State Working Groups: Followup From Philadelphia Conference

Posted: July 31, 2011 | Author: | Filed under: Uncategorized | Leave a comment »

(Anyone reading this blog should first take the time to read my four previous blog posts, as they set the stage for these ongoing discussions.)

I know it’s been a while since my last post, but believe me, that doesn’t mean things have slowed down around here.  In fact, just the opposite is true. First, let me say that the annual Brownfields conference in Philadelphia was a huge success.  EPA and ICMA must be commended, as this 2011 conference was certainly one of the best.  It was both educational and fun.  The sessions were timely and the presenters were very interesting.  And, Philadelphia is an excellent host city, with many delightful attractions.

Next, I am pleased to report great success from our session on using the ground lease liability relief model to encourage solar and other renewable energy projects on landfills and other contaminated sites.  Even though our roundtable panel was in the final time slot on the last day of the conference, the session was very well attended, with almost one hundred participants.

As noted in my pre-conference blog posts, we were able to boast a star-studded panel, including David Lloyd, Ken Patterson and Charlie Bartsch, all from the highest levels at U.S. EPA headquarters.   The panel was very complimentary of our efforts to date, with certain EPA panelists even stating that the ground lease liability bifurcation model is “brilliant”.

The panel’s conclusions were somewhat sobering, however, with the recognition that significant changes to many state laws will be necessary, and that a federal EPA ”ground lease liability relief” initiative is probably not likely, at least not in the near future.  The main focus of the panel discussion was how best to encourage the ground lease liability relief model, utilizing existing federal EPA policies and programs, and by encouraging state programs.

The panel also discussed EPA’s most recent Fact Sheet, entitled “Siting Renewable Energy on Contaminated Properties:  Addressing Liability Concerns,” which came out just in time for the Philadelphia conference.  As we noted in a previous blog post, this Fact Sheet is very well written and incredibly informative.  It will definitely be an invaluable resource for those looking for potential relief from CERCLA liability for the siting of renewable energy projects on contaminated sites.

It is true that the Liability Fact Sheet is a great compilation of references to existing federal EPA policies.  However, a reasoned analysis of the Fact Sheet yields the inescapable conclusion that most landfills and other contaminated sites remain too risky for renewable energy proponents, unless and until some changes are made, at the state and/or federal level.  In the next couple of blog posts we will explore the EPA Liability Fact Sheet in depth, and will discuss where existing federal policy falls short from the standpoint of encouraging renewable energy projects on contaminated sites.  Stay tuned for this upcoming analysis.  I think you’ll find it very interesting.

Finally, we have been having great success with our State Working Groups.  I’ll be sure to keep you apprised of our progress.

(Please note that this is not a public blog site, so I do not publish many of the comments I receive.  If you make a comment and want to keep it private, just let me know and I will be sure to respect your wishes.)

 

A Quick Primer on Federal CERCLA Ground Tenant Liability, and the BFPP “Safe Harbor” exception, at Renewable Energy Brownfields Projects

Posted: April 3, 2011 | Author: | Filed under: Uncategorized | Leave a comment »

(This is the blog post I had hoped to publish on March 31.  I apologize to those of you who have been waiting for this segment.  For those of you attending Brownfields 2011, I hope you will still take the time to read this entry prior to our  “Jumpstarting Renewable Energy Projects Using the Bona Fide Ground Tenant Lease Model” roundtable session,  set for 3:15 p.m. this Tuesday, April 5.  Also, as always, anyone reading this blog post should take the time to read my first three blog entries, as they set the stage for these ongoing discussions.)

 

In order to understand the need to alleviate the uncertainties of cleanup liability risk associated with siting renewable energy projects on closed landfills and other contaminated sites, it is important to first understand how that liability risk arises in a typical renewable energy project scenario. This entry is devoted to a cursory overview of that subject, under the federal CERCLA statute, and to a discussion of whether the self-implementing provisions of the Bona Fide Prospective Purchaser (“BFPP”) protections of the 2002 CERCLA Amendments provide enough, in the way of safe harbor protections, to allay the liability fears of renewable energy investors and lenders.

