Pennsylvania Environmental Law & Brownfields Lawyer & Attorney : Fox Rothschild Law Firm : Philadelphia PA

I've worked on a number of brownfield projects in Pennsylvania where the question is whether to enter into an SIA Agreement with PADEP or just go through the Act 2 process using the Site Specific Standard.   The SIA Agreement is another useful tool available to brownfield redevelopers.  Unlike the Buyer-Seller Agreement (discussed in a prior entry on this blog) which was created by PADEP and isn't mentioned anywhere in Act 2, the SIA Agreement was created by the General Assembly and is found in Section 305 of Act 2.  Back in 1995, the General Assembly decided, as a matter of policy, that there were certain brownfield sites in the Commonwealth that required additional incentives to be put back into productive use.

A Special Industrial Area ("SIA") Site is a property used for industrial purposes where there is no financially viable responsible person available to pay for the cleanup or a site located within an enterprise zone designated by the PA Department of Community and Economic Development.  If a Site qualifies as an SIA, then there are much more limited cleanup obligations.  The brownfield developer is only required to perform a baseline environmental assessment and remediate any immediate, direct or imminent threats to public health or the environment which would prevent the property from being occupied for its intended purpose.  In order to take advantage of the SIA provisions, the brownfield developer must not have caused or contributed to the contamination at the SIA site.  The other significant benefit of an SIA Site is that the statute requires that PADEP enter into an Agreement with the brownfield redeveloper that specifically identifies what was found in the baseline assessment and breaks out those conditions that are direct and immediate threats that must be remediated and all other conditions that do not constitute direct threats and do not need to be addressed.   In practical terms, the SIA Agreement often allows the brownfield redeveloper to avoid the need to remediate contaminated groundwater at sites that are served by public water, because in those instances, the contamination does not constitute a direct and immediate threat to persons who will be occupying the property in the future (of course, unless there is a vapor issue, which would have to be addressed).   You can find a lot of information regarding SIA sites on PADEP's website and it is discussed in great detail on pages II-109-119 of the Act 2 Technical Guidance Manual.    

I've worked on a number of SIA Sites, including a shipyard that was turned into a racetrack and casino, a former power plant that was redeveloped into residential condominiums, and a former Navy yard that was redeveloped into an intermodal freight facility.  In each of these instances, one of the questions was whether it made more sense to enter into an SIA Agreement or to conduct a remediation satisfying the Site Specific Standard.  In my view, it almost always makes more sense to get an SIA Agreement.  When you use the SIA Agreement, you actually have a CO&A from PADEP that specifically spells out the cleanup responsibilities of the brownfield redeveloper.  The Agreement itself, is not that difficult to negotiate.  In fact, there is a model agreement that exists on PADEP's website.   I like the fact that I have the CO&A in hand before any of the remediation work is performed.  When you go through the Site Specific Standard, you have to complete all the remediation work before you can get the letter from PADEP approving the final report, which triggers the statutory liability release.   I've worked on at least one site where PADEP told me they preferred that the brownfield redeveloper used the site specific standard instead of entering into an SIA Agreement.  That was a site along the Delaware River where there really wasn't any practical difference between the two options and the work was being done for a public entity, so the timing wasn't as much of an issue as it is for a private developer.   In all the other instances, the process for getting the SIA Agreement was relatively smooth and PADEP counsel were very helpful and cooperative.  Once you have the baseline assessment completed, an SIA Agreement can be completed in relatively short order. 

One other benefit I've found in using the SIA is that it is a relatively simple process if the brownfield redeveloper changes its mind and decides to use the site for residential purposes, when the SIA Agreement contemplated a non-residential reuse.  In that instance, the SIA has a specific provision requiring the brownfield redeveloper to provide prior written notice to PADEP of any change in the intended use of the property.  The redeveloper then has an obligation to remediate any direct and immediate threats that would prevent the site from being used for the new residential purpose.   So long as the redeveloper identifies the threats and remediates them, there is no obligation to submit any additional reports to PADEP to maintain the protection of the original SIA agreement.  

As with the Buyer-Seller Agreement, a brownfield redeveloper working in Pennsylvania should always consider whether an SIA Agreement is appropriate for a particular site.  Since PADCED is phasing out many enterprise zones, you should also look to see if the site is in a Keystone Opportunity Zone.  Those should be eligible for coverage as SIA Sites.  If the site is abandoned or vacant, that doesn't necessarily mean it qualifies as an SIA Site.  A Title report often needs to be obtained to determine if there are any viable entities in the chain of title that could be considered responsible parties.  In any event, the first step in the process will be for PADEP to verify that the site qualifies as an SIA Site.  After that, you can make the decision on whether to use the SIA provisions or to pursue a Site Specific cleanup.

