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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Legal End Around?

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

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

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

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

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

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

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

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

VAP CNS Issued by Year
Year

NFA Letters
Requesting a CNS

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

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

Developments that have small impacts to wetlands (typically around 1/2 acre or less) or streams (typically around 300 feet or less) have been able to qualify for expedited permitting known as Nationwide Permits (NWP).  Projects with greater impacts must obtain individual wetland or stream permits known as a 404 Army Corps Permit and 401 Ohio EPA Water Quality Certification (click here for Basics of Wetland Permitting).

Most developers try to arrange their development projects to stay under NWP thresholds if at all possible due to the time and cost savings associated with expedited permitting, which include:

  • Time Savings- NWP time frame 3-6 months versus 12-18 months for individual 404/401
  • Costs Savings- Permitting preparation range can be from $8,000 to $15,000 or more in cost savings just in permit preparation costs

The process for developing NWPs starts with the Army Corps of Engineers proposing NWP for the entire country under its 404 Clean Water Act authority.  Each individual state has the option of placing restrictions on usage of the NWPs under its 401 Clean Water Act authority.  The NWPs once finalized are effective for five years.

On March 17, 2017, Ohio EPA finalized its 401 water quality certification for the 2017 NWP.  The 2017 new NWPs are effective from March 19, 2017 through March 18, 2022.  

Under the new 401 water quality certification, Ohio EPA has placed significant limits on the use of the expedited permits for impacts to high quality streams in Ohio.  The Agency has developed a color coded map that designates areas into three categories:

  • Ineligible Areas (Purple)– Any impacts to streams in these areas are ineligible for coverage under NWP.  Any project with stream impacts in these areas must pursue an individual 404/401 permit.
  • Possibly Eligible Area (Yellow)–  Any impacts to streams in these areas require additional work before an applicant will be eligible for a NWP.  The applicant must:
    • Take pH values
    • Perform a habitat assessment- Qualitative Assessment Habitat Evaluation Index (QHEI) or Headwater Habitat Evaluation Index (HHEI) assessment of the stream. 
  • Eligible Areas (No color code)– any proposed  impact to streams within the project area are eligible for NWP coverage.

 In Northeast Ohio, the much of the Rocky and Cuyahoga River watersheds are color coded purple (ineligible for NWPs).  These new restrictions will have significant consequences for developers and property owners throughout Ohio.

This week, President Trump released his Administration’s first federal budget dubbed the "America First- A Blueprint to Make America Great Again."  Under the budget proposal, U.S. EPA current budget would be cut by 31% which amounts to a $2.6 billion dollar reduction.  

This leaves the Agency with $5.7 billion to run its programs which is the lowest amount funding provided U.S. EPA since 1990.  As reported by POLITICO, the proposed budget cuts would force U.S. EPA to layoff 3,200 workers. 

Since 1990, environmental regulation and science has advanced significantly.  As a result, numerous new programs have been added, including: climate change, protection of the Great Lakes, improving air and water quality standards.  

In the early years of environmental regulation the "easy" pollution reductions were achieved first. Additional reductions become much more challenging.  As a result, environmental permitting (NPDES, Title V, New Source Review) has become far more complex.

A drastically reduced workforce at the state and federal level will make implementation of these programs impossible and threaten to compromise the progress made over the last forty years.  The improvements to air and water quality since environmental regulations were implemented in the U.S. are well documented:

  • From 1970 to 2015, aggregate national emissions of the six common pollutants alone dropped an average of 70 percent while gross domestic product grew by 246 percent. This progress reflects efforts by state, local and tribal governments; EPA; private sector companies; environmental groups and others.
  • In the forty years since passage of the Clean Water Act there has been dramatic improvement to U.S. waterways:
    • Only about a third of U.S. water was safe for swimming or fishing. Now, an estimated 65% pass the fishable and swimmable test;
    • Before passage of the Clean Water Act, the country was losing up to 500,000 acres of wetlands per year. With wetland regulations, average wetland losses have fallen below 60,000 acres per year; and
    • Before the Clean Water Act and Safe Drinking Water Act, 30% of tap water samples exceeded federal limits for certain chemicals. According to a 2012 EPA report, 90.7% of U.S. community water systems met “all applicable health-based standards” in 2011.

The President’s EPA budget blueprint has a stated goal of shifting authority back to the states for primary implementation of the federal environmental regulations.  The Administration cites to waste as a result of duplication between state EPA’s and U.S. EPA.  Here are some of the statements included in the budget blueprint regarding prioritizing delegation of authority and responsibility to the states:

  • Avoids duplication by concentrating EPA’s enforcement of environmental protection violations on programs that are not delegated to States, while providing oversight to maintain consistency and assistance across State, local, and tribal programs. This reduces EPA’s Office of Enforcement
    and Compliance Assurance budget to $419 million, which is $129 million below the 2017 annualized CR level;
  • Supports Categorical Grants with $597 million, a $482 million reduction below 2017 annualized CR levels. These lower levels are in line with the broader strategy of streamlining environmental protection. This funding level eliminates or substantially reduces Federal investment in State environmental activities that go beyond EPA’s statutory requirements.

State Categorical Grants fund core programs, such as implementation of the Clean Air Act, Clean Water Act, hazardous waste regulation (RCRA) and the Safe Drinking Water Act.  The budget blue print calls for a 45% reduction in support to the states to run these programs.  

