The EPA and Sustainable Communities

I spoke with Charlie Bartsch who is Senior Advisor for Economic Development to the U.S. Environmental Protection Agency Assistant Administrator for the Office of Solid Waste and Emergency Response to catch up and find out what the former Director of Brownfield Studies at the Northeast-Midwest Institute was doing at the EPA. Despite the political appointment and ridiculously long title, Charlie is working to help communities think creatively and bring strategies for redevelopment and revitalization to the areas surrounding their Brownfield sites.

In simplistic terms, a Brownfield is an environmentally contaminated property. Even when redevelopment is performed by private industry, local governments and communities need to work together to encourage and facilitate the remediation, redevelopment and full utilization of Brownfield sites. The largest obstacles to redevelopment need to be removed or overcome to achieve this goal. The most obvious impediment is the contamination itself. The costs and time involved to remediate a site to pristine environmental conditions can be prohibitive. However, over the past two decades, the trend in the United States has been to develop risk based cleanup standards and voluntary cleanup programs intended in part to encourage Brownfield redevelopment. These programs reduced the cost of cleanup while intending to enforce cleanup levels, which are protective of human health and the environment. These programs differ in their application from region to region and agency to agency, but facilitate the remediation and redevelopment of contaminated properties. Though, cleanup to a lesser level costs less, it still costs more to redevelopment a contaminated property. The money to research and test a site to determine how contaminated the site is can be prohibitively expensive. In addition, there is the need to ensure that risk based cleanups will remain protective over time which can involve on-going increased property operating costs.

During the early days of the 21st century when real estate was white hot there was enough value in the contaminated properties in places like California, New York, and Massachusetts to be able to purchase a contaminated property at a discount and remediate and redevelop a site and we glossed over the durability of a cleanup and future operating cost associated with the cleanup. However, that was then. These days and especially in communities that are not in the markets with the most expensive real estate it is a tremendous challenge to not only redevelop a contaminated, but to revitalize a community. These languishing properties were contaminated by industry that in most cases long ago left town or by public works that have been replaced. Not only is a community left with an abandoned eyesore and contaminated property, but the community is left searching for economic vitality to revitalize the community.

One of the programs that Charlie is working with is what the EPA is calling The Brownfield Area-Wide Planning Program. In the area-wide planning approach to redevelopments the strategy is for the community to lead in the revitalization of the area surrounding the brownfield site. The thinking now goes that revitalization of the area surrounding the site is as critical to the successful reuse of the property as environmental assessment, cleanup, and redevelopment of the contaminated property site. It is believed that the area-wide planning approach will enhance EPA's core Brownfields assistance programs which had stalled in the great recession when the economics of Brownfield redevelopment and the lack of financing became insurmountable hurdles, especially in economically disadvantaged neighborhoods. So EPA is using small grants of $175,000-$200,000 to try to jump start economic redevelopment by encouraging “continued meaningful involvement in a locally-driven planning process” that will result in a strategy for making Brownfields site assessment, cleanup and/or redevelopment decisions for the future.

EPA’s Brownfield Area-Wide Planning program is part of the Partnership for Sustainable Communities collaboration among EPA and the Departments of Transportation (DOT) and Housing and Urban Development (HUD) launched by President Obama in 2009. The Partnership for Sustainable Communities ensures that the agencies consider affordable housing, transportation, and environmental protection together to create healthier communities. To date, the three agency program has provided more than $4 billion in funding for projects. You can search the link to see where the money has been spent. The EPA Area-Wide program was launched in 2010 when EPA selected 23 communities to receive grants and direct technical assistance to work towards these goals. The Brownfields Area-Wide (BF AWP) Planning program aims to promote community revitalization by using cleanups to stimulate local economies and protect people’s health and the environment. EPA’s Brownfields program encourages the redevelopment of abandoned and potentially contaminated waste sites across the country.

The grant recipients varied across the board and a quick look at the two ends of the spectrum can give you a flavor of the program. The City of Kalispell, Montana is the home to approximately 1,300 people. The grant given to the city was targeted to focus on the Core Revitalization Area (CRA), which generally follows historic railroad tracks and contains multiple brownfields. The CRA project began in 2004 when the community decided to develop a downtown strategy to revitalize the central core of Kalispell. This EPA grant- area-wide plan was targeted to identify and rank brownfields along the rail corridor in terms of health risk and revitalization need, develop a market study and needs assessment to facilitate brownfields site reuse planning, and allow the city to more fully involve the community in the planning process.

