New Ohio Law Encourages Brownfield Redevelopment

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New Ohio Law Encourages Brownfield Redevelopment

By: Nate Wanner, CP,CPG

Since 2002, a bona fide prospective purchaser (BFPP) of a brownfield property could avoid Federal liability for investigation and cleanup if they performed appropriate Due Diligence. This process typically begins with an All Appropriate Inquiry (AAI) or ASTM Phase I Environmental Site Assessment (ESA) performed prior to the purchase of a property. Until now, the only similar State of Ohio liability protection was through the Ohio Voluntary Action Program (VAP). Although the VAP has been a model program for redevelopment of heavily contaminated brownfield sites for 25 years, not every brownfield site is heavily contaminated, and participation in the VAP can be both costly and lengthy.

House Bill 168 (H.B. 168) establishes Ohio liability protection to match the Federal liability protection provided by standard AAI/ASTM Phase I ESAs. It also provides a much-needed change to prevent automatic voidance of protection under the VAP.

As summarized by the Ohio Legislative Commission H.B. 168 “establishes an affirmative defense that allows a bona fide prospective purchaser (BFPP) to claim immunity from liability for the costs associated with the state’s performance of investigational and remedial activities to address a release or threatened release of a hazardous substance from the BFPP’s facility.” In other words, it provides the same protection from state liability as is provided at the Federal level under CERCLA legislation.

H.B. 168 also makes an important change to the VAP that “eliminates the law that automatically voids a covenant not to sue under the VAP when a property subject to institutional controls or activity use limitations is not in compliance with those controls or limitations.” As an example, say that an employer generously began to provide on-site childcare for its employees without realizing that a commercial/industrial use restriction on the property meant that daycares were prohibited on their property. Under VAP rules, liability protection for the employer was automatically voided on the day the daycare opened. If they desire VAP liability protection they are now back at square one and need a new No Further Action (NFA) letter and Covenant Not to Sue (CNS) to regain their liability protection. Even if they can demonstrate that there is zero risk to the children and Ohio EPA is in full agreement that there is no risk, everyone’s hands are tied, and the CNS is void. With H.B. 168, this is changed so that the Director of Ohio EPA is authorized, but not required, to void a covenant when a property falls out of compliance.

So, as a post H.B. 168 prospective purchaser of an Ohio brownfield, should you take the BFPP route or the VAP route?

Every situation is unique, particularly in brownfield redevelopment. First, regardless of which route you choose, you want to have high quality, defensible assessments. Phase I ESAs have nearly become a commodity and, unfortunately, many lack the thoroughness and detail necessary to identify and address issues or even meet the AAI and ASTM standards. Second, a good environmental attorney will provide you pragmatic advice on the level of due diligence and liability protection you should have and can help you identify shortcomings in ESAs.

Presuming you have a strong project team and are eligible to enter the VAP (i.e. not subject to certain other programs or enforcement actions), we generally recommend VAP for the following:

  • Projects where a lender or buyer requires a VAP NFA or CNS,
  • Projects where grant funds require participation in the VAP,
  • Projects where a property owner desires liability protection from a release that they caused or contributed to (i.e. they cannot be a BFPP),
  • Projects that will likely be the subject of a regulatory enforcement action if not addressed voluntarily, and
  • Projects with a high level of risk, perceived risk, or public scrutiny, where written concurrence from Ohio EPA is beneficial.

In our experience, 95% of brownfield projects do not meet any of these criteria. While the VAP remains an option as a “gold standard” for risk aversion, it is often not our first recommendation.

All that said, there is a “but…”, and that is that simply having a Phase I and Phase II ESA does not guarantee you liability protection – no matter how well they were prepared. You must always remember your “continuing obligations.” In simple terms, even if you are not liable to investigate or cleanup contamination, you are required to protect occupants of your property from exposure and not do anything that would make things worse. Regrading contaminated soil, not securing or disposing drums of chemicals, changing stormwater drainage patterns, refusing access to regulatory agencies to investigate or cleanup, and failing to maintain engineering controls or remedial equipment can expose you to the liability you thought you had avoided. Regular checks that the fan on your vapor mitigation system is still running are easily forgotten, particularly when no regulatory agency is involved. Developing a clear and easy to follow Continuing Obligations Plan is an essential part of the BFPP process.

H.B. 168 passed with unanimous support and was signed by Ohio Governor Mike DeWine on June 16, 2020. The bill will take effect on September 14, 2020, with some of its provisions becoming applicable retroactively.

There are many benefits to brownfield redevelopment. If you own, or are considering purchasing, a brownfield property, give us a call and we will help you navigate the best path forward.    

Nate Wanner is a Cox-Colvin Senior Scientist with over 15 years of experience leading and completing environmental projects, in addition to six years as an educator and IT director. He holds a BS in Geology: Water Resources from Ohio University and a Masters in Geographic Information Systems from Penn State University. His areas of expertise include brownfields, underground storage tanks, due diligence and database services. Nate is an Ohio EPA VAP Certified Professional (CP), a Certified Professional Geologist (CPG) with the American Institute of Professional Geologists (AIPG) and is a registered Professional Geologist (PG) in Kentucky, and a Licensed Professional Geologist (LPG) in Indiana.