On Friday March 13, 2009, PADEP's newly formed UECA Stakeholder Group met for the first time at the Rachel Carson Building in Harrisburg. I was one of the participants along with several other environmental attorneys who represent brownfield redevelopers, environmental consultants, and in-house environmental engineers from two companies that have a large number of properties subject to activity and use limitations. The meeting was led by Troy Conrad, the Director of the Department's Land Recycling Program, and he was assisted by staff from the ECP Program and Counsel's Office, including Dave Crownover, Michael Buchwach, Kurt Klapkowski, Jim Shaw, George Hartenstein, Craig Oleweiler, and Marylou Barton, who acted as the facilitator.
My impression was that it was a very productive meeting. By way of introduction, Troy Conrad reviewed the history of UECA. He then noted that Acting Secretary Hangar recently gave the green light for the Land Recycling Program to move forward with the UECA Rulemaking process authorized by the statute. In my mind, the rulemaking is the most significant new development relating to UECA. The Department needs to put first things first. Parties that are compelled by UECA to convert prior activity and use limitations to environmental covenants will be reluctant to do so if the rules continue to be a moving target. Putting out draft regulations for public comment will allow parties subject to the conversion requirement to know exactly what they are getting into. Also, the rulemaking will lead to more uniform statewide rules with increased consistency in the implementation process. That doesn't mean that conversions shouldn't occur in the absence of new regulations. On the contrary, given the universe of sites potentially subject to the conversion requirement, it is definitely in the Department's interest to provide incentives for people to enter the conversion process, thereby avoiding an avalanche of paperwork come February 2013.
The majority of the Stakeholder meeting was devoted to a discussion of the conversion requirement. Section 6517(b) of UECA states:
"An instrument created prior to the effective date of this section which establishes activity and use limitations to demonstrate attainment or maintenance of a standard under the Land Recycling Act or to demonstrate satisfaction of a corrective action requirement under the Storage Tank and Spill Prevention Act shall be converted to an environmental covenant within 60 months of the effective date of this section unless conversion is waived by the Department."
Some of the issues we discussed included:
- UECA doesn't define "instrument"
- UECA doesn't say who is responsible for converting the prior instrument
- UECA doesn't provide for any penalties
- Failure to convert a prior instrument doesn't invalidate it.
- Failure to convert a prior instrument is not a re-opener under Act 2.
Apparently, Pennsylvania is the only state that made UECA retroactive. It's unclear why the General Assembly thought that was useful or necessary. There's little by way of legislative history. Moreover, the statute itself is decidedly vague on the conversion process. As a result, the Department has an enormous amount of discretion when it comes to implementation. How to use that discretion is part of the advice being sought from the Stakeholder Group.
Why would the General Assembly want to require people to convert their deed restrictions to ECs? The reasons appear to be durability and enforceability. An EC is a more durable restriction. Also, UECA gives both the Department and municipalities the right to enforce ECs, which is not the case with deed restrictions.
One of the difficulties facing the Department in implementing the conversion process is that it is impossible for the Department to generate a list of properties that are subject to deed restrictions under Act 2 and the Tank Act. PADEP knows which sites have approved Act 2 Final Reports or Remedial Action Completion Reports under the Tank Act. However, the database the Department uses -- efacts -- doesn't have a field identifying approvals that included deed restrictions. When the system was created, UECA didn't exist, so there was no need to create that box. As a result, the Department plans to undertake a new initiative, using EPA brownfield grant money, to go through the regional office files and flag the approved Final Reports or RACRs that imposed deed restrictions and/or post remediation care plans.
With regard to the fact that the word "instrument" is not defined in UECA, the group suggested that PADEP contact the Act's sponsors and committee staff to see if anyone knows what was intended. Presumably, the word "instrument" is referring to a deed. What is unclear is whether it was intended to refer to anything else. For example, a post remediation care plan may have been included in an approved Act 2 Final Report without having been placed in the deed. Does that mean there is no requirement to convert the terms of a PRCP into an EC? Also, sometimes a property that is the subject of an Act 2 Final Report or RACR is later taken in a condemnation action where no deed is exchanged, such as when PennDOT takes property for a road project. Is a declaration of taking an instrument for purposes of UECA? Also, deeds sometimes contain something less than a deed restriction, such as a deed notice or deed acknowledgment. Troy Conrad implied that deed notices and deed acknowledgments would not be viewed as "instruments" by the Department subject to UECA conversion.