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As many of you know, Act 2 was signed into law on May 19, 1995.  The statute gave PADEP two years to promulgate regulations implementing Act 2.  I worked with a dedicated team to put those brownfield regulations together and, in fact, I had the great fortune of presenting the proposed and final brownfield regulations to the Environmental Quality Board.  In addition to the brownfield regulations, the Department uses its Technical Guidance Manual (referred to as the TGM) to provide more detailed and specific guidance to remediators on taking sites through the Act 2 process.  One of the innovative tools developed by PADEP and included in the TGM is the Short List of Petroleum Products (See TGM p. I-10).  The Short List can be used whenever a remediation addresses releases of specific petroleum products (e.g., gasoline, diesel fuel, heating oil) that are uncontaminated from other sources.  The benefit of the short list is that it allows remediators to sample for a much smaller subset of substances than would otherwise be required.  For example, the Short List requires sampling for only 8 substances when remediating a gasoline spill, while technically the remediator might have had to sample for all 24 substances that might be found in gasoline.   When you use the short list, the Act 2 liability protection covers the substances on the short list and PADEP will not require any further remediation or sampling.

Earlier this month, PADEP announced that it was seeking comments on a proposal to add  additional substances to the Short List.   According to PADEP's notice accompanying the announcement, the Department's experience with the current Short List has shown that even when attainment is demonstrated for the substances on the list, other substances contained in select  petroleum products may still exist in the environment at concentrations exceeding the established statewide health standards.  As a result, the Department is proposing the following changes to the petroleum short list:

• Add both 1,3,4-trimethyl benzene and 1,3,5-trimethyl benzene to the leaded gasoline, aviation gasoline and jet fuel category; the unleaded gasoline category; the kerosene and fuel oil No.1 category; the diesel fuel and fuel oil No.2 category; and the mineral insulating oil category.
• Add MTBE to the kerosene and fuel oil No.1 category; and the diesel fuel and fuel oil No.2 category.

The Department is also proposing to add language to the TGM providing a transition process  allowing sites currently in the Corrective Action Process or for which a Notice of Intent to Remediate has been filed prior to the date the revised list becomes effective to use the current Short List.  Sites that come into the program after the effective date of the revised Short List will have to use the new list for characterization and attainment demonstration purposes.

The question is whether these changes are likely to have a real impact on persons conducting site remediations at sites that are contaminated with petroleum products.  For some added insight, I asked Bill Butler, Ron Fender and Peter Beyer at Environmental Resources Management (ERM) for their thoughts and this is what they told me: 

• For most petroleum hydrocarbon sites, the addition of 1,3,4-trimethyl benzene and 1,3,5-trimethyl benzene should not increase the cost associated with investigation since these constituents will be detected by the same analytical methods used for the current list of constituents.  ERM's experience suggests that these constituents posses toxicity and fate/transport characteristics similar to the other petroleum constituents already on the short list, so the likelihood of them driving the need for additional delineation and/or corrective action by themselves is low.
• MTBE is an existing analyte for unleaded gasoline and can be a driver for additional delineation and/or corrective action because of its potential mobility and persistence in the subsurface.  The addition of MTBE to the analyte list for other petroleum products should not increase the cost associated with investigation since it will be detected by the same analytical methods used for the current list of constituents. ERM's experience suggests that MTBE is typically not a remediation driver at sites where a petroleum product other than unleaded gasoline has been released since it is not typically present in other petroleum products.  Thus, the likelihood of MTBE driving the need for additional delineation and/or corrective action at other than unleaded gasoline release sites is low.
• PADEP also added the Mineral Insulating Oil category.  The cost for investigation could actually be lower than previous investigations involving this oil, because responsible parties would analyze soil and ground water samples associated with releases of this oil for a wide variety of constituents to be conservative.  The proposed list is focused on PCBs and the two trimethyl benzene isomers.

