Uses of Brownfield Funds
Under the EPA brownfield program, parties interested in remediating brownfield sites could only obtain loans through the BCRLF program.  It was recognized that under the Brownfield Amendments brownfield sites redeveloped for recreational property, open space or other non-economic uses would not generate sufficient revenue streams to repay the BCRLF and that it was difficult to obtain private financing for these properties. In addition, the legislative history acknowledged that disadvantaged communities might lack the resources to repay BCRLF awards.

As a result, new CERCLA section 128 directs EPA to establish a program to provide grants to inventory, characterize, assess, and conduct planning related to brownfield sites and to perform site assessments at certain brownfield sites.  Site assessments performed using funds authorized by section 128 must be conducted in accordance with the ASTM standard for Phase I Environmental Site Assessments.

The grants for characterization, assessment and planning shall not exceed $200,000 per site though EPA may waive the $200,000 limitation and permit an eligible entity to receive a grant of up to $350,000 for a brownfield site, depending on the anticipated level of contamination, size, or status of ownership of the site. The grants may be awarded to an eligible entity on a community-wide or individual site basis.

EPA is also authorized to provide direct grants of up to $200,000 to eligible entities or non-profit organizations to remediate one or more brownfield sites owned by the eligible entity or non-profit organization. 

In determining whether to make direct remediation grants, EPA is required to take the following factors into account:
 * The extent a grant will facilitate the creation, preservation, or addition to a park, a greenway, undeveloped property, recreational property, or other property used for nonprofit purposes;
* The extent a grant will meet the needs of a community that has an inability to draw on other sources of funding for environmental remediation and subsequent redevelopment of the area in which a brownfield site is located because of the small population or low income of the community;

* The extent a grant will facilitate the use or reuse of existing infrastructure;

* The benefit of promoting the long-term availability of funds from a revolving loan fund for brownfield remediation; and
* Other similar factors EPA considers appropriate to consider for the purposes of this section.

The eligible entities may receive up to $1 million for remediation grants to capitalize their own brownfield revolving loan programs. 

These funds may be used to remediate brownfield sites in the form of loans to an eligible entity, a site owner, a site developer, or another person selected by the eligible entity. 

EPA may award additional grants to an eligible entity in subsequent years after the year the initial grant is made after taking the following factors into account:

* The number of sites and number of communities that are addressed by the revolving loan fund;

* The demand for funding by eligible entities that have not previously received a grant;

* The demonstrated ability of the eligible entity to use the revolving loan fund to enhance remediation and provide funds on a continuing basis; and

* Other similar factors the Administrator considers appropriate to carry out this section. 

The Brownfield Amendments do not specify how cleanup standards will be developed.  Since local governments will be able to directly apply to EPA for the remediation grants, it is an open question whether an eligible entity located in a state that does not utilize risk-based cleanups will be able to use the 1995 EPA policy on land use to be taken into account when developing appropriate cleanup levels.  Use of this guidance might allow for a less stringent cleanup than would be required under a state cleanup program that does not consider land use when developing cleanup standards. 

EPA may also issue grants to eligible entities or nonprofit organizations to provide training, research, and technical assistance to individuals and organizations to facilitate the inventory of brownfield sites, site assessments, remediation of brownfield sites, community involvement, or site preparation.The brownfield funds are intended as seed money to leverage other financial resources.  The Brownfield Amendments allow eligible entities to use brownfield grant funds in conjunction with other sources of money so long as the funds are used to characterize, assess or remediate the brownfield site. Local governments may use up to 10% of a brownfield grant to develop and implement a brownfields program that may include monitoring the health of populations exposed to one or more hazardous substances from a brownfield site, and monitoring and enforcement of any institutional controls at a brownfield site. 

Eligible entities must pay a matching share that may be in the form of a contribution of labor, material, or services of at least 20% from non-Federal sources of funding. The brownfield funds may not be used to pay a penalty or fine, a federal cost-share requirement, administrative or oversight costs, a response cost at a brownfield site where the recipient of the grant or loan is a PRP. If EPA determines that a grant or loan recipient has violated or is in violation of a condition of the grant, loan, or applicable Federal law, EPA may terminate the grant or loan, require the person to repay any funds received; and seek any other legal remedies available to the Administrator.

Brownfield Grant Application Process

The Brownfield Amendments direct EPA to review grant applications from eligible entities at least once a year. EPA must also establish a ranking system for evaluating applications. 

