of concern.”

To give some perspective as to the number of sites in Ohio that may have some level of TCE contamination, earlier this year, Massachusetts recently announced a TCE initiative in which it reviewed 1,000 closed cleanup sites across the State.  Ohio, a much larger and more industrial state, likely could have more TCE impacted sites. 

Implications of New Vapor Intrusion Guidance

The guidance has major implications for businesses/property owners, consultants and attorneys:

  • Property owners have increased liability risk, in particular if they are aware that trigger levels may be exceeded.
  • Through guidance and training sessions, Ohio EPA has pressured consultants to come forward with data even in instances when their clients may not want the information to be public;
  • It will be critical for attorneys to ensure adequate evaluation of vapor intrusion is included in Phase Is.  While it is a requirement to evaluate vapor intrusion risks under the current Phase I standard (ASTM 1527-13), inconsistencies persist among consultants in evaluation of vapor intrusion in their Phase I reports.
  • Where Ohio EPA has data and wants further evaluation of vapor intrusion risks, the Agency is notifying property owners they must take action or the Agency will proceed with sampling.
  • In early summer, Ohio EPA revoked portions of its prior vapor intrusion guidance that relied upon use of the Johnson & Ettinger model (a less conservative model than U.S. EPA Vapor Intrusion Screening Level (VISL) Calculator).  Ohio EPA still hasn't been clear as to whether it will reopen previously closed cleanup sites that relied upon the Johnson & Ettinger model.
  • While the guidance states it does not have the force of law, EPA is taking action based upon the new guidance.  

 

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.

Ohio EPA Takes Hard Look at Vapor Intrusion Risks

Vapor intrusion is the process where contamination in soil and groundwater volatilizes and enters indoor air in buildings.  Understanding and evaluating the risks to occupants of buildings with vapor intrusion issues has received dramatic new focus nationally in recent years.

In Ohio, scrutiny of vapor intrusion issues is at an all time high.  This post details some of the recent significant initiatives and actions taken by Ohio EPA to address vapor intrusion.

Ohio EPA Revokes 2010 Vapor Intrusion Guidance

On May 27, 2016, Ohio EPA announced that it was revoking prior guidance in place since 2010 on analyzing the risks associated with vapor intrusion.  Ohio EPA revoked two entire chapters of its 2010 vapor intrusion guidance document.  It also indicated that environmental consultants should utilize U.S. EPA’s guidance document titled, “Technical Guide for Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Vapor Sources to Indoor Air (June 2015)” and U.S. EPA’s Vapor Intrusion Screening Level (VISL) calculator.

The VISL calculator is a new tool utilized by U.S. EPA to quickly determine whether a site presents a potentially unacceptable health risks due to vapor intrusion.  Using the VISL, soil gas, soil and groundwater sample results are plugged into the calculator to determine if risk presented by the detected contaminant levels exceed screening levels.  If screening levels are exceeded, the Agency can require either more investigation or cleanup.

The VISL replaces prior modeling techniques that have been utilized for years to evaluate contaminated properties.  Ohio EPA's 2010 Vapor Intrusion Guidance document relied heavily on the Johnson & Ettinger (J&E) model to analyze risk.  J&E was used to evaluate vapor intrusion at hundreds of site in Ohio.

Some consultants tell me that the VISL is approximately 50 times more conservative than the J&E model.  As a result, site contamination issues previously thought to present no issues under J&E are now viewed as significant problems under VISL.

Ohio EPA's revocation of portions of its 2010 vapor intrusion guidance includes the chapters regarding the J&E model.  Ohio EPA's announcement included a statement that all sites currently being evaluated will no longer consider J&E data valid and will require use of the VISL.

Ohio EPA Reviews TCE Site Inventory

Ohio EPA has also decided to heavily scrutinize any site with trichloroethylene (TCE) contamination (typically associated with a solvent used to clean metal parts).  A new study determined that the risk presented by exposure to TCE contamination to woman of child bearing years and pregnant women are greater than previously thought.  Those risks are also thought to be acute risks (i.e. short term) versus the long term risk based upon 30 years of exposure used to develop many cleanup standards.  

