Superfund: Proposals to Remove Barriers to Brownfield Redevelopment

Published by the Government Accountability Office on 1997-03-04.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United States General Accounting Office

GAO                Testimony
                   Before the Subcommittee on Superfund, Waste Control,
                   and Risk Assessment, Committee on Environment and
                   Public Works, U.S. Senate

For Release
on Delivery
Expected at
9:30 a.m. EST
March 4, 1997
                   Proposals to Remove
                   Barriers to Brownfield
                   Statement by Peter F. Guerrero, Director
                   Environmental Protection Issues,
                   Resources, Community, and Economic
                   Development Division

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss the Committee’s efforts to
support the cleanup and redevelopment of hazardous waste properties
across the country. Over the past several decades, manufacturing has been
declining in many of the nation’s cities. When businesses closed, they
often left abandoned and idled properties, commonly known as
“brownfields.” These properties are sometimes contaminated with
chemical wastes from manufacturing processes. Partly to avoid the costs
of assessing and cleaning up these properties according to federal and
state environmental laws, some new businesses have chosen to locate in
uncontaminated areas outside cities known as “greenfields.” These
decisions have led to the loss of tax revenue and employment in central
city neighborhoods.

The Congress has been interested in finding ways to help localities clean
up and redevelop brownfields. This Committee asked us to provide it with
information on the (1) legal barriers that the Comprehensive
Environmental Response, Compensation and Liability Act, commonly
known as Superfund, presents for redeveloping brownfields and (2) types
of federal financial support that states and localities would like to help
them address such properties. This testimony summarizes the major
findings from our June 1996 report on brownfield redevelopment and
information from an ongoing review for this Committee of states’
voluntary cleanup programs.1 These programs substitute incentives for
enforcement actions to encourage, rather than compel, private parties to
clean up contaminated properties. States are beginning to use these
programs to address brownfields because they are faster and less costly
than enforcement programs. This testimony also comments on how
liability and funding provisions in two legislative proposals pending before
this Committee respond to the legal barriers and funding needs we
identified in our work.2

In summary, we found the following:

 Superfund: Barriers to Brownfield Redevelopment (GAO/RCED-96-125, June 17, 1996).
 S. 8, the Superfund Cleanup Acceleration Act of 1997, includes provisions that would (1) limit
Superfund liability for prospective purchasers; (2) clarify the circumstances under which landowners
who did not contribute contamination at a site (innocent landowners) may avoid liability; (3) limit
liability for property owners whose property is contiguous to a contaminated site; and (4) limit liability
at any site subject to a state cleanup plan. S. 18, the Brownfield Remediation and Environmental
Cleanup Act, also includes provisions that would limit liability for prospective purchasers and would
clarify liability for innocent landowners. Both bills would establish grant programs and provide
assistance for brownfield redevelopment.

Page 1                                                                             GAO/T-RCED-97-87
             •   Superfund’s liability provisions make brownfields difficult to redevelop, in
                 part because owners are unwilling to identify contaminated properties and
                 prospective developers and property purchasers are reluctant to invest in
                 a redevelopment project that could leave them liable for cleanup costs.
                 While brownfields are usually not contaminated seriously enough to be
                 listed as Superfund sites, these parties still fear that they may be sued
                 under Superfund and state laws for cleanup costs if they become involved
                 with a contaminated property. In addition, most of the voluntary cleanup
                 program managers in the 15 states we surveyed judged that volunteers’
                 concerns about being held liable for a property under federal Superfund
                 law, once a cleanup is complete, discouraged some of them from initiating
                 a cleanup. Both bills include provisions that would help to address these
                 concerns, including provisions to limit liability for some prospective
             •   To help promote the redevelopment of brownfields, states and localities
                 would like federal financial support to cover some of the costs of
                 assessing these properties for contamination, cleaning them up, and
                 developing their voluntary cleanup programs. Over the past few years, the
                 Environmental Protection Agency (EPA) and the Congress have provided
                 some funds which states and localities have used for activities such as
                 developing an inventory of brownfield properties. Funding provisions in
                 the bills would continue and expand this support and respond to the
                 states’ and localities’ needs. For example, Senate bills S. 8 and S. 18 would
                 authorize EPA to provide grants to support the characterization and
                 assessment of brownfields. We determined that the amounts of the grants
                 proposed in the bills for these activities would be sufficient to cover the
                 costs for most brownfield properties. Additional provisions in the bills for
                 grants to fund some cleanup costs and provisions in S. 8 to fund the
                 development of state voluntary cleanup programs should also promote
                 brownfield cleanup and redevelopment.

