Brownfields Update for the Pacific Northwest

When a prime piece of property was offered to the city of Newberg, Ore., there was little doubt the city needed to accept the gift, says David Beam, the city’s economic development coordinator.

Not accepting could mean that the corner property, the site of an auto dealership and service center, would be abandoned and left to be a community eyesore in the heart of its historic downtown. As it deteriorated, the downtown could follow, Beam says.

However, accepting the property wasn’t that simple. The city needed to protect itself, because with the lot came concerns of contamination. In 1987, a leaking waste oil underground storage tank was removed from the property. The extent of the contamination wasn’t known. Still, the fear of having an abandoned lot in the downtown weighed heavy on the city, Beam says.

With a Phase I assessment already completed, the city requested a Phase II, completed by Oregon’s Department of Environmental Quality (DEQ) through its Targeted Brownfield Assessment program. The city also asked DEQ to give it three scenarios: best, most likely and worst case. The results? At best, the cleanup project would cost only $10,000. More realistically, it was expected to cost around $25,000. Or, worst case, it could cost $120,000. A large contingency fund was set up to protect the city. Feeling good about the due diligence put into the project, Newberg bought the land for $1.

“It was only at that time did we feel, yeah, this is a risk we can take on,” Beam says.

The saying “don’t look a gift horse in the mouth” goes a long way for brownfields. When public or nonprofit entities are approached with a potential gifted property, there are steps needed to protect the prospective new owner.

The biggest question new owners should be asking is why a property owner wants to get rid of the land, says Rick Wells, city councilman in Caldwell, Idaho. Then, do your homework, he advises.

“We’re dealing with public funds,” he says. “We have to do our due diligence before we take (gifted property).”

In Caldwell, a property owner wanted to gift land adjacent to the city’s police station. It would have been a good location for a much-needed parking lot. A church already had been offered the property where a dry cleaners sat many years ago, but turned it down after some testing showed low levels of tetrachloroethylene (perc or PCE). However, it was believed the contamination was coming from a different source.

For Wells, who owns a local environmental company, this brought up warning flags. While a minimum of a Phase I assessment should be done on a gifted site, if there’s any hint of contamination, samples must be taken, he says.

And that’s what the city did, finding the contamination did stem from the drycleaners and was four blocks long, incorporating a significant portion of the downtown. The property has the highest perc concentrations in Idaho. The plume stretches under numerous buildings, creating millions of dollars of potential liability. EPA and Idaho’s Department of Environmental Quality (DEQ) brought enforcement actions against the current property owners. EPA conducted a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) removal action to the cost of more than $700,000.

“We would have been sitting there, holding millions of dollars of liability,” Wells says. The city still could buy the property at a good price; however the third-party liability law, for the most part, would go away, he explains.

The Small Business Liability Relief and Brownfields Revitalization Act, enacted in 2002, provides important liability limitations for landowners who qualify as bona fide prospective purchasers. It limits EPA’s recourse for unrecovered response costs to a lien on property for the increase in fair market value attributable to EPA’s response action.

Potential owners may purchase property knowing there’s contamination after performing an all-appropriate inquiry and still qualify for landowner liability protection under the federal law, provided they meet criteria established by CERCLA. The all-appropriate inquiry must be done before the property is acquired. Bona fide prospective purchasers also must demonstrate they aren’t potentially liable or affiliated with any other person who’s liable for response costs at the property. Other continuing obligations are:

• Complying with any land use restrictions made and not impeding the effectiveness or integrity of institutional controls
• Taking “reasonable steps” with respect to hazardous substances affecting a landowner’s property
• Providing cooperation, assistance and access necessary for the installation, operation and maintenance of a response action
• Complying with information requests and administrative subpoenas
• Providing legally required notices

For more information about how to qualify as a bona fide prospective purchaser, visit http://www.epa.gov/compliance/. Liability under state law may differ from the federal law; so, you need to check both.

In the case of Newberg, while the city’s worst-case scenario came true, the community still got a good deal. A $300,000 Community Development Block Grant paid for demolition and contamination removal. Oregon’s DEQ is expected to close the project within the month. For now, the city has a nice green space that in the future could be sold or even developed into a business complex with apartments on top.

In this case, the property owner was a good community member looking to do the right thing, Beam says. His gift to the community will bring economic dollars into the downtown for many years to come.

In May, Building on Brownfields will include a story about tools that protect yourself from environmental liability when acquiring property.