Beginning in the later part of 2015 and continuing through today, Ohio EPA has been internally evaluating any site where it has data showing TCE contamination.  Those sites are being analyzed using the new TCE cleanup standards and the VISL calculator.  Due to the fact both the cleanup standard and VISL are more conservative, sites are much more likely to be deemed to present potential health issues.  

Ohio EPA has sent letters to owners of sites with TCE contamination requesting additional investigation or cleanup.  In some cases, Ohio EPA has demanded additional testing and if the property owner refused, Ohio EPA performed its own sampling.

In February 2012, at an Ohio EPA brownfield training course, environmental consultants were told of Ohio EPA's position regarding vapor intrusion and TCE.  Here are some of the key points discussed:

  • Ohio EPA will not "sit on data" if it believes an issue exists it will move quickly to seek or take additional action;
  • In terms of sampling techniques to evaluate vapor intrusion, Ohio EPA wants to see sub-slab paired with indoor air samples to analyze the risk;
  • In analyzing vapor intrusion, Ohio EPA will want multiple sample locations and multiple sampling events (to address seasonal variation in contaminant levels);
  • If off-property vapor intrusion needs to be analyzed, the Agency's expectation is the owner/developer will do it.  In not, the Agency will collect the data it needs;
  • Agency is not going to have long technical debates whether a health issue may exist.  If the Agency thinks there may be an issue it wants to act quickly;
  • On Voluntary Action Program (VAP) cleanups, if a consultant is aware of data that indicates a potential health issue, the Agency expects the consultant to come forward with the information even if the property owner or developer doesn't want the information released to the Agency;
  • Due to TCE's short term risks to sensitive populations, the Agency expects quick action and evaluation of data at sites where TCE is at issue.

At the Spring 2016 Ohio Brownfield Conference many of these points were reiterated by Agency representatives.  In particular, participants were told the Agency will act quickly and aggressively when it believes contamination has the potential to present a public health issue.  

Ramifications to Property Owners and Developers

The changes relative to analysis of vapor intrusion in general as well as the specific initiative on sites with TCE, has major ramifications for property owners and developers.  Here are some the issues or considerations for owners/developers:

  • Consultants are under increasing pressure to disclose any data to Ohio EPA that suggests a public health issue may exist;
  • Expectation is that properties with potential vapor intrusion issues on or off site will be evaluated very quickly;
  • The standards and models use to analyze vapor intrusion risk have become significantly more conservative.  Sites are much more likely to be deemed to present potential issues than even a year ago; 
  • All ASTM compliant Phase I reports are supposed to evaluate the potential for vapor intrusion.  In light of the increased focus on vapor intrusion, it is critically important to conduct high quality due diligence prior to acquisition that includes a robust evaluation of the potential for vapor intrusion; 
  • Liability risks have increased dramatically in recent years for owners and/or developers of property that may have vapor intrusion issues; and
  • Due to increased stringency of modeling and cleanup standards, what will the Agency do regarding sites that were previously deemed sufficiently cleaned up under outdated guidance and cleanup standards?

 

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.

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.

 

 

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.

Schedule

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. 

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.  

Process

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."  

Governor Signs Three Major Pieces of Environmental Legislation

Typically, environmental legislation may be passed in Ohio once every few years.   In fact, most environmental regulatory reform is done in small doses during the budget bill process.  In the last two weeks, Governor Kasich has signed into law three separate bills that including major environmental regulatory provisions. 

  • S.B. 315- Establishes new regulations for oil & gas drilling, including provisions regarding fracking;
  • S.B. 294- Contained a series of legislative overhauls to laws administered by Ohio EPA including: wetlands, solid waste, and underground storage tanks
  • H.B. 473- Implemented Ohio's Water Withdrawal Regulatory Program under the Great Lakes Compact

Below are some of the major highlights from each piece of legislation. 

H.B. 473- Ohio's Implementation of the Great Lakes Compact

The Great Lakes Compact required each State to pass implementation legislation to set up regulations governing withdrawls and diversions from the Great Lakes.  Under the Compact, the Great Lake States were given wide discretion for deciding when a permit would be needed and the criteria for issuance of a water withdrawal permit. Now that H.B. 473 has passed, for the first time Ohio, businesses may need to get a permit before withdrawing water from Lake Erie or its tributaries.

