Hush-Hush HazardsState kept unaware of environmental dangers at casino siteDelphi spent about a year identifying toxins at the West Side manufacturing plant it closed in 2007 but never told the state about what it found. It wasn’t required to. New owner Penn National Gaming has shared Delphi’s 3,000-page report with the EPA and plans to clean up the site before opening a casino in 2012… Prospective buyers have a right to know about any potential problems, said Tiffani Kavalec, the agency’s (Ohio EPA) cleanup and reuse-section manager.
"If they had any expectations of selling the property, they would have had to do this," Kavalec said.
But what might be surprising is that companies don’t have to share their findings with the government.
The story misses several key issues regarding brownfields.
- Surprise..old manufacturing plants have contamination– It is expected that a plant that operated for 70 years is going to leave behind some residual environmental issues. The plant pre-dated most of the modern environmental regulations.
- Companies routinely perform assessments of their properties- The privatized system works in the sense companies are encouraged to evaluate and assess their properties. Phase I and Phase II environmental assessments have become routine in any private party real estate transactions. Any sophisticated purchaser will demand a due diligence period to understand the issues associated with the property they are considering purchasing.
- Regulations contain reporting obligations- Many environmental regulations, including hazardous waste regulations, contain mandatory reporting requirements. Companies that violate these provisions would still be open to enforcement. Its the historical contamination issues that generally fall outside these mandatory reporting requirements.
- Mandatory reporting would discourage evaluation- If companies were required to submit every environmental assessment they performed to Ohio EPA, it would act as a strong deterrent to performance of assessments. These are voluntary assessments after all. Companies perform them to get a better understanding of potential liabilities as well as facilitate transfer of the property.
- A brownfield redevelopment success story- Penn Central is purchasing and redeveloping a contaminated brownfield that is currently owned by a bankrupt company. Without the redevelopment, this brownfield, like many in the State would remain contaminated. Without the environmental assessments, Penn Central may have been unwilling to take the risk of buying unknown liabilities.
- State and local grant programs pay for assessments- In recognition that the lack of information regarding contamination on property can act as a deterrent to redevelopment, there are State and local brownfield grant programs that will pay for these assessments. The biggest and best program is Clean Ohio, which will pay for up to $300,000 in assessment costs. Clean Ohio has been a huge success by overcoming impediments to private party transactions involving brownfields, including assessment and clean up costs.
We should be encouraging private parties to perform environmental assessments of their properties. Only by understanding the levels of contamination can a clean up cost be calculated. Potential buyers must know that number to be comfortable with moving forward with the transaction.
If private parties are discouraged from performing assessments there will be a greater need for federal, state and local grant funding to pay for these costs. Most prospective purchasers are unwilling to pay a few hundred thousand dollars to perform sampling unless there are very strong business reasons for doing so.