As noted in prior blog entries, most renewable energy projects are done, for a variety of reasons, under a long-term (20 years or more) lease, typically using what is known as a “ground lease”.

Once again, from the 10,000 foot level here’s how it works.

CERCLA Cleanup Liability for Ground Tenants

An otherwise “innocent” ground tenant can incur CERCLA liability in one of two primary ways.  First, if that tenant holds sufficient property control (e.g., long lease term, pays all taxes, has essentially unfettered access to surface and soils), known as “indicia of ownership,” that tenant can be deemed a de facto owner under CERCLA, and is subject to the same liabilities for cleanup as would be incurred by someone who actually purchased fee title to the property.  Second, if the tenant actually disturbs the soil at the site (from site grading, sinking of footings, etc.), the tenant could be liable as an existing “operator” or “transporter”.

How the “BFPP” Safe Harbor Applies to Ground Tenants

The Bona Fide Prospective Purchaser, or BFPP, provisions of the 2002 CERCLA Amendments provide an important limitation to liability for new property owners that meet certain specified conditions.  This liability limitation can also extend to tenants, in certain circumstances.

One such circumstance is when a tenant qualifies, as discussed above, as a de facto owner.  Under those circumstances, according to EPA Guidance, if that de facto owner (tenant) otherwise meets the conditions to qualify as a BFPP, the tenant may take advantage of the BFPP protections of CERCLA as if it were a true owner of the property.

Another circumstance where BFPP protections can apply is where (even though the tenant doesn’t qualify as a de facto owner) the tenant is leasing from a property owner that itself qualifies as a BFPP.   Under those circumstances the BFPP protections of the property owner can be bootstrapped for the benefit of the tenant.

The tenancy interest that does not enjoy the BFPP protections of CERCLA is a tenant who leases from a potentially responsible party (PRP), has some site control but not enough to be a de facto owner, and who somehow “turns dirt” to a degree where that tenant could be liable as either an operator or transporter.  This circumstance is likely to be the rule, rather than the exception, at many renewable energy Brownfield projects.  In those situatiions, the tenant is basically just out of luck from a BFPP safe harbor standpoint, at least according to existing EPA Guidance.

Is BFPP Status Enough to Encourage Mass Sitings of Renewable Energy Brownfields Projects?

So, what about those long-term tenants that are able to qualify as a BFPP (either as a de facto owner or as a tenant of a new owner that qualifies as a BFPP)?  How much protection do the BFPP safe harbor provisions of the 2002 Amendments really provide these renewable energy tenants, and is that enough certainty to help jumpstart hundreds of renewable energy Brownfields projects across the country?

The answer appears to be that, while it is true that the BFPP protections of the 2002 Amendments greatly reduce the cleanup responsibilities faced by those who can qualify for BFPP status, even in the best of circumstances the remaining cleanup liabilities will often be cost-prohibitive to many renewable energy project proponents.  This is mainly because of the “appropriate care” and “reasonable steps” cleanup obligations placed on these new BFPP property owners.

To reach this conclusion, all we have to do is take a  quick look at the 2002 Amendments themselves and at EPA’s May 31, 2002 Memorandum on Bona Fide Prospective Purchasers and the New Amendments to CERCLA.   Those provisions very clearly set forth that a BFPP must excercise appropriate care with respect to hazardous substances found at a site by taking reasonable steps to:  (1) stop any continuing releases;  (2) prevent any threatened future release; and (3) prevent or limit human, environmental or nature resource exposure to any previously released hazardous substance.

While the cost of complying with the above appropriate care and reasonable steps requirements may well be minimal at certain sites, at many other sites these same  requirements are likely to require a BFPP project proponent to incur significant remediation and mitigation expenditures.   This is especially true at sites where vapor plumes are migrating off site, or where hot spots of contaminants still exist at the site and are continuing to migrate to groundwater or offsite.

In addition to this likelihood of significant cleanup cost requirements incumbent in the statutory BFPP status established by the 2002 Amendments, the concern is exacerbated by the “self-implementing” nature of the BFPP statutory protections.  This self-implementing approach to BFPP protection means that at many sites the renewable energy developer will essentially be forced to guess at the acceptable level of cleanup necessary to accommodate the appropriate care and reasonable steps requirements.  This terribly inexact approach is exacerbated by the fact that the discovery of new, previously unidentified constituents, or a change in cleanup standards, could later bring the renewable energy project proponent back into the liability chain.

