Turning Brownfields into Big Green: Practical Concerns Regarding Contaminated Real Estate

by Katherine Croswell March 8 2007, 15:20
I.  Introduction

Greenfields, otherwise known as pristine tracts of land, are becoming scarce as demand for residential property continues to rise, yet environmentalist groups are fighting to preserve these undeveloped areas. [1] How, then, can we provide more residential areas to meet the increasing demand, while refraining from construction on previously unused land?  Brownfields very well may be the answer to this fundamental conflict.  Brownfields are “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” [2] Some authorities report that there are more than 500,000 abandoned brownfields scattered throughout the United States. [3] While the thought of turning polluted land into a residential area may at first seem unappetizing, brownfield redevelopment is gaining more acceptance as lenders and insurers begin to give financial support for these projects. [4] As more and more builders are taking on these projects, the question remains as to whether the benefits really outweigh the risks.

II.  Advantages to Using Brownfields

Those in support of brownfield redevelopment point to the numerous advantages that may stem from taking on these projects.   The first possible advantage is the large profit potential for builders who decide to take on these projects. Contaminated sites generally cost the builder less money than other locations, and current technology makes it easier and less expensive for companies to clean up the land.  [5] When these two factors combine, builders stand to make a large profit once they turn the land around and sell it at market value.  In addition, the local tax base and job market can be strengthened, because previously underperforming or dormant land will be put to a higher use. [6] The builders will have to employ more workers to clean up the area and construct homes, and both the builders and the ultimate landowners will pay taxes on the land once it is redeveloped.  There is also the issue of utilizing existing infrastructure. [7] When builders break ground on greenfields, new roads as well as utility wires and piping must be implemented before the project is fully operational, but when brownfields are used, the existing infrastructure is often salvageable, substantially decreasing time and money spent, as well as reducing waste.  From an environmental standpoint, cleaning up brownfields is beneficial because we are improving the environment; toxins from commercial and industrial areas are being removed and in their place we are building homes and parks, a more earth-friendly use. [8] “Brownfield development is the ultimate example of recycling.” [9] Using brownfields also helps the environment indirectly because it takes the pressures off for using open and undeveloped land, allowing more of nature to remain unspoiled.  [10]

III.  Disadvantages to Using Brownfields

While the advantages of utilizing brownfields are many, the disadvantages and potential risks are worthy of consideration.  For the developers of these areas, the exact profit potential is unknown for any given brownfield.  The exact cost for cleaning up a brownfield can be estimated, but one cannot know for sure until the site has gotten the final seal of approval that the site is clean and ready for residential use, making these projects risky to the investor. [11]  This can be somewhat alleviated by the fact that the builder may be able to pass the clean-up costs onto the ultimate buyer or even the government. [12] There is also an issue with how much can really be done with the land once it has undergone remediation.  Contaminants may stretch down into the soil, and the legal standards for cleanup may or may not specify that this pollution must be removed.  Therefore, owners of redeveloped brownfields may be limited with what they can do with their land.  For example, if the soil three feet below the land is contaminated, owners may be restricted from digging a well or a swimming pool on that land, decreasing their enjoyment and use of their land. [13] The last major disadvantage that may be an obstacle for developing brownfields is the fact that the process takes time and patience.  It may take years for a builder to acquire, get necessary approvals, clean up, and start construction on a contaminated site, which requires a degree of dedication and depth of pockets that many private developers simply do not have. [14]

VI.  Incentives to Develop Brownfields

Federal and state governments as well as organizations such as the EPA have weighed the advantages and disadvantages of redeveloping brownfields and have thrown their support strongly behind these projects.  This is evidenced by various grants, tax incentives, and liability relief that have become common-place offers to those who wish to take on a brownfield redevelopment project. [15] Individual states have given companies incentives in the form of tax benefits and low-interest loans, and in some cases even eliminated “time hurdles and project approval impediments.” [16] New York offers developers long-term liability relief, and protects lenders who support brownfield projects. [17] The Federal government has authorized $250 million per year from 2002 to 2006 to assist with brownfield cleanup.  [18] These incentives have helped turn these potentially risky projects into consistently lucrative franchises.