Last summer, Governor Kasich vetoed Ohio's first attempt at passage of the Compact implementation legislation- H.B. 231.   The bill was sharply criticized as being too business friendly. 

This time Governor Kasich signed the legislation after certain aspects of the water withdrawal permitting program were made more stringent. (See Prior Post) Here are the most notable changes from H.B. 231:

  • Withdrawal Triggers-  The thresholds for triggering a permit were significantly lowered.  Any withdrawal of the following size will trigger a permit: 
    • 2.5 million gallons per day (MGD) from Lake Erie or a recognized navigation channel;
    • 1 MGD from a river or ground water
    • 100,000 gallons from designated high quality streams
  • Adverse Impact-  If you trigger a permit, ODNR can't grant a permit if it determines the withdrawal will have an "adverse impact" on Lake Erie.  H.B. 231 defined adverse impact in the negative- any withdrawal from the Lake less than 90 mgd was presumed to cause no impacts.  This proved highly controversial and was jettisoned in H.B. 473.  Rather than try and define adverse impacts in the legislation, H.B. 473 simply defers to ODNR to define the term through rulemaking. 

In one significant way H.B. 231 and H.B. 473 are very similar.  Only impacts to Lake Erie are to be considered in determining whether a withdraw would have an adverse impact.  Impacts to the receiving stream itself are not evaluated, except possibly with high quality streams.  In the end, Ohio's program is still, in essence, a Lake Erie and not a stream protection program.

S.B. 294- Ohio EPA Omnibus Regulatory Reform Bill

S.B. 294 was dubbed the Ohio EPA regulatory reform bill by the Administration.  While it does contain some significant changes to certain Ohio EPA programs, the regulatory reform could hardly be described as controversial. 

Most of the changes tweak certain administrative aspects of Ohio EPA's programs. While it is true the legislation does not contain any major substantive regulatory reforms, there are some much needed reforms in the bill, including the following:

  • OCAPP Confidentiality- The Office of Compliance Assistance and Pollution Prevention is housed within Ohio EPA.  The Office serves as a free compliance assistance resource to businesses.  One historical impediment to use of OCAPP has been related to confidentiality.  Previously, Ohio law only protected as confidential inquiries related to air pollution compliance.  S.B. 294 changes this and provides confidentiality protection to all inquiries made to OCAPP regardless of subject matter (hazardous waste, solid waste, wetland permitting, surface water, and drinking water). 
  • Underground Storage Tanks-  S.B. 294 addresses a longstanding issue with regulatory overlap pertaining to clean up of underground storage tanks.  Prior to the legislative changes, a developer or business wishing to clean up their property under Ohio EPA's Voluntary Action Program (VAP) had to first deal with any underground storage tanks regulated by BUSTR.  Those portions of the property with BUSTR tanks had to be cleaned up first under BUSTR's clean up program before proceeding with the VAP.  This double regulation made no practical sense since VAP standards were designed to address this type of contamination.  S.B. 294 allows volunteers to address BUSTR USTs through the VAP thereby removing a significant hurdle that had delayed and increased costs at many brownfield and site clean ups.
  • Wetland Mitigation- S.B. 294 provides Ohio EPA the authority to establish an "in-lieu fee" program for wetland mitigation.  Instead of a developer needing to create wetlands on-site or buying credits at a wetland bank to offset its wetland impacts, the developer could write a check to pay for the necessary wetland mitigation.  If the program is established it could significantly streamline the wetland permitting process.

S.B. 315- New Regulation for Oil & Gas Drilling including "Fracking"

While S.B. 315 was dubbed as an all encompassing energy bill, it is largely tilted toward one form of energy- natural gas.  The most significant provisions in the bill place new regulation on the oil & gas industry, in particular "fracking."

For over a year, renewable energy companies and advocates feared Governor Kasich would do away with Ohio's fledgling renewable energy standards (RPS).  For many, the good news regarding S.B. 315 is what the bill didn't do- overhaul Ohio's RPS.  The bill did allow waste energy recovery systems to qualify for credits towards meeting Ohio's RPS, but the main structure of Ohio's RPS was left in tact.