                 Under Superfund, EPA can compel the parties responsible for hazardous
Background       waste contamination to clean up a contaminated property, or pay for its
                 cleanup, in order to protect public health and the environment. Also, any
                 party that contributed to the contamination, even if this action was legal at
                 the time, may be liable and may be held responsible for the entire cost of
                 the cleanup. The federal government targets its enforcement and cleanup
                 resources to properties on the National Priorities List (NPL), a list of highly
                 contaminated sites. However, parties may be subject to Superfund’s
                 liability and enforcement provisions even if a property is not on the NPL.
                 Most states have adopted similar liability laws and enforcement programs.

                 Page 2                                                        GAO/T-RCED-97-87
                           States find that these stringent liability provisions have provided leverage
                           to convince responsible parties to clean up the more highly contaminated
                           sites in the states’ inventories. As we reported last year in a separate study
                           of the potential cleanup workload in eight states, the program managers in
                           these states pointed out that the threat of having a site placed on the NPL
                           and identified as one of the most contaminated sites in the country created
                           a major incentive for responsible parties to clean up their sites.3

                           Brownfields, however, are typically urban properties that are less
                           contaminated than NPL sites. EPA defines brownfields as abandoned or
                           underused facilities, usually in industrial or commercial areas, where
                           redevelopment is hampered by real or perceived environmental
                           contamination. While we identified no official nationwide count of
                           brownfields, the states estimated in a study conducted for EPA that they
                           may have about 85,000 potentially contaminated properties, including
                           brownfields, that need investigation and may need cleanup.4 The federal
                           Superfund program and similar programs in the states do not have the
                           capacity to address these properties. These programs have limited
                           resources, which EPA and the states target to small numbers of highly
                           contaminated properties. As a result, states and localities are looking for
                           alternative ways to address brownfields, including voluntary programs.

Superfund’s Liability      Most brownfields are not likely to be added to the NPL because they are not
Provisions Raise a Legal   severely contaminated. However, investors are still wary of the cleanup
Barrier to Redeveloping    liability provisions of both federal and state legislation because these can
                           apply to all sites, including brownfields. As a result, developers who
Brownfields                purchase properties may become liable for any contamination later found
                           there. Former property owners may also be liable for cleanup costs if the
                           contamination occurred while they owned the properties. Thus, even the
                           suspicion of current or prior contamination may make developers hesitant
                           to purchase brownfield properties and owners reluctant to place their
                           properties on the real estate market.

                           The voluntary program managers in the 15 states we surveyed also
                           identified Superfund liability as a barrier to attracting volunteers to
                           accomplish cleanups, including those at brownfields. All but one of these
                           managers reported that their programs were addressing brownfields so
                           that they could be returned to productive use through redevelopment and

                            Impact on States of Capping Superfund Sites (GAO/RCED-96-106R, March 18, 1996).
                            An Analysis of State Superfund Programs, Environmental Law Institute under contract with EPA

                           Page 3                                                                       GAO/T-RCED-97-87
                           expansion. Twelve of the managers reported that the limits on state
                           liability that their voluntary programs provide are a good incentive to
                           attract volunteers. However, state officials judged that some potential
                           volunteers would still find Superfund liability a deterrent to participation.
                           Moreover, managers cited limiting federal liability as one of the more
                           important ways the federal government could assist voluntary cleanups.