V.  Potential Legal Issues

While more developers and governments jump on the brownfield bandwagon due to the various incentives discussed above, a lingering question remains: With all of the liability protection given to developers, who is liable if something goes wrong and contamination remains?  While technology for cleaning up contaminated sites has gotten better in recent times, there is still a possibility that some contamination will remain, creating a potential for illness and decreasing the value of the land itself. While it is true that builders must disclose the fact that buyers are purchasing previously contaminated land, is this enough to say that someone is truly making an informed decision?  There is likely to be a conflict between the corporate side of the development company which wants to disclose as much as possible to reduce potential liability, and the marketing side which wants to limit disclosure so that the purchase looks as attractive as possible. [19] This conflict could mean that the buyer may not get all of the information and therefore purchase the land without making a truly informed choice.  It appears that if these buyers do not actually hire an expert to survey the land for possible contamination, which most buyers fail to do, they become responsible for any contamination of the property even though the contamination was there before the purchase. [20] These homeowners may not even have a remedy against the developer if they were granted liability relief.  It is unclear, then, whether ultimate landowners are really the ones bearing the risk.

Another concern is that various standards may be compromised as pressure to develop these sites(and develop them quickly) intensifies. Health and safety should be a chief concern when turning these brownfields around for residential use.  Can we ever be truly certain that all of the harmful contaminants have been removed and what the long-term effects of actually living on a reformed brownfield are? Likely not, but high environmental standards will go a long way toward reducing the risks.  These environmental standards should be uniform and non-negotiable, so as to assure that political and economical concerns do not rise above the concerns regarding human life.  It has been suggested that developers can “negotiate” healthy standards with the EPA during the proposal stage of a new brownfield project. [21] Also, many sites have been de-listed from databases of toxic properties in order to remove the stigma that goes along with that classification. [22] Presumably these properties were put on that list for a reason, and taking them off only does a disservice to the public at large by misrepresenting the true danger.  Uniform standards must go into classifying these properties and determining when they have been sufficiently decontaminated, based on scientific research regarding what degree of contamination is truly safe.

VI.  Looking Forward

Brownfield redevelopment programs offer a promising alternative to breaking new ground and increase the likelihood that we will be able to preserve the precious few tracts of land that remain undeveloped.  The advances in technology which assist in clean-up efforts, as well as various incentive programs, ensure that this relatively new form of recycling will gain more popularity and continue to expand.  It’s important to remember, however, that everything comes with a price. It is contaminated land that is at issue here, and in some cases, that contamination rises to an alarming level.  Caution must be taken and respect paid to the importance of cleaning the property not only in a cost-effective way in order to turn the all-important profit, but also in a way that will not compromise the quality of human life.

Sources
[1] See Felicia Oliver, Mining for Green in Brownfields; Formerly Contaminated Sites Hold Promise for Profitable, Conservation-Smart Development, GIANTS, Feb. 1, 2007, p. 22, available athttp://www.housingzone.com/giants/article/CA6415827.html.

[2] United States Environmental Protection Agency (US EPA), Brownfields Cleanup and Redevelopment,http://www.epa.gov/swerosps/bf/ (last visited Mar. 6, 2007).

[3] See Bea Grossman & Ram Sundar, Brownfields Revitalization Law: Incentives, Exceptions, and Concerns, REAL EST. ISSUES, Winter 2003.

[4] See Oliver, supra note 1.

[5] Id.

[6] United States Environmental Protection Agency (US EPA), About Brownfields,http://www.epa.gov/swerosps/bf/about.htm (last visited Mar. 5, 2007).

[7] Id.

[8] Id.

[9] See Oliver, supra note 1.

[10] See US EPA, supra note 6.

[11] See Oliver, supra note 1.

[12] Id.

[13] Id.

[14] Id.

[15] See Grossman & Sundar, supra note 3.

[16] See Scott Houldin & Tony Pohle, The Urban Brownfield: New Federal and State Efforts are Providing Incentives for the Clean up and Development of Once Contaminated Properties in Urband and Industrial Areas, RISK & INS., July 2002.

[17] See Christopher Rizzo, Brownfield Redevelopment Opportunities in NYS, REAL EST. WEEKLY, Feb. 2, 2005.

[18] See Grossman & Sundar, supra note 3.

[19] See Oliver, supra note 1.

[20] Bradford Mank, Reforming State Brownfield Programs to Comply with Title VI, 24 HARV. ENVTL. L. REV. 115, 122 (2000).

[21] See Oliver, supra note 1.

[22] See Houldin & Pohle, supra note 16.

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