With regard to oil & gas drilling, S.B. 315 did put in place major new regulations, including:

  • New Oil & Gas Permit Requirements-  The legislation requires more information to be submitted with permit applications.  This includes: agreements with local governments regarding road maintenance, identification of the proposed source of surface or ground water, as well as requiring water well sampling in the neighboring area prior to drilling.
  • Disclosure of Chemical Used in Drilling- Upon well completion, the well owner must supply information regarding the amount of products, fluids, and substances used to facilitate drilling or stimulate the well.  However, the bill includes a broad trade secret provision that exempts covered chemicals or materials from the disclosure requirements.
  • Insurance-  Requires the oil and gas well owner to obtain liability insurance in an amount not less than $5 million dollars for bodily injury or property damage.  The insurance policy must also include a "reasonable level" of coverage for environmental claims. 

 

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.

 

Ohio EPA Reform Bill Introduced

Last week Senator Schaffer introduced Senate Bill 294- dubbed the EPA reform bill.  According to testimony from Senator Schaffer and OEPA Director Scott Nally, the two had been working on the legislation for months.

This bill is the probably the first since Ohio EPA creation that touches on so many different areas of EPA regulatory authority, including:

  • Infectious waste- eliminate duplicate regulation
  • Wetland mitigation- change the hierarchy of mitigation (see below)
  • Underground storage tank clean up at brownfields- streamlines brownfield clean up (see below)
  • Compliance assistance to small businesses- expands confidentiality for inquiries for assistance by small businesses
  • Construction & demolition debris fees- clarifies fees apply to asbestos containing material
  • Statute of limitations for environmental enforcement actions- applies statute of limitations to enforcement actions related to construction & demolition debris
  • Regulation of public water systems and public water system operators- establishes criminal penalties for falsification and vandalism related to public drinking water systems
  • Disposal of solid waste- bans disposal of certain aluminum production waste after issues with fires at Countywide landfill

While the bill is broad in scope, many of the changes are minor fixes to address out of date statutory language.  The biggest changes fall into the following areas:

Wetland Mitigation- 

Anytime a developer impacts wetlands, they must offset the impacts with mitigation.  Under current law, the hierarchy of mitigation required the developer to, first, try and perform mitigation on-site by creating new wetlands.  Then mitigate off-site, but in the same watershed.  If on-site and off-site mitigation weren't possible, the final option was purchasing credits at a wetland mitigation bank owned and operated by a third party. 

Years ago, Ohio EPA studied the effectiveness of on-site mitigation and found that most newly created wetland were failing.  This prompted a lengthy discussion about the merits of using wetland banks versus developer driven mitigation projects.

S.B. 294 flips the hierarchy on its head.  Now, the preferred option is purchasing credits at a mitigation bank.  Such a change may allow for better success in terms of survival of man-made wetlands.  Also, a preference towards banks should greatly accelerate the permitting process for developers who often get bogged down in trying to find mitigation sites.

S.B. 294 also provides Ohio EPA with the authority to start an in lieu fee program.  Under such a program, a developer could simply write a check paying for mitigation credits versus finding a mitigation project or bank.  Ohio EPA, ODNR or a private entity operating the in lieu fee program could then use the funds to start mitigation projects they select.  This option assist developers when they can't find sufficient credits at an acceptable mitigation bank.

Underground Storage Tanks at Brownfields-

This has long been an issue highlighted on this blog.  Under current Ohio law, any business or developer cleaning up a brownfield is forced to go through two separate clean up programs if their site has underground storage tanks regulated by the Bureau of Underground Storage Tank Regulation (BUSTR).

Under Ohio law, any areas of brownfield site with BUSTR tanks is ineligible for participation in the Voluntary Action Program (VAP) until it, first, clean up the BUSTR tanks in accordance with BUSTR regulations.  Never mind that the VAP clean up standards and BUSTR were equivalent in their protection of human health and the environment.

What resulted is lengthy delays at brownfield sites while the volunteer addressed all BUSTR tank issues prior to proceeding with the VAP.

S.B. 294 will allow any person cleaning up a brownfield to use the VAP to address BUSTR tanks as long as two conditions are met:

  1. The VAP clean up also addresses other hazardous substances or petroleum that is not BUSTR regulated; and
  2. The fire marshal has not issued an enforcement order requiring BUSTR closure.

