BAR BULLETIN FOCUS
June 15, 2004
2004 MARYLAND GENERAL ASSEMBLY
REVITALIZES BROWNFIELDS LAW
By James B. Witkin and Melissa B. Derwart
On April 27, 2004, Maryland Governor Robert
L. Ehrlich, Jr. signed the Brownfields Redevelopment Reform Act, one of
the major environmental bills enacted by the General Assembly in its 2004
legislative session. The Act is intended to improve the Maryland Voluntary
Cleanup Program (VCP), which encourages the cleanup and redevelopment of
properties that are, or are perceived to be, contaminated by providing
liability protections and financial incentives. Since many brownfields are
located in urban areas, the VCP supports “smart growth” by encouraging the
recycling of sites with existing infrastructure, rather than pushing
development to outlying areas.
Historically, the development of
brownfields has been hampered by numerous factors, including fear of legal
liability, the costs of environmental cleanup and the difficulty of
obtaining financing due to federal and state environmental laws that can
hold a purchaser of an environmentally impacted property liable for
remediation costs. Numerous states, including D.C. and Virginia, and the
federal government have enacted programs designed specifically to overcome
these barriers to redevelopment.
Maryland enacted its VCP in 1997. As of the
beginning of 2004, the Maryland Department of the Environment (MDE) had
received approximately 175 VCP applications. Of those, 91 properties have
completed the program. To date, eligible applicants to the VCP have
included property owners, potential purchasers, lenders and tenants.
A prominent VCP success story is the former
American Can Company in Canton. Vacant for 10 years due to environmental
concerns, this former manufacturing plant on Baltimore’s waterfront is now
a successful retail and office complex.
Under the Maryland program, parties that
voluntarily agree to investigate and, if required, clean up a brownfield
are offered liability protection in the form of a “Certificate of
Completion” or “No Further Requirements” determination, indicating that
the State will not bring an enforcement action for the known
contamination. Most lenders are then willing to make loans on these sites.
Generally, a contaminated property, or one
perceived to be contaminated, is eligible for the VCP. However, there are
some exceptions, and it is important to determine a site’s eligibility
before going through the application process. In addition, a person who
knowingly violated any law concerning controlled hazardous substances is
not eligible to participate in the VCP.
Notable Changes in the
The new law, effective October 1, 2004,
expands the range of eligible parties and properties. Oil-contaminated
sites will now be included in the VCP. Previously, properties contaminated
by petroleum products were handled in a separate MDE program, which did
not provide the same liability protections afforded by the VCP. Now, a
shopping center site contaminated by dry cleaner solution and gasoline
will only need to go through the VCP.
In the past, properties under active
environmental enforcement have not been eligible for the VCP. Now, sites
under active enforcement, such as an industrial property charged with
environmental permit violations, can potentially qualify for the VCP.
Some of the Act’s changes could shorten the
VCP process. Currently, a “Phase II” environmental assessment, where an
environmental consultant tests soil or groundwater for contamination, must
be submitted with every VCP application. Under the new law, a Phase II
assessment is only required when the MDE’s review of the Phase I
(non-intrusive) report determines it is necessary. In addition, the new
Act shortens the turn-around time for the MDE to notify applicants of the
status of their application from 60 to 45 days and provides a new option
for expediting certain administrative determinations – although MDE will
charge a $2,000 fee.
Certain changes may lengthen the VCP
process, however. The new law contains more extensive public notice
requirements, including the posting of signs on the subject property, the
publishing of a notice of the application on MDE’s website, a public
informational meeting for proposed cleanup plans and MDE’s acceptance of
public comments after those meetings.
The new law provides certain additional
liability protections. For example, in cases where MDE imposes a use
restriction on a property and that restriction is violated by a third
party, the original applicant will not be held liable. The Act also gives
MDE greater enforcement authority.
Although certain fees associated with VCP
applications will increase, the new law permits lower fees upon a
demonstration of financial hardship; it also permits a reduced $2,000 fee
for each application submitted subsequent to the initial application for
adjacent properties that are a part of the same development project.
The current law offers financial incentives
such as low interest loans or grants for environmental assessments and
site remediation and property tax credits in certain jurisdictions. By
expanding the range of properties eligible for the VCP, the new law
broadens the number of sites that will qualify for these incentives.
In all, these changes to the VCP program
should assist developers of brownfields and result in the continued
restoration and reuse of these properties.
James B. Witkin is a Partner at the law firm of Linowes and Blocher LLP
and editor of the book Environmental Aspects of Real Estate Transactions.
Melissa B. Derwart is an Associate at Linowes and Blocher LLP.