The above concerns are heightened at a site where little is presently known about contamination, and where the BFPP’s likely responsibilities at the site are, therefore, completely unknown.  Without a definitive confirmation by regulators of the cleanup responsibilities to be relegated to a renewable energy developer at such sites, it is highly unlikely (without some other liability mitigation incentive – like a strong indemnity from the seller, or property owner) that these projects will receive financing.

It is the existence of these uncertainties that has prompted our Ground Lease Liability Relief “White Paper” and our present efforts to establish state-by-state “Working Groups” to address and resolve these liability concerns.  We are looking for qualified stakeholder to participate in these state Working Groups and look forward to hearing from those with a strong interest in this effort.

I also look forward to meeting many of you who have been reading our blog posts, on Tuesday, at our 3:15 Brownfields 2011 roundtable discussion. It is my sincere hope that I have provided you with a good foundation on the gound lease concept as it applies to renewable energy Brownfields projects, so that you can hit the ground running during our roundtable discussions.  And, for everyone who reads this blog, including those who aren’t attending Brownfields 2011, please stay tuned AFTER the conference.  This is only the beginning of our outreach efforts!

Please Note:  EPA’s RE-Power America’s Land group has just completed its “Siting Renewable Energy on Contaminated Properties:  Addressing Liability Concerns” Fact Sheet.  This Renewable Energy Liability Fact Sheet document, which has just been released in final form, is very well written and incredibly informative.   The Liability Fact Sheet will serve as an invaluable  resource for those renewable energy project proponents who are trying to navigate the often-unsettling CERCLA liability front.

I am also pleased to report that this final version of the Renewable Energy Liability Fact Sheet includes reference to many of the liability concerns we have been addressing with EPA throughout our ground lease “White Paper” discussions with EPA officials.

(Please note that this is not a public blog site, so I do not publish many of the comments I receive.  If you make a comment and want to keep it private, just let me know and I will be sure to respect your wishes.)

 

 

 

 

 

 

 

 

Creating State “Working Groups” to Encourage Renewable Energy Projects on Brownfields Using the Ground Lease Liability Relief Model

Posted: March 29, 2011 | Author: | Filed under: Uncategorized | 2 Comments »

The purpose of this post is to focus on the need for state-by-state efforts to encourage liability relief for those renewable energy projects which utilize ground leases on Brownfields rather than actually purchasing the site.  As always, anyone reading this blog post should take the time to read my first two blog entries, as they set the stage for these ongoing discussions.

It is a fact that most renewable energy projects operate on very thin financial margins, and often pencil out only because of the numerous tax credit and other financial incentives which savvy project proponents are able to piece together.   Given these stark financial realities, it is critical that renewable energy developers be offered up a Brownfields development model that requires little in the way of cleanup cost expenditures and provides concrete protections from future cleanup liability uncertainties.

But how do we get to the point where renewable energy project proponents and their lenders/investors regularly feel comfortable focusing their sights on old landfills and other contaminated properties?  Well, the obvious first step is to make sure that each individual state’s laws and regulations provide the necessary liability relief comfort.  In California, the SB 989 law already exists; it provides actual “immunities” to a renewable energy developer that operates under a ground lease, once that developer makes its site safe for the intended human use.  California’s Department of Toxic Substances Control (DTSC) is looking to use this law to encourage renewable energy projects on landfills and other contaminated sites throughout the state.  As noted in my first blog post, DTSC is also teaming with us on our ground lease “White Paper” outreach.

For other states, the analysis must be done on a case-by-case basis.  Some states already have broad, developer-friendly bona fide prospective purchaser statutory protections, as well as broad regulatory programs, such that very few modifications need be made to encompass a ground tenant liability protection approach.  Many other states might have the appropriate statutory framework, but lack the necessary regulatory programs.  Still other states will require new legislative initiatives in order to accommodate a ground lease liability bifurcation/relief model.

