Construction, Environmental, Water, and Energy Law – An Intro to North Carolina Brownfield Redevelopment
A “brownfields site” is defined as an abandoned, idle, or underused property where environmental contamination, even if it is perceived/expected but not yet proven, has hindered its redevelopment. The Environmental Protection Agency (EPA) began the Brownfields Initiative in 1995 and North Carolina enacted its Brownfields Property Reuse Act in 1997. The federal and state roles in brownfields may differ, but they are all designed to encourage the cleanup and reuse of contaminated properties. The federal program provides funding to states to develop and operate programs, and grants to local governments for assistance in assessment and cleanup of brownfields sites. Under the Federal Brownfields Grants Program, North Carolina local government entities, including Western North Carolina’s Land of the Sky Regional Council, have been awarded millions of dollars for brownfields activities.
The North Carolina Brownfields Program is administered by the North Carolina Division of Waste Management and Department of Environment and Natural Resources (DENR), and offers liability protection to non-causative parties (essentially non-polluting prospective purchasers or developers of contaminated land) in return for site cleanup suitable for the proposed reuse. In 2013 the legislation was amended to include previously excluded underground storage tanks. A prospective developer or purchaser is defined as any person or entity who desires to buy or sell a brownfields property for the purpose of redeveloping it and who did not cause or contribute to the contamination at the property.
The costs are always an important, and sometimes integral, factor for taking on a brownfield redevelopment project. While the prospective purchaser or developer is generally responsible for all assessment, cleanup, and redevelopment costs, there are public monies potentially available for these tasks through an EPA Assessment Grant or Revolving Loan Fund Cleanup Grant. The government (state, and possibly federal) provides oversight to the private sector to ensure protection of public and, the interconnected, environmental health. Additionally, there may be approximately $8,000-12,000 available via public grant funds through local governments or governmental entities to assist with the cleanup costs. By consulting with an attorney familiar with the subject, businesses and individuals may be able to better access grant funds; however, those public monies cannot be counted upon in many situations.
Prospective developers or purchasers will need to negotiate a brownfields agreement with the NC Brownfields Program that defines activities needed to make the site suitable for reuse. Under a Brownfields Agreement, a prospective developer agrees to perform those actions deemed by the DENR to be essential to make the property suitable for the proposed reuse and in return, the department agrees to limit the liability of the prospective developer to those actions described in the agreement. While these defined liability limitations are extended to the prospective developer, the Brownfields Agreement in no way changes the legal liability for the polluting parties of the site.
The following steps are required to complete a successful Brownfields Redevelopment Project:
1) Submit a completed Brownfields Property Application (BPA), which must include answers to specific questions on the form and have a notarized Eligibility Affidavit and an initialed Preliminary Proposed Brownfields Agreement attached.
2) DENR then screens the site for eligibility to program and provides the applicant with one of three responses: (a) Letter of Eligibility; (b) letter of deficiency; or (c) letter indicating that the subject property is ineligible for Brownfields Redevelopment.
3) If the applicant property is found eligible for Redevelopment, the prospective purchaser or developer will then be required to pay a $2,000.00 statutory fee to the Program to move forward.
4) DENR and Prospective Developer evaluate site risks and recommend remediation for the intended use of the subject property or certain land use restrictions. During this process the DENR identifies data gaps that need to be filled prior to outlining and entering into the Agreement. To fill in the potential data gaps, if any exist, the Prospective Developer may need to perform assessment work to provide the DENR additional answers and information.
5) The Parties then negotiate and draft the site specific Brownfields Agreement.
6) The Agreement is submitted for 30-day public comment period.
7) Following the public comment period, and any recommended and proposed changes that may emanate from it, the prospective purchaser is required to pay a second statutory fee of $6,000.00, prior to the execution of the Brownfields Agreement. Should the prospective developer choose to negotiate changes to the agreement that necessitate evaluation by the Department of Justice, additional fees shall apply. Fees may be higher if a particular project requires legal review and negotiation through a Department of Justice attorney. However, based on experience the Program staff believe that the legal fees are entirely avoidable at most sites.
8) If it is able to move forward, the parties implement the Brownfields Agreement, which must be completed per the provisions and instructions to enact the Program’s liability protections for the Prospective Developer.
9) Once implemented, Brownfields Agreements with Land Use Restrictions require annual certifications, known as a Land Use Restriction Update, to be recorded at the register of deeds by the property owner establishing and showing that the restrictions are in place and are being complied with.
Although the North Carolina Brownfields Program generally provides no upfront funding for prospective developers, in addition to potential public grant monies, the Brownfields Agreement entitles the developer to a five year graduated property tax exclusion for the improved site. Following the completion of the Redevelopment, the local property tax is phased in to the redeveloped property in the following increments: for year one following Redevelopment the property is assessed at 10% of the improved value; year two at 25%; year 3 at 50%; year 4 at 70%; and year 5 at 90%. The five-year period begins the first January following the completion of the improvements. This property tax exclusion can potentially more than pay for assessment and cleanup activities on many projects.
Brownfield Redevelopment is important because it: (1) decreases urban sprawl and allows reuse of already commercialized properties; (2) is sustainable real estate investment; (3) provides an increased tax base for the local government; (4) potentially creates more jobs in the area, both through redevelopment process as well as the final product; and (5) allows the developer to have a defined liability while taking advantage of investing in property for a future profit. It may also allow purchasers or developers to get and take advantage of sites in particular or optimal locations that suit their business, commercial, industrial, or other desires and needs.
The timeline for access to and completion of a Brownfield Redevelopment varies due to site-specific factors (such as site complexity, the developer’s responsiveness to data requests, their need for negotiation, and others) and the program capacity at the time of the application. In the past the average time spent from eligibility to completion was approximately 18 months. While this timeline is fine for most, for those developers who need to go even faster, the program has instituted an optional approach called the Redevelopment Now Program Option, whereby the developer may opt to pay a significantly higher fee for a nearly dedicated project manager which therefore bypasses any normal queue of sites. The Redevelopment Now program is covered in a subsequent Blog Article, along with “Ready-for-Reuse” and “Voluntary Cleanup” Programs for ineligible or polluting property and owners.
Forrest Merithew, Attorney at Law is an active outdoorsperson and environmental advocate. That being said, he does believe in development and understands the needs of society and business. Part of the great situation with brownfield redevelopment is that it achieves financial opportunity and development while also providing environmental cleanup and, therein, societal and health protections. Forrest has a background in environmental, water, and energy law, which he applies to his practice, including brownfield redevelopment, with success. By going to law school and previously practicing in California, Forrest is a progressive thinker with experience on the forefront of where environmental, water, and energy law and regulations are headed. Through his personal and professional endeavors, Forrest has amassed a collection of useful and applicable professional contacts in a range of environmental, and related engineering and construction, industries and fields to assist clientele with responsible and successful regulatory and development projects.