Grants shall be awarded to the eligible entities that EPA determines have the highest rankings under the following criteria: 

* The extent a grant will stimulate the availability of other funds for environmental assessment or remediation, and subsequent reuse of an area where 1 or more brownfield sites are located;
* The potential of the proposed project or the development plan for an area where 1 or more brownfield sites are located to stimulate economic development of the area on completion of the cleanup;
* The extent a grant would address the identification and reduction of threats to human health and the environment, including threats in areas in which there is a greater incidence of diseases or conditions that may be associated with exposure to hazardous substances, pollutants, or contaminants;
* The extent a grant would facilitate the use or reuse of existing infrastructure;
* The extent a grant would facilitate the creation, preservation, or addition to a park, greenway, undeveloped property, recreational property, or other property used for nonprofit purposes;
* The extent a grant would meet the needs of a community that has an inability to draw on other sources of funding for environmental remediation and subsequent redevelopment because of the small population or low income of the community;
* The extent to which the applicant is eligible for funding from other sources;
* The extent a grant will further the fair distribution of funding between urban and non-urban areas;
* The extent a grant provides for involvement of the local community in decisions relating to cleanup and future use of a brownfield site; and
* The extent a grant would address or facilitate the identification and reduction of threats to the health or welfare of children, pregnant women, minority or low-income communities, or other sensitive populations.

Eligible entities may submit applications through the EPA regional offices.  EPA publishes guidance to assist eligible entities in applying for grants and coordinate with other federal agencies to help make eligible entities aware of other available Federal resources.Successful applicants will be required to enter into agreements that will require the recipient to:

* Comply with all applicable federal and state laws,

* Ensure that the cleanup protects human health and the environment,

* Use the grant or loan exclusively to characterize, assess or remediate brownfield sites; and

* Comply with other terms and conditions as the Administrator determines to be necessary to carry out this section.

By substantially increasing the amount of money available for brownfield grants, the Brownfield Amendments will allow more sites to receive money for assessment and cleanup.  However, by limiting the remediation grants to $200,000 ($350,000 in special cases) and the maximum grant of $ 1 million for capitalizing a brownfield cleanup revolving loan fund, Congress did not seem to learn from EPA's early mistakes with the brownfield.  Initially, the EPA BCRLF grants ranged from $200,000 to $400,000 per site. However, it became clear that grants of this size were inadequate incentives for all but the smallest contaminated sites.  As a result, EPA has been increasing the size of its BCRLF grants. 

NCP Compliance
Another drawback of the current administrative brownfield program was that the response actions had to comply with the national contingency plan ("NCP").  This requirement discouraged brownfield redevelopment because it made cleanups more costly and slowed down the cleanup process.  To simplify the application process and expedite funding of response actions, section 128 provides that applicants will not have to comply with the NCP. However, if EPA determines that a particular NCP requirement is relevant and appropriate such as public participation, the agency may include this requirement as a condition of the application process.

NPL Deferral Of Brownfield Sites
Because of concern the property may become known as a problem property, many states are reluctant to have contaminated sites added to the National Priority List ("NPL").  The Brownfield Amendments authorize EPA defer final listing of an eligible response site on the NPL at the requested of a state if EPA determines that:

* The state or a private party acting pursuant to a state order or agreement is conducting a response action at the eligible response site in compliance with a state response program that is protective of human health and the environment, and provides long-term protection of human health and the environment; or* The state is actively pursuing an agreement to perform a response action at the site with a person that the state has reason to believe is capable of conducting a response action.

EPA may defer the listing for one year from the time the eligible response site is proposed for listing on the NPL.  EPA may defer the listing for an additional six months if the agency determines that reasonable progress is being made toward completing the response action, deferring the listing would be appropriate based on the complexity of the site, substantial progress has been made in negotiations and other appropriate factors that EPA may identify.

EPA may decline to defer, or elect to discontinue a deferral of a listing of an eligible response site if the state is as an owner, operator or a significant contributor of hazardous substances at the facility. EPA may also decline or discontinue deferral if the agency determines the NCP criteria for issuance of a health advisory have been met or the other conditions for deferral are no longer being met.

State Response Programs
Under its administrative brownfield program, EPA has been providing financial assistance to states to help them establish and administer state brownfield programs. The monies authorized by the Brownfield Amendments for establishing or supporting state cleanup programs is considerably more than EPA has been providing the states under its administrative brownfield program.

