Third Party Liability Protections –
The Next Wave of Brownfields Reforms?
Evans Paull
Northeast-Midwest Institute
www.nemw.org
[email protected]
Redevelopment Economics
www.redevelopmenteconomics.com
[email protected]
1
Northeast-Midwest Institute
Brownfields Federal Policy supported
by the Brownfields Inner Circle
Redevelopment
Economics
Brownfield Equity
Company
Your logo,
right here
2
Redevelopment Economics







Green Job Strategies
Brownfields and Smart Growth Strategies
Climate Benefits of Smart Growth
Site Redevelopment Analysis and
Financing, Tax Increment Financing
Incentives to Support Smart Growth
Economic Impact Analysis
Local Government Energy-Climate Plans
3
Getting a Handle on Liability for
Brownfield Sites
Type of Liability
Solution
Liability relative enforcement actions

To the State
State VCP’s

To EPA
Bona fide Prospective Purchaser and
State “enforcement bar”
Third Party Liability

Contribution actions by RP’s
Most state VCP’s

Citizen suits
Private liability insurance

Property damage suits
Private liability insurance

Property value diminution
Private liability insurance

Toxic tort (personal injury)
Private liability insurance
Other Common Law – nuisance,
trespass
Private liability insurance

4
Ranking Third Party Liability Relative to
other Brownfields Tools

2004 survey of developers – ranked 3rd
party liability first among five
mechanisms:
1.
2.
3.
4.
5.

Third Party Liability
Cleanup Liabilities (to governmental
agencies)
Redevelopment subsidies
Site assessment reimbursement
Public hearing requirements
Lenders have become more risk averse
– third party liability protection could be
a key element for lender participation
5
Current Third Party Liability Solutions

Private liability insurance and liability transfer:





Expensive – widens the brownfields-greenfields gap
Insurance usually covers no more than 10 years
Generally works only for properties with high
cleanup costs
Liability transfer – limited third party coverage
Governmental response to third party liability

Subsidized environmental Insurance


Massachusetts – 50% of private insurance costs
Pooled environmental insurance

Ohio – 10% discount
6
Liability Transfer

Environmental
Liability Transfer
(ELT)



Euclid, Ohio, former
PMX Corporation 80ac site
Environmental
Liability & Risk
Transfer: In excess of
$12,000,000
Up to 1,000 jobs
7
States that have Third Party Liability
Protections

Comprehensive




Common Law
protections


California



Property damage


Connecticut
Georgia
South Carolina
Public agency
protections:
 Comprehensive
protections
Massachusetts
Tax credit recipients

Missouri
Protections for public
agency grantees


Pennsylvania
Wisconsin
New York
Common law
protections

New Jersey
8
States w/ Comprehensive 3rd party Protections
Georgia

2002 Georgia Hazardous Site Reuse and Redevelopment Act.
(a) Upon the director's approval of the prospective purchaser
corrective action plan or concurrence with the certification of
compliance described in this Code section, whichever first occurs,
a prospective purchaser shall not be liable to the state or any third
party for costs incurred in the remediation of, equitable relief
relating to, or damages resultant from the preexisting release…

Development community – positive response





VCP participation way up
Lenders like it – more willing to participate
Residential developers, in particular, value added protections
Requires superfund cleanup standards, but developers willing
Developers foregoing environmental insurance
9
Atlantic Station




Expected $4 billion
investment
TIF $167 million of
$250 million gap
Reimbursing $50
million cleanup
Dramatic VMT
reduction





6 mil sq ft office
5,000 DU’s
2 mil sq ft retail
1,000 hotel rms
11 acres open space
10
States w/ Comprehensive 3rd party Protections
South Carolina
Section 44-56-750 of the 1976 Code, SECTION 1:
 "(H)(1)
A nonresponsible party is not liable to any
third-party for contribution, equitable relief, or claims
for damages arising from a release of contaminants
which is the subject of a response action included in
the nonresponsible party voluntary cleanup contract
provided for in this section.
 Development community – positive response


Third Party protection is a “primary driver” for VCP
participation
Regarded as effective even though there are no
corresponding federal protections:

Toxic tort or property damage lawsuits are brought under
state statutes or common law, both under the jurisdiction of
state courts.
11
States w/ Comprehensive 3rd party Protections
Connecticut


CN Senate Bill No. 795, Public Act No. 05-90, “An Act
Concerning Third-Party Liability for Contaminated Property.
Section 1. … (a). No owner of real property shall be liable for
any costs or damages to any person other than this state,
any other state or the federal government, with respect to
any pollution or source of pollution on or emanating from
such owner's real property that occurred or existed prior to
such owner taking title to such property, provided:
(1) The owner did not (cause or exacerbate the pollution)…

Development Community – little response – Issues:




Not linked to CNTS – separate process
Only available after state certifies the cleanup
Requires notice to all potentially affected parties
Requires state oversight – slower than LSP
12
Property Damage Protections and Lender Protections
Massachusetts

Liability protection granted by the Commonwealth
confers protection “from claims by third parties
for contribution, response action costs and
property damage under (statute)… and property
damage under common law.”



Projects (statewide) that achieve a permanent
cleanup or remedy, or
Project is located in certain distressed areas and
meets certain job, affordable housing, or
preservation criteria.
Mass also protects lenders from all third party
liability
13
Public Agency and Lender Protections
Pennsylvania
1995 Act 3:
 “An economic development agency that holds an indicia of
ownership in property as a security interest for the purpose of
developing or redeveloping the property or to finance an
economic development or redevelopment activity shall not be
liable under the environmental acts to the department or to
any other person …”
 “A lender, fiduciary or economic development agency can
avoid liability under the environmental acts or the commonlaw equivalents by showing evidence…”
 2009 amendments added third party liability:






Bodily injury or death (e.g., toxic torts)
Claims under common law
Property damages
Diminution of property claims
Natural resources damages
Economic loss
14