This is a great reform that is a long time coming.  It should make brownfield as well as VAP clean ups at operating sites far less complicated.

Compliance Assistance for Small Businesses

Ohio EPA has the Office of Compliance Assistance and Pollution Prevention (OCAPP).  OCAPP allows small business to call EPA staff and ask for assistance with permitting or compliance issues without fear of enforcement. 

Under existing law, only inquiries regarding air permitting are confidential.  S.B. 294 would make inquiries into other permitting programs confidential.  This gives the business the comfort of knowing their noncompliance, by law, cannot be reported to other EPA divisions or offices. 

OCAPP can be a great tool for small businesses to cost effectively untangle complex EPA regulations and file for permits.  S.B. 294 will enhance OCAPP's capabilities.

Introduction Just Marks the Beginning of the Legislative Process

S.B. 294 will be very interesting to watch as it proceeds through the legislature.  Will Senator Schaffer and Ohio EPA be able to prevent it from becoming a "Christmas Tree", where every group and legislator tries to include their concepts or ideas for reforms to EPA?

Time will tell.

 

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)

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."

Conclusion

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.

 

New BUSTR Classification for Underground Storage Tanks Meant to Accelerate Clean Ups

One of the issues that can complicate a clean up is if multiple environmental regulatory programs apply to the site.  Even the same type of contamination may be required to be addressed under different programs and different processes.

A prime example of this issue in Ohio is the disconnect between Ohio's Voluntary Action Program (VAP) and the Bureau of Underground Storage Tank Regulation (BUSTR) which applies to petroleum underground storage tanks (USTs).  Until recent legislation, a BUSTR regulated UST was totally ineligible for clean up under the VAP.

As a practical matter, the ineligibility of BUSTR tanks can cause significant delays on a clean up project.  Why?  Because the property owner typically wants to eliminate the BUSTR eligibility issue first by investigating and cleaning up USTs under BUSTR regulations before proceeding with the VAP. 

If you don't front load the BUSTR clean up and proceed with the VAP, you can be left with what is called a "Swiss Cheese" covenant upon completing the VAP- you get a legal release (covenant not to sue- CNS) from Ohio EPA that excludes all areas failing to complete a BUSTR required clean up.

In order to avoid the "Swiss Cheese" CNS, property owners complete their BUSTR Tier 1 investigations and Tier 2 clean up, if needed, under BUSTR regulations first before completing the VAP.  This often prolongs a clean up by months or even up to a year.  It also adds costs to the project.

Does this really make sense when both VAP  and BUSTR clean up standards have been determined to be protective of human health and the environment?

New Legislation Creates BUSTR Class C

In an attempt to partially remedy the delays caused by the conflict between BUSTR and VAP, House Bill 152 amended the law on June 30, 2011.  The new law is effective as of September 28th.

The law states that certain BUSTR USTs- Class C tanks- can be cleaned up under the VAP without completing a BUSTR clean up first. The tank has to be removed in accordance with BUSTR regulations, but the soil assessment and clean up can be performed under the VAP.

A Class C release is defined as a release of petroleum subject to BUSTR laws, where the responsible person for the release is determined by BUSTR to not be a viable person capable of undertaking or completing the required assessment and clean up.  In other words, the responsible party has no money to perform the BUSTR clean up.

BUSTR can determine a UST is a Class C if the following apply:

  • responsible party is deceased or bankrupt
  • a review of financial records demonstrates the responsible party is financially unable to assess and clean up the release

Based upon an Ohio EPA fact sheet on the BUSTR Class C designation, 121 sites have Class C releases already determined (as of July 12, 2011).  

For more information here is a link to Ohio EPA's web page discussing the Class C designation.

Class C Designation Doesn't Go Far Enough

As discussed above, the fact BUSTR clean up regulations can apply to a VAP clean up can result in significant delays, added costs and additional complexities.  Both clean up programs are protective of the environment.  So, why not allow all BUSTR regulated tanks to be closed and cleaned up pursuant to the VAP?

I suppose the State's answer is, in part, if a viable party responsible for the tanks exists they shouldn't be allowed off the hook for their BUSTR clean up obligations.  This would be rewarding a tank owner who ignored its legal obligations.