It sounds like the changes are unlikely to have a significant substantive impact on brownfield remediation work in PA, but only time will tell.  With that said, I would urge everyone to take a look at the Department's proposal and come to your own conclusions.  You can access the proposal by going to PADEP's website.  Click on "Public Participation", then "Final Guidance", then within the DEP eLibrary click on "Technical Guidance Draft Documents" then select "Land Recycling Program Technical Guidance Manual". The Petroleum Short List is included in the Land Recycling Program Technical Guidance Manual (TGM) as Table IV-9, page IV-94. The associated transition language is added in TGM Section IV.E.3, page IV-94.  The comment period will remain open until September 4.  Once the comment period closes, I'll try to get my hands on the comments submitted and we'll see if there are any objections to the proposal.          

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My thanks to Bill Cluck, a fellow environmental lawyer in Harrisburg, PA, for asking the following question about the connection between the Hazardous Sites Cleanup Act (HSCA) Fund and the Act 2 program :

"I keep hearing how HSCA is relevant to brownfields cleanup and redevelopment.  Can you provide information on how HSCA funding relates to brownfield redevelopment?  I always thought Act 2 was our brownfields law?  I know HSCA can fund orphan cleanups, but I never associated that as "brownfields"."

The answer is that PADEP has historically used money taken from the HSCA Fund to pay salaries and benefits for the Central Office staff and regional office Environmental Cleanup Program (ECP) staff that manage and implement the Land Recycling Program.  Yes, the HSCA Fund was created primarily to fund the State's Superfund program.  But when Act 2 was enacted on May 19, 1995, the HSCA Fund was flush with cash and it seemed like a great place to dip into to pay for the Act 2 program.  No one anticipated that the HSCA Fund would some day dry up.  Unfortunately, what was once a very large balance has been drawn down year after year to pay for the operations of the Land Recycling Program, while at the same time the sources of revenue going into the HSCA fund (the Capital Stock and Franchise Tax and fees imposed on hazardous waste) have diminished  --  the tax is being phased out and there is less and less hazardous waste being generated because of successful pollution prevention programs and industries closing down or moving elsewhere.  We are now at the point where the HSCA fund is almost out of money and no additional funding was included in the 2007-2008 budget.   The seriousness of the funding shortfall was confirmed in an email that I received from the ECP program management in Harrisburg:  It read " The Land Recycling Program staff in central office and the Environmental Cleanup Programs - Special Projects Sections staff in the regions are paid out of the HSCA fund. If the HSCA fund runs dry the Land Recycling Program will be completely out of business." 

I've subsequently written letters to the State Senators from my home county -- Bucks County -- asking for their help in finding a permanent source of funding for the HSCA fund.   Here's what I wrote in one such letter:

"Via First Class Mail

The Honorable Charles T. McIlhinney, Jr.

Senate Box 203010

187 Main Capital Building

Harrisburg, PA  17120-3010

Re:      HSCA Funding

Dear Chuck:

            As you know, I served as Deputy Secretary at PADEP under Governor Ridge.  In that capacity, I was part of a team that set up and managed the Commonwealth’s award winning Land Recycling Program.  I have worked on many brownfield redevelopment projects in your District with private developers and in my capacity as environmental solicitor to the Bucks County Redevelopment Authority.  These projects remediate blighted properties, bring in new businesses and homes, and create jobs and economic opportunities.  The Land Recycling Program staff in PADEP’s central office and the ECP staff in the regional offices are paid out of the HSCA fund.

            If the HSCA fund runs out of money, the entire Land Recycling Program will come to a crashing halt.  Everything we have done over the last 12 years to build that into the most successful environmental program in the history of the Commonwealth could be lost as developers, local economic development agencies, lenders and citizens lose confidence in the Commonwealth’s ability to manage the program.  Even this morning, there was an article in The Intelligencer reporting on the fact that PADEP may not be able to do remediation work at a local HSCA site in Doylestown because of limited funding and EPA may be asked to take over that work.

            I urge you to do everything in your power to ensure that the HSCA fund does not run dry and that a funding source is put in place to permanently fund this important work.  Everyone wants more economic development, but you can not have economic development in this Commonwealth without a strong, vibrant, and sustainable Land Recycling Program. " 

Senator McIlhinney did write me back and said that he is working hard to try to secure a permanent funding source for the HSCA Fund.

Getting back to my friend Bill Cluck's question, the answer is that the HSCA Fund is very relevant to brownfield cleanup and redevelopment in Pennsylvania.  As a result of decisions made at the outset of the Act 2 program, the HSCA Fund remains the lifeblood for the ECP staff and the entire brownfield redevelopment program in Pennsylvania.  I urge everyone who has an interest in brownfields remediation -- developers, consultants, attorneys, economic development agencies, lenders, and environmentalists -- to contact their local legislators and ask for their help in finding a permanent funding source for HSCA.    Without it, many of our best projects could be put on hold, and no one wants that to happen.   