                           The Congress has considered actions to help address some of these issues.
                           For example, because lenders had feared being named as responsible
                           parties if they foreclosed on contaminated properties, the Congress passed
                           legislation limiting lenders’ liability at such sites.5 S. 8 and S. 18 also
                           include various provisions to help address Superfund liability issues at
                           brownfields, including limiting the liability of prospective purchasers of
                           these properties and clarifying circumstances under which current
                           landowners would not be liable for past contamination.

Federal Funding Can Help   During our reviews of brownfields and voluntary programs, we found that
Support Brownfield         states and localities would like federal funding support to help them
Redevelopment              characterize, assess, and clean up brownfields, and establish and support
                           voluntary programs. Most of the states in our ongoing review of voluntary
                           programs—even those states that levied fees on volunteers that were high
                           enough to cover their program costs—identified federal funding as a key
                           way for the Congress to promote their programs. Some states said they
                           would use the funds to help municipalities cover the costs of assessing
                           properties where no parties had been identified as responsible for the
                           contamination or where the cleanup costs would otherwise be too high to
                           attract voluntary cleanups. One state sought to use the support to establish
                           a revolving loan fund to support brownfield cleanups, similar to provisions
                           in both the bills. Others said they would use the funds to, for example,
                           publicize the programs or develop information systems to better manage
                           and evaluate the programs.

                           To date, both federal agencies and the Congress have provided some funds
                           in support of brownfield cleanups and voluntary programs, and the
                           pending two bills would continue and expand on this support. In 1995, EPA
                           issued a “brownfields action agenda” which, among other things, currently
                           provides grants of up to $200,000 each to 76 state and local governments to
                           fund a wide variety of brownfield demonstration projects. These include
                           developing inventories of brownfields and establishing policies to govern

                            The Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996, contained in
                           the Omnibus Consolidated Appropriations Act, 1997 (P.L. 104-208).

                           Page 4                                                                          GAO/T-RCED-97-87
           brownfield redevelopment. The Department of Housing and Urban
           Development has also provided funding to communities to redevelop
           brownfields once they have been cleaned up. The Congress, in the House
           Conference report accompanying EPA’s fiscal year 1997 appropriations act,
           indicated that more than $36.7 million of the current Superfund
           appropriation would go to support EPA’s brownfield activities and
           voluntary programs.

           The two pending bills would provide substantial amounts of additional
           funding that states and localities could directly use to characterize, assess
           and clean up sites. Specifically, the bills give EPA the authority to provide
           Superfund grants of up to $200,000 per property, to characterize and
           assess brownfields.6 Before these properties can be redeveloped, an
           assessment must be performed to determine the nature and extent of the
           contamination present. Because the assessment requires research into a
           property’s history and a technical analysis of its conditions, a substantial
           expenditure may be involved. For some brownfields, this expenditure may
           be significant enough to discourage developers. We estimated that for
           most brownfields, assessment costs could average $60,000 to $85,000 and
           for some properties with groundwater contamination could exceed
           $200,000. Therefore, the grant provisions in the bills to help fund property
           characterization and assessment should be sufficient for most

           In addition to these assessment funds, both bills would give EPA the
           authority to issue Superfund grants to pay for actual cleanup actions at
           brownfields. S. 8 would also provide funds to assist states in establishing
           and administering voluntary cleanup programs. Although we asked the
           states for information on their costs to clean up brownfield properties and
           to operate their voluntary programs, most states did not yet systematically
           collect such data. Therefore, we cannot offer a perspective on the
           sufficiency of the grants proposed for brownfield cleanup actions or state
           voluntary programs.

           Mr. Chairman, this concludes my prepared remarks. At this point, I would
           be glad to respond to any questions you may have.

            The grants would be provided out of the Superfund trust fund which has been primarily financed from
           taxes on crude oil and certain chemicals.

(160385)   Page 5                                                                         GAO/T-RCED-97-87
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