At the other end of the spectrum is the Neighborhood Parks Council (NPC) of San Francisco, CA. The EPA grant to NPC was intended to will facilitate community involvement in area-wide planning of the Blue Greenway which is imagined as a 13-mile corridor along the city’s Southeastern waterfront, where open spaces will be linked together for new recreational opportunities, nature discovery, and public access to the waterfront. This area adjacent to the Bay was the industrial heart of the city from the 1850s to the mid-1900s and included heavy industrial uses, sewer treatment facilities, and power generation facilities. This is a poor neighborhood with a poverty rate at 21% and unemployment of 19% sitting adjacent to the waterfront, but blighted by the abandoned properties. The NPC has led the effort to create the Blue Greenway Project since 2003. The area-wide planning grant was intended to leverage existing efforts to address the threats to human health and the environment posed by the historic contamination, and identifying reuses for brownfield sites.

As Charlie explained to me, EPA does not have established metrics to measure the success of the Brownfields Area-Wide Planning Pilot Project. However, Charlie did list a series of goals for the program that would demonstrate success.

• Lead to success in redeveloping these economically and environmentally damaged locations. 
• Modify and advance local government thinking and knowledge about Brownfields and the redevelopment process.
• Facilitate the removal of stigma from the Brownfields and adjacent communities.
• Cross fertilization of knowledge and ideas across communities and getting everyone to think more creatively about resources and infrastructure.
• Encourage everyone of the communities to grow smarter and determine what is feasible and desirable. 

The first 23 communities that have received grants have pretty much spent the money and we will all look forward to hearing what they have learned and accomplished with the grants. EPA reports Brownfields grants and investments have leveraged more than $19 billion in cleanup and redevelopment over the years, creating 87,000 jobs from both public and private sources though it is unclear how this was measured, but that would be a cost of under $220,000 per job. This past spring, EPA announced that the second round of grants had been awarded. Approximately $4 million in grants had been given to 20 communities to assist with planning for cleanup and reuse of Brownfields properties.

Hunters Point: Remediation Before Redevelopment

Last year, the San Francisco Board of Supervisors approved the massive 702-acre redevelopment of the former Hunters Point Navy Shipyard and Candlestick Point including 10,500 housing units and a new 69,000-seat football stadium for the San Francisco 49ers. The construction is slated to be completed by the developer Lennar Urban Corporation and is projected to last more than twenty years. This caught my eye because for a decade spanning the end of the 20th century and the beginning of the 21st century a significant portion of my work was Brownfield redevelopment, and in 2007 I bought a two and a half year old Lennar subsidiary built home from Freemont Bank that had several flaws, no wax seals on the toilet, a failure to insulate the eves, attic vent covers installed over plywood with no vent holes, missing flashing, and long list of other small flaws that I have systematically corrected over the past few years. That was easy stuff that Lennar failed to get right. Lennar is not exactly the company I would trust to properly finish a remediation and verify its safety to man and the environment.

This past July the superior court of California stopped the early transfer of the shipyard. The court ruled that the City of San Francisco’s redevelopment plan for the former Hunters Point Naval Shipyard failed to properly evaluate the environmental and health risks from allowing the Navy to transfer ownership of the contaminated Superfund site to the City and developer before the clean-up of the area is complete. http://earthjustice.org/sites/default/files/POWERTentativeDecision7-11-11.pdf

The 88-acre Parcel A which was the former military housing portion of the base transferred to the City of San Francisco in December 2004 after EPA approved the FOST (finding of suitability to transfer). During the investigation of Parcel A soil and groundwater, little contamination was found.

In court papers the City of San Francisco and the Lennar Corporation claimed there was no need for the Environmental Impact Report, EIR, to evaluate the environmental and health impacts of transferring the contaminated Superfund site to the City and the developer, Lennar, in advance of a completed, regulatory reviewed and approved clean-up. However, the court found that under the California Environmental Quality Act (CEQA), the City has the responsibility to evaluate these impacts and I would heartily agree. The court also recognized that under early transfer the City and Lennar would become responsible for much of the cleanup as part of the redevelopment, a task which the EIR simply ignored. A large part of remediation is excavation, which is part of construction; however, it is essential that soils be properly tested, characterized and either reused or removed from site. To ensure a safe remediation the work must be through and methodical without cutting corners.