Since the approach to jumpstarting the ground lease liability relief model must necessarily start with this state-by-state analysis, our ground lease White Paper outreach efforts include the organizing and coordination of stakeholder “Working Groups” in each of several states.  We are focusing our initial efforts in this regard on states with strong renewable energy incentives.

It is our hope that through this Brownfieldgroundlease.com blog site, together with the “Jumpstarting Renewable Energy Projects Using the Bona Fide Ground Tenant Lease Model” panel discussion next week in Philadelphia, we will attract solid stakeholder participation for several of our state Working Groups.  Please feel free to contact us on this blog, or through our Twitter Account (BFGroundLease), if you have an interest in participating in one of these Working Groups. Or, attend our panel discussion (on Tuesday, April 5, at 3:15 p.m.) and sign up then.

I will have one more blog post prior to Brownfields 2011, on Thursday, March 31.  That entry will focus on federal EPA enforcement of CERCLA at renewable energy sites, including the 2002 Amendments and the Bona Fide Prospective Purchaser protections of those Amendments.  You won’t want to miss that blog post as it will set the stage for much of the roundtable discussion which will occur  during our panel in Philadelphia on April 5.   EPA will also be introducing its own renewable energy project Liability Fact Sheet, for the first time, at the Philadelphia conference.  That Liability Fact Sheet will be a major source of discussion during our April 5 roundtable.

(Please note that this is not a public blog site, so I do not publish many of the comments I receive.  If you make a comment and want to keep it private, just let me know and I will be sure to respect your wishes.)

 

 

 

 

 

A Little Background on Ground Lease Liability Relief at Renewable Energy Sites

Posted: March 16, 2011 | Author: | Filed under: Uncategorized | 2 Comments »

The conventional approach to the reuse and redevelopment of contaminated Brownfield sites has long been to fully characterize both the onsite and offsite contamination, conduct much (or all) of the cleanup, and then, and only then, begin site redevelopment.  This cleanup/delayed development model has evolved this way primarily because developers have historically preferred taking full fee title to properties, with the developer/buyer often not “closing” on the fee title purchase until much of the cleanup has occurred.  This approach has been utilized, historically, as a means to avoid “owner” liability under CERCLA (the Comprehensive Environmental Response, Compensation and Liability Act), and state statutes, until the risk of such liability can be fully accounted for.

With the advent of California’s SB 989 law and its anticipated progeny in other states, this conventional “remediate first, build later” approach to the reuse and redevelopment of contaminated sites is destined to change.  Under the “Bona Fide Ground Tenant” provisions of SB 989, for example, a bifurcated cleanup approach, and an early, expedited development, is allowed where development rights are acquired via a long-term ground lease instead of a fee title purchase.

The general concept under the Bona Fide Ground Tenant model is to allow a ground lease developer to “bifurcate” cleanup between onsite near-surface human health issues and the deeper soil and groundwater issues, as well as any contamination migrating offsite.  The Bona Fide Ground Tenant developer must merely make its own development safe for the intended human use, and at that point development can occur.  In California, the site owner remains on the hook to do a full cleanup, but those cleanup efforts can occur while the development project is being entitled and built, or even after the project is up and running.

Ground Leases at Renewable Energy Sites

It turns out that renewable energy projects are a perfect fit for the ground lease cleanup/liability bifurcation model.   Renewable energy projects typically utilize a ground lease instead of a fee title land purchase, and these projects are always on a very constrained budget, where extensive cleanup obligations and liability unknowns are non-starters.

The general consensus from many regulators across the country, including many folks at EPA, is that most renewable energy projects situated on contaminated sites should not be subject to significant liability concerns.  The thought process appears to be that the act of disturbing small amounts of soil, especially for such a productive “green” purpose for the land, shouldn’t result in project-paralyzing liability concerns.

However, especially for utility-scale PV installations, the need to “move dirty dirt” through site grading or other earthmoving activities is often a must.  And it is this earth-moving, as well as the incurring of “de facto owner status” (from certain long-term leases) under CERCLA, that brings about cleanup liability uncertainties that could well deter the siting of otherwise viable renewable energy projects on Brownfield sites.