A recent article in the Columbus Dispatch discussed the potential impacts on Ohio EPA.  As noted in the article, federal funds make up a significant portion of Ohio EPA’s operating budget.

After fees for permits, inspections and licenses, federal funding is the Ohio EPA’s second-largest source of income, accounting for about $40 million of its $200 million budget.

In 2016, the U.S. EPA awarded its Ohio counterpart nearly $37 million for programs that maintain Superfund sites, restore wetlands, protect the Great Lakes and manage hazardous waste. 

The Administration is missing an opportunity to be more cost effective in implementation of environmental regulation.  The Administration is also losing a significant opportunity to be true to principles of federalism by entrusting the states with greater autonomy with regard to implementation of environmental program.  

If the Administration truly wants to shift power more toward the states, then drastic cuts to federal funds that allow states to implement those federal programs undermines that important policy goal. The danger exists that without adequate funding states cannot meet the increased demands.  In the years to follow, the states inability to be to handle the increased burden will be used by those who champion increased federal oversight to justify taking authority away from the states.  

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.  

 

On July 29th, the Michigan Attorney General Bill Schuette charged six more public officials in connection with their roles in the Flint Water Crisis.  One of the six charged included a senior management official at the Michigan Department of Environmental Quality (MDEQ)- the former Chief of the Office of Drinking Water and Municipal Assistance. The latest charges are in addition to the two MDEQ officials charged in April.  

Attorney General Schuette stated:

"Many things when tragically wrong in Flint.  Some people failed to act, others minimized harm done and arrogantly chose to ignore data.  Some intentionally altered figures and covered up significant health risks."  (emphasis added)

Ohio experienced its own issues with drinking water in Sebring Ohio.  In January, Ohio EPA fired two employees for failing to timely provide information to the District Office deemed critical to providing timely information regarding the condition of water in Sebring.  Here is what Ohio EPA’s Press Release said about the reason for terminating the employees: 

"Ohio EPA Central Office employee responsible for sending laboratory results from the Central Office failed to ensure that data was provided to the field office to help them conduct their review…The employee’s supervisor is also being terminated for not properly managing an employee who had an existing record of performance issues and not providing appropriate corrective counseling or progressive discipline despite being instructed to do so."

Ohio EPA also announced that it established a new process to provide staff with a direct and expedited communication route to senior Ohio EPA officials of situations that have possible “significant environmental and public health consequences.”

It is rare for State environmental protection agencies to fire employees for not performing their job.  It is even more rare for criminal charges to be brought against State EPA employees relating to performance of their job functions.  The firings and criminal charges have garnered national attention.  The crises have, no doubt, had an effect on the cultural and work environments of State EPA.s

Here are five things businesses can expect:

  1.  More Aggressive Deadlines-  One of the themes from Flint and Sebring was whether officials acted on information on a timely basis.  Also, whether officials raised public health issues up the chain quickly.  As a result, it is likely regulators will be demanding more aggressive deadlines for businesses to address non-compliance and/or investigate issues.
  2. Demand for Action-  Regulators will have less tolerance for debating over appropriate responses to ongoing violations and/or investigating issues.  If businesses don’t respond in a timely fashion (in the Agency’s viewpoint) or refuse to take the steps the Agency believes are appropriate, regulators will takes action.  This could be performing sampling using Agency resources (not waiting for businesses to sample).  This could be referring matters up the chain more quickly for enforcement.  
  3. Less Deference to Outside Technical Consultants–  Regulators will be less willing to defer to the private sector to decide how to appropriately respond.  Historically, it was common place for private consultants and agency representatives to debate technical issues.  With the pressure on agency employees to perform their duties quickly this will likely translate to less deference to private consultants.
  4. More Involvement of Management in Decision Making-  Another theme from both Flint and Sebring was whether agency employees made management aware of issues in a timely fashion.  For example, Ohio EPA announced a new protocol for making senior management aware of "public health" issues quickly.  What constitutes a public health issue or  potential issue is vague.  Lower level employees will be more inclined to raise issues up chain of command to management.  In some cases, even directing businesses to address correspondence directly to senior management when that same correspondence would have gone to staff just a year ago.
  5. Changing Work Environments-  Even though environmental regulators perform a critical function, the stereotype is that government workers have less stress and more reasonable work hours then their counterparts in the private sector. With the added pressure and spotlight these recent news events have brought, there will be changes in the work environment within State EPAs.  These "cultural" changes will also be felt by businesses, consultants and individuals that interact with regulators. 

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

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

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

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

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

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

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

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.

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

Current Options for Addressing Environmental Liability 

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

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

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

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

Issues with VAP 

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

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

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

Issues with BFPD

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

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

Current Ohio Brownfield Incentives

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

Brownfield Grants and Loans Tax Incentives

Former Clean Ohio Program

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

JobsOhio Revitalization Program

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

 Issues with Grant/Loans/Tax Incentives

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

Ohio’s Scorecard on Brownfield Redevelopment

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

VAP Cleanups Completed 1995-2015

659 NFA’s submitted to Ohio EPA 

132 withdrawn, denied, revoked or pending

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

 

Clean Ohio (2001-2012)

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

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

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

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

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

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

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

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

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