With regard to who is responsible for converting a prior instrument, there was a lot of discussion about the fact that properties subject to an Act 2 Final Report or RACR may have been sold or transferred. One concern expressed by the Stakeholders was that conversion could expose the prior owner to litigation over who is responsible for the costs of conversion. In some cases, conversion may be covered under an indemnification provision of the purchase and sale agreement. In cases where a property has been leased and there is an absentee owner, the lease agreement may or may not address who would be responsible for complying with UECA. In the case of a property that was redeveloped into residential housing, a large parcel may have been subdivided into multiple smaller parcels that are now single family lots, townhomes or condominiums subject to reuse limitations on groundwater usage. Is the expectation that every one of those homeowners is subject to the UECA conversion process? In some instances, deed restrictions may have been imposed on a buyer of the property that weren't necessary to comply with Act 2, but were put in to protect the prior owner from third party tort liability. How does UECA conversion apply to those parcels? In the former case, there was discussion about the Department using waivers for residential properties. In the latter case, the Department agreed that deed restrictions put on a property for business reasons and not to comply with Act 2 or the Storage Tank Act were not subject to the conversion requirement. Who is responsible for the conversion if the property is now vacant or the property owner is bankrupt and the mortgage is being held in lieu of foreclosure? The discussion made abundantly clear that companies need to think about revising their sales agreements and lease agreements to take UECA into account, if that hasn't been done already. Lenders may also want to consider looking at their standard loan agreements to make sure they address UECA, as well.
Throughout the discussions, Troy Conrad made it clear that the policy of Central Office is that UECA is not intended as a substantive change to Act 2. In that regard, the Department is not looking to impose new obligations on property owners as a result of the required conversion. For example, if the deed restriction language that currently exists did not include a PRCP or requirement that the property owner periodically certify to the Department that the activity and use limitation is being complied with, then the environmental covenant shouldn't add that requirement, even though the model used by PADEP includes a compliance monitoring requirement. There was talk about taking the language of the deed restriction and dropping it into the new EC. At least one of the stakeholders suggested that it would be unconstitutional for the Department to alter property rights held by an owner pursuant to a valid contract or deed.
Toward the end of the first meeting, an effort was made to categorize groups of sites that would be potentially subject to the conversion requirement. One purpose of categorizing the sites was to see if there was any consensus among the group on the subject of extending waivers for any particular category. The discussion resulted in a list of categories based on Act 2/Tank Act, residential/non-residential, statewide health/site specific, soil only/soil and groundwater/groundwater only, groundwater contamination on-site only/groundwater with contamination migrating off-site, non-use aquifer, SIA site, RACR approved pre-Act 2 standards. More will need to be done in terms of fleshing out the categories at the next meeting. There was some discussion of temporal waivers, meaning waiving the conversion requirement until the next property transaction.
My view was that the discussion was very substantive and the Department came to the meeting with an open mind. I commend Troy Conrad and his staff for using the time effectively and for soliciting the views of a good cross-section of persons active in the field of brownfield redevelopment. In my case, I enjoy talking about environmental policy and the meeting reminded me of my days at the Department working with a team to put together the Act 2 guidance and regulations. It was nice to see my friends from the Act 2 program and to have another chance to help the Department work through some issues that have great significance to brownfield redevelopers and local communities throughout the Commonwealth. In this time of economic difficulty, the Department needs to be very careful not to impose new and costly burdens on brownfield redevelopers. Companies looking to come to Pennsylvania and to locate on brownfield sites need certainty. In that regard, UECA needs to be applied consistently and with common sense. Wrong steps on the road to implementing UECA could easily cause brownfield developers and companies looking to move to Pennsylvania to look elsewhere. We don't want that to happen.
I thank Troy Conrad for allowing me to participate and I look forward to the next meeting of the UECA Stakeholder Group.