The only problem with that argument  is that the ineligibility of BUSTR tanks for the VAP really hurts the volunteer more than it does the responsible party.  The volunteer wants an expedited and cost effective clean up. The volunteer often doesn't want to chase down the responsible party before completing its clean up.  Forcing the volunteer to address the outstanding BUSTR obligations first before proceeding with the VAP results in both delays and added costs to the detriment of the volunteer.

Why not at least allow a volunteer to address BUSTR tanks under the VAP without having to demonstrate the tank's responsible party is not viable?  You could still exclude the responsible owner from using the VAP.  This would at least not reward the UST responsible party, but would greatly assist the volunteer.

(Photo:  South Carolina Department of Health and Environmental Control)

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)

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.

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.

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.

Conclusion

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)

WHAT: Brownfield Program

For WHAT:

LOANS for Planning/Design and/or Construction of Brownfield site remediation

WHY:

To clean up contaminated property, especially in urban areas through direct loans or credit

(Purpose)

enhancement.

By WHOM:

Administered by: OWDA

Funded by: OWDA Brownfield Fund (under LED) from OWDA Revenue Bonds Surplus

 

Local Government Agencies (Cities, Villages, Counties) that have:

1. Plans designed by certified professionals;

2. Plan approval by OEPA;

3. Demonstration of revenues adequate to meet annual loan repayments.

And Private Entities that have:

1. A VAP certified engineer directing the remediation effort;

2. Financial strength analysis;

3. Real estate appraisal;

4. Evaluation of potential effectiveness of remediation.

HOW MUCH:

Max Construction Loan: No max

Eligible Costs: Engineering & design fees, construction costs, legal and inspection fees

Application Fee: $2,500 (May be credited to Loan Fee)

Loan Fee: .35% (.0035) of total estimated project, processing and closing costs OR $400 for loans up to $100 million; .00175% for loans between $100 million to $150 million; capped at $150 million

Contract

Interest Rate: Based on the higher of the comparable Treasury Note Rate or the comparable MMD AAA scale, plus 50 basis points

Rate Discounts: NA

Capitalized

Interest Rate: Same % as Contract Interest Rate; Accrues on portion of loan disbursed, until 6 months prior to the Loan Maturity Date

Retainage: 8% of first 50% of labor until project is substantially completed (as defined by the community), for all communities except home-rule, on Construction Loans only

Planning/Design

Repayment Rate: Balloon payment at maturity, if no prior repayment made

Construction

Repayment Rate: Varies by loan

Late Pmt Penalty: Greater of: 10% of amount overdue OR $25 minimum

Default Rate: Greater of: Contract Interest Rate + 300 basis points (3%) OR 16%

Loan Amount: Max Planning/Design Loan: $500,000

HOW LONG:

Planning/Design Loan: Min: None Max: 5 years

(Contract Term)

Construction Loan: Min: None Max: None

WHEN:

Loan Fee: Due when the Loan Agreement is executed

Repaymt Invoice: Mailed approximately every May 15 and Nov 15 by OWDA to loan recipients

Planning/Design

Loan Repayment: Begins earlier of: 5 years, OR at the time remediation begins (May be rolled into subsequent Construction loan)

Construction

Loan Repayment: Negotiated between OWDA and borrower at the time the loan is made

Application: Due 15th of the month

WHERE:

Disbursement request: OWDA Chief Engineer

Repayment to: OWDA Accounting Dept

Application from and to: OWDA Chief Loan Officer

HOW:

To Apply the Borrower must:

1. Fill out and submit application form with supporting documents as listed on the application.

2. Meet with OWDA to negotiate loan terms.

For Cooperative Agreement approval the Borrower must:

1. Receive bids and tentatively approve contract awards.

2. Pass legislation authorizing signing of the Cooperative Agreement.

3. Complete any necessary assessment, tap-in and/or rate legislation.

4. Prepare a Projection schedule of revenues, debt service obligations, and operation and

maintenance costs, over the contract term of years repayments are to be made to OWDA.

For Disbursement of loan funds the Borrower must:

1. Fill out Loan Payment Request form and send with supporting contractors’ documentation.

For WHOM:

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.

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.