To be eligible for this money, a state must have either executed a Memorandum of Agreement ("MOA") with EPA or established a response program with the following minimum elements:  
* Timely survey and inventory of brownfield sites in the State;
* Oversight and enforcement authorities or other mechanisms, and resources that are adequate to ensure that a response action will protect human health and the environment; be conducted in accordance with applicable Federal and State law; * Oversight and enforcement authorities or other mechanisms, and resources that are adequate to ensure that if a person conducting the response action fails to complete the necessary response activities, including operation and maintenance or long-term monitoring activities, the necessary response activities are completed;
* Mechanisms and resources to provide meaningful opportunities for public participation;
* Mechanisms for approval of a cleanup plan, and a requirement for verification by and certification or similar documentation from the State, an Indian tribe, or a licensed site professional to the person conducting a response action indicating that the response is complete.

Presumably, the state response program funding will replace the existing administrative financial assistance EPA has been providing to states.  Accordingly, states will need to review their programs to make sure that they are eligible to apply for this funding.  In addition, some states rely heavily on CERCLA for enforcement.  Since the legislation narrows the range of PRP's, those states may be pressured to pass their own legislation to enhance their enforcement program.

Environmental Insurance
The Brownfield Amendments provide that a state may also use a portion of its grant to pay for premiums to purchase environmental insurance premiums, develop a risk sharing pool, an indemnity pool, or insurance mechanism to provide financing for response actions under a State response program.

Until a few months ago, environmental insurance products such as the secured creditor and cost cap policies had played an increasingly important role in facilitating property transactions. However, properties underwriting requirements have tightened considerably and premiums have increased significantly.  Hence, some brownfield sites may no longer be eligible for these policies or the costs of the policies may no longer make economic sense for the transaction.  By enabling states to provide premium subsidizations and increased capacity, the Brownfield Amendments may help make affordable environmental insurance available to more brownfield sites.

The Brownfield Amendments may affect claims under various environmental insurance policies.  For example, many secured creditor policies have a so-called double trigger where there must be both a pollution condition as well as an event of default before the insurer is required to pay under the policy. The term pollution condition often refers to levels of contaminated that are required to be remediated.  However, if a borrower goes into default of a loan but has no obligation to remediate the pollution condition under one of the new defenses, the lender may still be able to make a claim under the policy.

Federal Enforcement Bar At Sites Remediated Under State Brownfield Programs
Approximately 45 states have enacted brownfield or voluntary cleanup programs that use risk-based cleanups. Purchasers of brownfield sites and their lenders were concerned that EPA might determine that a site cleanup performed under a state program was inadequate. This fear of federal enforcement is probably theoretical because brownfield sites are not as seriously contaminated as NPL sites and are therefore usually not subject to federal enforcement. 

However, to address these concerns, approximately a dozen states have entered into a memorandum or agreement where EPA has agreed not to require additional cleanup except under certain circumstances.The Brownfield Amendments added a new section 129 to CERCLA that bars EPA from bringing enforcement actions under CERCLA when a cleanup is performed at an "eligible response site" and the state response program meets the minimum standards in this section.

An "eligible response site" under section 129 includes sites that fall within the definition of a brownfield site and those sites that EPA determines are eligible for brownfield financial assistance on a case-by-case basis.  Sites specifically excluded from this definition are NPL sites as well as sites where EPA has conducted or is conducting a preliminary assessment and site inspection, and determines after consulting with the state that the preliminary score of the site makes it eligible for inclusion on the NPL. 

However, if EPA decides not to take any further action, the property may be classified as an eligible response site.  In addition, sites that pose a threat to a sole-source drinking water aquifer or a sensitive ecosystem may not be considered an eligible response site. Congress did not provide extensive standards for state response programs in order for the federal enforcement bar to apply at eligible response sites. The only state program requirement is that a state maintain an inventory of sites where response actions have been completed in the previous year and that are planned in the upcoming year.

The inventory must be updated at least annually and be made available to the public.  The inventory must indicate if a site will be remediated unrestricted use or if institutional controls will be used.  The specific land use controls that will be used must also be identified in the inventory. The federal enforcement bar is more limited than the BFP, contiguous property owner or innocent purchaser's defense.  It is limited to actions involving eligible response sites in states with response programs that meet the minimum statutory standards. In addition, it only applies to CERCLA section 106 unilateral orders to compel a cleanup or section 107 to recover response costs. 