The Hunters Point Naval Shipyard was first established in 1869 on leased land. In 1940 in preparation for war, the Navy obtained ownership of the shipyard for ship building, repair and maintenance for the Pacific fleet. The war effort was the only focus. Fuels, solvents, and lead paint were routinely used, dumped and buried at the shipyard and its landfill. When atomic tests began in the south Pacific, radioactive waste was also disposed of on-site. From 1946 to 1969, the Naval Radiological Defense Laboratory at Hunters Point decontaminated ships and studied the effects of nuclear weapons and disposed of waste on-site.

The Navy operated Hunters Point as a shipbuilding and repair facility from 1941 until 1976 shifting from surface ship repair to submarine servicing and testing after World War II. Between 1976 and 1986, the Navy leased most of the shipyard to Triple A, a private ship-repair company that was eventually charged with criminal violations for the illegal storage and disposal of hazardous waste on the property. In 1989, the shipyard was designated as a federal Superfund site under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).The shipyard consists of 936 acres: 493 acres of land adjacent to the Bay and 443 under water within San Francisco Bay.
http://yosemite.epa.gov/r9/sfund/r9sfdocw.nsf/vwsoalphabetic/Hunters+Point+Naval+Shipyard?OpenDocument

The reality is that when a military base is assessed, the history of the base is studied so that potentially problem areas can be identified. Contaminated soil and groundwater are identified after testing in areas likely to be impacted. Many areas received regulatory closure after assessment if there was determined to be no significant impact on the area from historical use. To expedite investigation and cleanup, the site was initially divided into 6 parcels; A through F. Parcel F is the offshore parcel and A containing the military housing. During the investigation, sampling on Parcel E and groundwater sampling throughout the Shipyard resulted in the Navy proposing to subdivide Parcel E into parts; E and E2. Parcel E2 contains the landfill. As the investigation and remediation progressed more contamination was found. Utility corridors were found to be conduits of contamination and were separately designated. Parcel D was subdivided D-1, D-2, Utility Corridor 1 (UC-1), UC-2, and G. The remedial investigations and feasibility studies continue for Parcels C through G.

So far the Navy has excavated and removed large sections of soil and contaminated steam and fuel pipelines on Parcels C and D, and cleaned up several aboveground and underground storage tanks. The Navy has also conducted numerous removal actions to address soil and buildings contaminated with radiation. The Navy's largest removal action has been ongoing since 2006 and involves removing over 11 miles of sanitary and storm drain sewer lines site-wide to address low-level radiation that has been discovered throughout the system. Impacted soils are transported and disposed in a low-level radiological landfill.

In 2000, a subsurface landfill fire was discovered and burned for weeks after discovery. In 2002, it was discovered that landfill gas had migrated offsite to an adjacent property. The Navy constructed a barrier wall and trench to prevent future migration of the gas and installed an active landfill gas extraction system to extract methane and volatile organic compounds (VOCs), treat the VOCs and vent the methane (a greenhouse gas).The Navy has conducted extensive removal actions to address areas of metal debris on Parcel E, buried radium dials also on Parcel E, PCBs on Parcel E/E2 and metal slag on Parcel E, but proposes to cap a significant portion of the land fill leaving the trash and materials in place. Even with plans to leave a significant portion of the landfill in place along with contaminated groundwater plums contained on site, the soil excavation is projected to continue until 2017 based on volume of soil to be excavated, sorted, treated, disposed of off site or returned to the site.

Military Brownfields in CA

A few weeks back I saw an article in the San Francisco Chronicle titled “Development Progress Hard to See at Former Navy Bases.” For a decade spanning the end of the 20th century and the beginning of the 21st century a significant portion of my work was Brownfield redevelopment, so I was very interested in the article. The entire gist of the article can be summed up in a single quote from Pat Keliher, Vice President of SunCal, one of the largest privately owned developers of mixed use and master planned communities in California. "I can't think of one base reuse project in California that's gone well, in all honesty,…The issue is that when the bases closed, everyone came up with reuse plans and set all these expectations, but then no one sat down and said, 'Can we really build this?' "

I went back to look at the some of the military projects I worked on in California. One of my favorite military installations was the former Marine Corp Air Station Tustin, located in southern California. The installation was approximately 40 miles south of LA and approximately 100 miles north of the California and Mexico border. MCAS Tustin encompassed about 1,600 acres of land mostly within the city of Tustin; with approximately 80 acres in the southeast corner of the station within the City of Irvine.