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This morning I received an email from Tom Mellott at PADEP announcing that the Department had redesigned the website for the Land Recycling Program.  The new website is a significant improvement and I want to compliment Jill Gaito, the Deputy Secretary, Dave Hess, the Director of the Pennsylvania Land Recycling Program, and their staff on a terrific new design.  What I like most about the new design is how easy it is to navigate.  There are now large boxes on the right hand side with lists of programs and documents.  While the prior website focused primarily on the nuts and bolts of the Land Recycling Program, e.g., the technical information needed to comply with Act 2, the regulations and guidance documents,  the new website provides more practical information on the economic development aspects of the program.  I've always looked at the Act 2 program as a way of creating new jobs and economic opportunities, and this new website design gives that angle added attention.  In addition to including useful information about the brownfield action team, the new website provides better organized information about funding opportunities at the Pennsylvania Department of Community and Economic Development.  In addition, the new website provides lots of helpful links to other brownfield programs.  For example, there are currently links to 15 other state brownfield program websites and 19 Pennsylvania-based regional economic development agencies.  In addition, there is a great page providing links to Pennsylvania brownfield success stories.  Anyone wanting to see what Pennsylvania is doing right with brownfields, should click on "success stories".  The only deficiency of the new website is the continuing lack of a search component.  You couldn't search the old Land Recycling Program website and you can't search the new one.  When you click on search, you get to look at the picture of the little girl saying Why Can't I Search this website?, and it just throws you back to the A to Z directory for the overall PADEP website.  Even with that, the newly designed website for the Pennsylvania DEP brownfield program is a significant improvement, and I urge all of you to bookmark the new page.   

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One of the most helpful tools available to developers involved with brownfield redevelopment projects in Pennsylvania is the Buyer-Seller Agreement.   It's a 3 way agreement in the form of a CO&A between the buyer, the seller and PADEP.  Under the terms of the Buyer-Seller Agreement, the seller agrees to remediate the property in accordance with Act 2 and attain one or a combination of the Act 2 remediation standards.  The PADEP gives the buyer a Covenant Not to Sue at the time the agreement is signed.  The seller agrees to comply with a schedule ( which is usually very generous) for moving the site through the Act 2 process.  When PADEP approves the seller's Act 2 Final Report, then both the seller and buyer receive a statutory release of liability (consistent with Act 2 Section 501) and the release runs with the property.  The beauty of the Buyer-Seller Agreement is that it allows the transaction to proceed.  The buyer takes possession of the property, knowing that the seller is bound by a CO&A with PADEP to remediate the property in accordance with Act 2.  Also, the seller gets paid for the property, and it can use the proceeds of the sale to complete the remediation work.  It is particularly useful in the situation where the contamination on site has no impact on the buyer's plan for using the property.

I just completed a transaction that included signing a Buyer-Seller Agreement with PADEP, which  provides an excellent example of how they can be used.  In my transaction, our client was selling a small strip mall in a highly commercialized area.  The buyer's due diligence discovered low levels of PCE in the groundwater, most likely from historic operations at a dry cleaner within the strip mall.   Our consultant did a more complete site characterization and determined that the PCE in the groundwater (while above the Act 2 medium specific concentrations -- the drinking water standard), did not pose a risk to people who would be on the property (because the property was connected to public water and there were no vapor intrusion issues) and the PCE wasn't going to migrate off-site and impact any drinking water wells or surface water.  The Seller committed to meeting the Act 2 Site Specific standard, which involved performing quarterly groundwater sampling (Act 2 requires 8 quarters which can be reduced to 4) and imposing a deed restriction prohibiting the use of the groundwater for drinking water purposes and limiting the use of the property to non-residential uses.  I drafted up the Buyer-Seller Agreement using the model agreement on PADEP's website .   It's basically a cookie-cutter agreement and PADEP counsel will expect you to fill in the blanks and submit it for their review.  I've found that the review usually takes about four to six weeks because the Environmental Cleanup Program staff will need to review the site assessment and approve the work plan.  If the transaction is moving quickly, you can ask PADEP to expedite the review and then it depends on their workload.   In our case, PADEP approved our Buyer-Seller Agreement in a few weeks, allowing both parties to be comfortable going forward with the closing.              

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