The general statutory overlay for cleanup liabilities at the federal level, the CERCLA statute, provides that parties are in the statutory liability scheme  if they are either an “owner”, “operator”, “transporter” or one who “arranges for disposal” of any of a huge list of “hazardous substances”.  Section 107(a)(1) of CERCLA specifically provides that “the owner and operator of a vessel or facility . . . from which there is a release . . . of a hazardous substance, shall be liable for . . . (A) all costs of removal or remedial action incurred by the United States Government . . .”  This is why parties generally do not like to buy properties that are (or could be) heavily contaminated.  As the new owner they are potentially liable for all of the cleanup costs associated with that contaminated property, even though they (as the new owner) were not in any way involved with causing the contamination.

A ground tenant can be deemed an “owner” of a contaminated property, for CERCLA liability purposes, if the lease is for a long period of time (e.g., 30 years) and if that ground tenant has virtually complete control over how the property is used during that tenancy.   Moreover, in addition to this potential CERCLA liability as a de facto “owner” under CERCLA, a tenant who conducts site development activities, such as grading or earth removal activities, may likewise find itself liable under CERCLA as an “operator” or “transporter”.

Thus, while most regulators may believe that renewable energy developers should not be saddled with the potential for significant site cleanup responsibility, existing law at the federal level may provide otherwise.  It is these uncertainties as well as liability uncertainties at the state level that make exploration of a nationwide Bona Fide Ground Tenant model a must.

In my next blog entry, I will explain how individual state efforts are critical, and will outline some of the outreach we are doing to help organize state ground lease liability relief “working groups”.  Feel free to contact me over the next couple of weeks, especially as we get closer to the Philadelphia “Brownfields 2011″ conference.

Beginning Our Discussion of the Ground Lease Liability Relief Model

Posted: February 24, 2011 | Author: | Filed under: Uncategorized | Leave a comment »

Brownfield Ground Lease is a blog site that I have established for the purpose of creating an ongoing nationwide dialogue around the subject of utilizing ground leases as an oft-preferred real property development model at contaminated real property sites.

The jumping off point for this discussion is the already-enacted law, California Senate Bill 989, which I drafted and shepherded through the California legislature and which became effective in California on January 1, 2007.  That law provides for significant environmental cleanup liability limitations for a developer who conducts a real estate development project under a ground lease, rather than taking actual fee title to the property.  The basic tenet of the SB 989 law is that the ground lease developer does not have to clean up contamination of deep soil or deep groundwater, or contamination that is migrating offsite to another property.  The “Bona Fide Ground Tenant” developer must merely make the site safe for its intended human use.

My intention is to use this blog site in conjunction with a “White Paper” that I am preparing on this very ground lease liability bifurcation topic.  The White Paper and the blog are intended to serve as a resource to real estate developers, renewable energy developers, property owners, cities, redevelopment agencies, lenders, federal and state environmental and land use regulators, and the environmental community.

The White Paper is co-sponsored by the California Business Properties Association (“CBPA”), who also helped build the original trade group coalition in support of the original SB 989 legislation.  The California Department of Toxic Substances Control (“DTSC”) is an additional partner in this White Paper development, as are the various private sponsors of the White Paper development and outreach efforts.  The U.S. EPA is providing assistance with the White Paper outreach, development and preparation, as is the National Renewable Energy Laboratory (“NREL”).

Early Focus on Solar and Renewable Energy Projects:

While the Bona Fide Ground Tenant concept is useable at almost any contaminated site where development is to occur, I will be focusing this blog for the first few months on the topic with the most immediate practical nationwide application, the siting of renewable energy projects on landfills and other contaminated sites.

This is especially timely because of the ongoing EPA/NREL(DOE) partnership on the “Repowering America” Initiative.  Working with the EPA, I am organizing and moderating a panel on this very topic on April 5 at this year’s Brownfields 2011 conference in Philadelphia.  The first several weeks of this blog will be designed to bring readers up-to-speed on how this bifurcated ground lease cleanup concept works, and to prepare the readers for participation in the panel discussion in Philadelphia.  It is also my intention to use this conference and blog as the opportunity to begin organizing and coordinating the establishment of state-by-state “working groups” to help jumpstart the ground lease concept immediately at renewable energy sites across the country.