In contrast, a BFP, contiguous property owner or innocent purchaser will be immune from CERCLA liability brought by government and private parties at any site.EPA may bring an enforcement action if one of the following conditions occurs:

* The State requests EPA assistance in the performance of a response action;* EPA determines that contamination has migrated or will migrate across a state line and further response actions are necessary to protect human health or the environment;
* EPA determines that contamination has migrated or is likely to migrate onto property subject to the jurisdiction, custody, or control of a department, agency, or instrumentality of the United States and may impact the authorized purposes of the Federal property;
* EPA determines after taking into consideration the response activities already taken that a release or threatened release may present an imminent and substantial endangerment to public health or welfare or the environment, and that additional response actions are likely to be necessary to mitigate the release or threatened release; or
* EPA determines after consulting with a state that new information that was not known by the state when the response action was approved or completed has been discovered that indicates further remediation is necessary to protect public health or welfare or the environment.

The extent of contamination is usually not completely understood when a state approves a cleanup plan.  Also, it is common for contamination to migrate at a site and courts have broadly construed what constitutes a threatened release.  As a result, these reopening conditions may vitiate the protection provided by the federal enforcement bar. If EPA decides to make a response action at an eligible response site, the agency must notify the state of the proposed action 48 hours before taking the action.  The state has 48 hours to notify EPA if the eligible response site is or has been subject to a cleanup conducted under a state program or if the state is planning to abate the release or threatened release and identify the planned actions.  If the state fails to respond in the 48-hour period, EPA may take immediate action.  However, if EPA determines that more than one of the exceptions to its enforcement bar applies, the agency may take immediate action after notifying the state.

Small Business Liability Protection Act
Title I of the legislation is the Small Business Liability Protect Act ("SBLPA"). It provides liability relief primarily for certain categories of PRP's.  However, the liability relief is not limited to small businesses.  These changes will impact transactions involving the sale of businesses that may have generator liability.

De Micromis PRP Exemption
The SBLPA adds a de micromis (small volume waste contributor) PRP exemption to section 107 of CERCLA. This section codifies EPA's settlement policy for de micromis PRP's.  The exemption apples to generators or transporters who arranged for the disposal or transport very small quantities of waste or low toxicity wastes.  To be eligible, a PRP must have generated or transported less than 110 gallons of liquid waste or 200 pounds of solid waste before April 1, 2001. 

These amounts are the same absolute volumetric cutoffs that were contained in EPA's de micromis policy though the policy also allowed for a volumetric percentage cutoff of 0.001% of the total hazardous substances at a site. However, the exemption will not apply if EPA determines that the hazardous substances generated or transported by the de micromis PRP contributed significantly or may contribute significantly to the cost of the response action or natural resource damages, if the person has failed to respond to an information request or is impeding a response action, or the person has been convicted of a criminal violation for the conduct to which the exemption would apply.

Municipal Solid Waste Exemption
The Brownfield Amendments also add a new exemption for certain generators of municipal solid waste ("MSW") that generated the MSW prior to April 1, 2001.  The exemption does not apply to transporters of municipalities that own or operate a MSW landfill. The exemption defines MSW as waste material generated by a household, including a single or multifamily residence, and commercial, industrial, or institutional entity that is essentially the same as waste normally generated by a household.  The waste must be collected and disposed with other MSW as part of normal MSW collection services and contain a relative quantity of hazardous substances similar to that contained in waste generated by a typical single-family household. 

The definition of MSW contains a non-exclusive list of exempt MSW including food and yard waste, paper, clothing, appliances, consumer product packaging, disposable diapers, office supplies, cosmetics, glass and metal food containers, elementary or secondary school science laboratory waste, and household hazardous waste.  Waste materials that are not eligible for the MSW exemption include combustion ash generated by resource recovery facilities or municipal incinerators, or waste material from manufacturing or processing operations (including pollution control operations) that is not essentially the same as waste normally generated by households. The MSW exemption applies to an owner, operator, or lessee of residential property that generated municipal solid waste.  Also exempt are businesses generating MSW that employed 100 or fewer workers during the three taxable years preceding receipt of a PRP notice and qualify as a small business concern under the Small Business Act. 

Finally, the MSW exemption also applies to non-profit organizations that employed fewer than 100 paid individuals during the taxable year preceding the PRP notice at the location that generated all of the MSW of the organization. In any contribution action, plaintiffs will have the burden of establishing that these conditions do not apply.  Plaintiffs who are unable to establish that the exemption does not apply will be liable to the defendant for all reasonable costs of defending the action, including all reasonable attorney's fees and expert witness fees.

