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Maryland Harvesting Brownfields for Growth*
By James B. Witkin and Melissa B. Derwart
*This article originally appeared in the May 14-20, 2004 edition of the
Washington Business Journal.
On April 27, Maryland Gov. Robert L. Ehrlich Jr. signed the Brownfields Redevelopment Reform Act, one of the major environmental bills enacted by the General Assembly in this year's legislative session.
The act is intended to improve the Maryland Voluntary Cleanup Program (VCP), which encourages the cleanup and redevelopment of properties that are -- or are perceived to be -- contaminated by providing liability protections and financial incentives.
A prominent VCP success story is the former American Can Co. manufacturing plant. Vacant for 10 years because of environmental concerns, this property on Baltimore's waterfront is now a successful retail and office complex.
Brownfields development has been hampered by the fear of legal liability, costs of environmental cleanup and difficulty of obtaining financing due to federal and state environmental laws that can hold a purchaser of an environmentally harmed property liable for remediation costs, even though the purchaser did not contribute to the contamination.
Clearing the Way for Redevelopment
The federal government, D.C. and numerous states, including Virginia, have enacted VCPs designed specifically to overcome these barriers to redevelopment.
Because many brownfields are in urban areas, the programs also support "smart growth" by encouraging the recycling of sites with existing infrastructure, which decreases development pressures on outlying areas.
Under the Maryland program, parties that voluntarily agree to investigate and, if required, clean up a brownfield site are offered liability protection in the form of a "certificate of completion" or a "no further requirements" determination, indicating that the state will not bring an enforcement action for the known contamination.
Most lenders are then willing to make loans on these sites.
Maryland enacted its VCP in 1997. As of the beginning of this year, the Maryland Department of the Environment had received about 175 VCP applications. Of those, 91 properties have completed the program.
Generally, a contaminated property, or one perceived to be contaminated, is eligible for the VCP.
However, there are some exceptions, and it is important to determine a site's eligibility before going through the application process.
In addition, a person who knowingly violated any law concerning controlled hazardous substances is not eligible to participate in the VCP.
New Provisions for Maryland
The new law, effective Oct. 1, expands the range of eligible parties and properties.
Oil-contaminated sites will now be included in the VCP.
Previously, properties contaminated by gasoline or other petroleum products were handled in a separate Environment Department program, which did not provide the same liability protections afforded by the VCP.
With the change, a shopping center site contaminated by dry cleaner solution and gasoline will need to go through only the VCP.
In the past, properties under active environmental enforcement have not been eligible for the VCP.
Now, sites under active enforcement, such as an industrial property charged with environmental permit violations, can potentially qualify for the VCP.
Some of the act's changes could shorten the VCP process.
A Phase II environmental assessment, where an environmental consultant tests soil or groundwater for contamination, currently must be submitted with every VCP application.
Under the new law, a Phase II assessment is required only when the Environment Department's review of the Phase I (nonintrusive) report deems one necessary.
In addition, the new act shortens the turnaround time for the Environment Department to notify applicants of the status of their application from 60 to 45 days.
There also is a new option for expediting certain administrative determinations -- although the department will charge a $2,000 fee.
Other changes may lengthen the VCP process.
The new law contains more extensive public-notice requirements.
They include posting signs on the subject property, publishing a notice of the application on the Environment Department's Web site, a public informational meeting for proposed cleanup plans and the department's acceptance of public comments after those meetings.
Although certain fees associated with VCP applications will increase, the new law permits lower fees upon a demonstration of financial hardship.
It also permits a reduced $2,000 fee for each application submitted subsequent to the initial application for adjacent properties that are a part of the same development project.
The new law provides certain additional liability protections.
For example, in cases where the Environment Department imposes a use restriction on a property and that restriction is violated by a third party, the original applicant will not be held liable.
The act also gives the department greater enforcement authority.
More Enticing Incentives
The current law provides financial incentives such as low-interest loans or grants for environmental assessments and site remediation and property-tax credits in certain jurisdictions.
By expanding the range of properties eligible for the VCP, the new law broadens the number of sites that will qualify for these incentives.
In all, these changes to the VCP program should assist developers of brownfields and perpetuate the restoration and reuse of these properties.
© 2004 American City Business Journals Inc.
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