The Maryland General Assembly has enacted significant and positive improvements to the State’s Brownfields programs that will make many more properties prime for redevelopment.

House Bill 294 expands eligibility for the Voluntary Cleanup Program (VCP), including now allowing oil contaminated properties to enter that program; modifies the fees for the VCP, including a fee for a 5 day decision on Inculpable Person status; increases predictability and efficiencies, by standardizing the environmental site assessment process; and more ….

Current Law

Brownfields are abandoned or underutilized industrial or commercial sites where redevelopment is hampered by contamination with hazardous substances, whether real or perceived. In 1997 Maryland enacted Brownfields legislation creating the Voluntary Cleanup Program to make possible the cleanup of eligible properties and to provide predictability and finality to the cleanup process.

Eligible applicants in the current VCP may be either Responsible Persons or prospective owners who did not cause or contribute to the contamination at the property, but only that second category is eligible for Inculpable Person status with the resultant full liability protections. Eligible parties must submit an application, including environmental site assessments, to the Maryland Department of the Environment. MDE then notifies the applicant within 60 days whether the application is accepted, denied, incomplete, or whether a No Further Requirements determination has been issued stating that there are no further requirements related to the investigation or cleanup of hazardous substances at the property. A participant may develop a Response Action Plan describing its proposed cleanup, and MDE must give notice within 120 days as to whether the plan has been approved or rejected. Upon completion of the cleanup in accordance with the Response Action Plan, MDE will issue a Certificate of Completion. A No Further Requirements determination or Certificate of Completion conditioned on the limited use of the property must be recorded in the land records.

Use of the Brownfields Program

Maryland’s Brownfields program has had limited use since its creation 7 years ago. As of January 7, 2004, MDE had received applications for 174 properties, 114 of which were accepted into the VCP. Of those 114 properties, 77 were issued a No Further Requirements determination and 14 were issued a Certificate of Completion. Cleanups were pending on an additional 23 properties.

The Brownfields Redevelopment Incentives Program (BRIP), administered by the Department of Business and Economic Development, approved 31 of those properties to receive State funds, totaling less than $4.8 million.

Changes to Federal Superfund law in 2002, that expand liability protections to prospective purchasers, contiguous property owners, and innocent landowners, have spurred states to modify their hazardous substance laws, including buttressing existing state Brownfields programs to prime redevelopment.

Expanded VCP Eligibility

In Maryland, the Governor’s HB 294, that won wide bipartisan support, expands eligibility to enter the VCP to include properties with oil contamination. Those properties had been separately regulated by MDE, but not eligible for VCP protections. Also the legislation modifies the definition of Eligible Property to include a site under active enforcement (for violation of environmental laws) under specified conditions.

Liability

The bill provides that participants receiving a No Further Requirements determination will receive protection from litigation initiated by a Responsible Person, as is currently the case only when a participant completes a cleanup and receives a Certificate of Completion. The bill also provides participants with continuing liability protection if a third party violates the property’s use conditions imposed as a requirement of either a No Further Requirements determination or a Certificate of Completion.

The legislation also modifies the definition of Inculpable Person to clarify that a person who is not a Responsible Person under the State Controlled Hazardous Substances Law will now clearly be entitled to Inculpable Person status (closing a troublesome gap).

Fees To Enter VCP

The existing application fee for the VCP is $6,000, refundable if not fully expended by MDE. And while the bill authorizes a mechanism to reduce that fee for applicants who demonstrate financial hardship, it is the additional $2,000 fee for each of the following that is considered significant: (1) an applicant wishing to expedite the determination of the applicant’s status as an Inculpable Person; (2) a participant receiving a No Further Requirements determination conditioned on certain uses or on the maintenance of certain conditions; (3) a participant receiving a Certificate of Completion conditioned on the permissible use of the property; and (4) a participant requesting to alter a record of determination in the land records for an eligible property with conditions. In addition, the bill provides that the application fee for a subsequent application regarding the same property is $2,000. The bill also makes application fees nonrefundable.

Increased Predictability and Efficiencies

As noted, for an additional $2,000 fee, MDE will now expedite approval or disapproval an applicant’s Inculpable Person status within 5 days. And the legislation makes less uncertain the application requirements related to environmental site assessments when it ties that work to ASTM standards. Additionally, the bill decreases MDE’s turnaround times with respect to acceptance of a VCP application, approval of a Response Action Plan, etc.

Other Significant Changes

When the bill goes into effect on October 1, 2004, there will be other significant changes to Brownfields regulation. The enactment mandates increased public protections, including a requirement that all applicants post notice of VCP application on the property. The new law expands MDE’s enforcement authority and for the first time authorizes punitive damages, up to three times the costs incurred, for violations of the State Hazardous Substances law. The law also broadens the eligibility of sites for financial assistance under BRIP.

Additionally, the bill requires the State to convene a work group to consider the proposed Universal Environmental Covenants Act in advance of next year’s session. And finally, the enactment authorizes Baltimore City, Anne Arundel and Montgomery Counties to enter private land for environmental assessment in advance of possible acquisition by the local government.

It is clear the General Assembly has enacted significant and positive improvements to the State’s Brownfields programs making many more properties eligible for redevelopment. If you would like us to send you a copy of HB 294, or if we can assist you in understanding how this legislation may impact upon real estate that you own, do not hesitate to give Stuart Kaplow a call.