However, the MSW exemption will not apply if EPA determines that the hazardous substances generated or transported by the PRP contributed significantly or could contribute significantly to the cost of the response action or natural resource damages, if the person has failed to respond to an information request or is impeding a response action, or the person has been convicted of a criminal violation for the conduct to which the exemption would apply.i EPA's decision to withdraw the municipal solid waste exemption will not be subject to judicial review. While the MSW exemption has its origins in EPA policy, the MSW exemption differs significantly from the most recent EPA settlement policy on MSW. 

Where the statutory exemption is limited to MSW, the EPA MSW policy included municipal sludge and also applied to municipalities that owned or operated co-disposal facilities. Settlements under that policy were based on a presumptive cost of remediating MSW.  While the policy did not specifically address small businesses, it did allow settlements to be based on an ability to pay determination.

Ability to Pay Settlements
The Brownfield Amendments codify the EPA Policy On Ability to Pay Determinations.  Under section 122(g)(7), a PRP that can demonstrate an inability or a limited ability to pay response costs may enter into an expedited settlement to resolve its CERCLA liability.  When considering a limited ability to pay settlement, EPA shall take into account the ability of the person to pay response costs and still maintain its basic business operations, including consideration of the overall financial condition of the person and constraints on the ability of the person to raise revenues. A PRP requesting a limited ability to pay settlement must promptly provide EPA with all relevant information needed to determine the ability of the person to pay response costs. 

EPA may decline to offer a limited ability to pay settlement if EPA determines that the PRP has failed to comply with any request for access or information, an administrative subpoena issued by EPA, or has impeded or is impeding the performance of a response action at the facility.  If EPA determines that the PRP is unable to pay its total settlement amount at the time of settlement, EPA shall consider alternative payment methods as may be necessary or appropriate. If EPA determines the PRP is not eligible for limited ability to pay settlement, EPA must notify the PRP as soon as practicable after receipt of sufficient information to make a determination and provide the reasons for not entering into such a settlement. 

After a limited to pay settlement becomes final, EPA must promptly notify PRP's who have not resolved their liability for the facility of the settlement. As a condition of the settlement, the PRP will be required waive all of the claims, including contribution claims, that the party may have against other PRP's unless EPA determines that requiring a waiver would be unjust.  A PRP that enters into a settlement shall not be relieved of the responsibility to provide any information or access requested in accordance with the limited ability to pay settlement or a CERCLA section 104(e) request for information.EPA's decision to enter or refuse to enter into a limited ability to pay will not be subject to judicial review.

Effect On Concluded Actions
The legislation shall not apply to or in any way affect any settlement lodged in or judgment issued by a United States District Court, or any administrative settlement or order entered into or issued by the United States or any State before the date of the enactment of this Act.

Under CERCLA, courts expanded the strict liability framework to parties who Congress probably never intended to be liable in 1980.  EPA adopted policies in the 1990s to bring more fairness and equity to the CERCLA program. The legislation codified many of these reforms while retaining CERCLA "polluter must pay" liability framework of CERCLA. The establishment of the EPA policies during the 1990's is an endorsement of those reforms.  CERCLA is fairer than when it was enacted in 1980.  Small businesses that send small amounts of waste to a site no longer become involved in expensive CERCLA contribution. 

It is unclear whether the reduced liability obligations will offer enough incentive to stimulate the redevelopment of brownfields.  Developers of large contaminated sites typically assume the liability for those sites in exchange for major reductions in purchase prices or have established risk transfer mechanisms to reduce the liability. 

For smaller sites with expensive environmental insurance, this may not make economic sense and the new defenses may be of limited value because developers will not be able to purchase property with certainty that they will not incur CERCLA liability until the many obligations of these defenses are reviewed by the courts.  In addition, the liability reforms are limited to CERCLA and will not eliminate liability under other federal laws such as citizen suits brought under RCRA section 7002 nor under state laws that constitute sources of liability for smaller sites. The brownfield funding program may provide incentives to develop smaller sites but may be of limited value for larger, complicated sites. 

Large projects at these sites take several years to be completed and many developers may be unwilling to incur the additional delays associated with applying and receiving the brownfield funds. Although the legislation gives relief to purchasers and owners of contaminated property, they can readily lose their immunity from liability. Thus, purchasers of property  and businesses must seek environmental law advice on how to structure their deals to minimize their potential liability.  Environmental consultants are busy because purchasers must perform adequate due diligence to preserve the new defenses created by the legislation.


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