MCAS Tustin was one of my favorite sites because of its history. It was commissioned from agricultural land as a Department of the Navy “lighter-than-air” base in 1942. The installation was used for blimps performing antisubmarine patrols off the coast of southern CA during World War II. Blimp patrols were used to protect costal convoys. Between the end of World War II and 1949 Navy Blimps continued to use the station. In 1950, when the Korean War began, the station was converted to helicopter use and support. The major pollution that occurred at the site was due to the routine maintenance of helicopters, ground support equipment and vehicles engines. Maintenance operations generated wastes such as engine oil, hydraulic fluids, and solvents from cleaning and degreasing operations, jet fuel and hydraulic fluid. There was a main fuel line that transversed the base, the line that ran from the tank farm to the fueling mats (over 7,000 feet of line) and was left in place after the base was closed. In addition, there was a history of spills off the edge of the aircraft parking aprons and temporary storage aprons. Excavation and soil removal took place in the areas adjacent to the aprons, but contaminated soils were left in place under the apron and no testing was done there before the military wanted to transfer ownership of the property to the city.

MCAS Tustin was not a Superfund site, so its remediation and site closure could be handled by California regulators and the Navy. However, for twenty-six years the BRAC (base realignment and closure) Cleanup Team had coordinated cleanup and closure activities at the base. The BRAC Cleanup Team consists of representatives from the Department of the Navy, the US EPA, the Santa Ana Regional Water Quality Control Board, and DTSC. These agencies reviewed and commented on the required documents for closure of the individual areas of concern and contamination. The Department of the Navy acted as the lead federal agency for environmental restoration and the DTSC was the lead regulatory agency providing oversight except where the California Water Quality Control Board was the lead agency. The first problem with the military cleanups was the Department of Defense obligation to minimize costs for the Taxpayer and DTSC trying to maximize the quality of the cleanup. The second problem wasthe dueling agencies. The DTSC and the Water Quality Control Board did not share the same regulatory view point and mission. The groundwater contamination resulting from the solvent and jet fuel releases was left in place and remains to this day. This has resulted in continuing remediation, monitoring and restrictions on use.

The reality is that when a military base is assessed, the history of the base is studied so that potentially problem areas can be identified. Contaminated soil and groundwater are identified after testing in areas likely to be impacted. Many areas received regulatory closure after assessment if there was determined to be no significant impact on the area from historical use. Most soil (except that with PCB and lead contamination) was excavated and treated with the on-site thermal desorption unit (cooked to get rid of the solvent and oil), then returned to the excavations. The soil was tested to confirm that the remediation had removed enough of the contaminants for residential use. The ground water extraction system began pumping on January 3, 2002 and has treated millions of gallons of ground water. However, the Navy did not have a lot of success in eliminating or even reducing the contaminated groundwater plumes. Restrictions on land use and containment of the plume have been used as solutions.

Though the city of Tustin still envisions an 820-acre master planned urban activity center, a place (according to their web site) to “Live, Work, Shop and Play.” The timeline envisioned by the community and the city itself was far too aggressive and optimistic. The remediation and regulatory process has taken years more than they anticipated. In addition, the recession and housing crash forced the Master developer Tustin Legacy Community Partners, a company made up of Shea Homes and Shea Properties II, to walk away from the master planned development. However, most of the land was turned over to the city of Tustin in 2002. The Navy carved out the most contaminated parcels and the source of contamination on 100 acres still held by the Navy and a 14 acre parcel held by the Reserves. This allowed Tustin to begin building housing when the regional housing market and economy was still booming. The housing downturn and the severe economic impact of the recession on the city finances and various developers including SunCal have slowed the project. Future plans still include development of an additional 2,105 new homes, 6.7 million square feet of non-residential commercial space, new roadways and infrastructure and significant parkland and open spaces, including a 2 mile long linear park, but Tustin still has not named a new master developer. .

So far $130 million Infrastructure has been completed. This includes storm drains, water and sewer facilities, dry utilities, traffic signals, and a number of roadways. A 1 million square foot shopping center, “The District at Tustin Legacy” has been open since 2007. South Orange County Community College District has developed an initial phase of its Advanced Technology Education campus. Orange County Social Services has completed the Tustin Family campus on site, and the Village of Hope, a transitional facility for the homeless. Over 1,700 homes of various types have been built in four distinct neighborhoods. For now the former MCAS Tustin is a mix of developed shopping center, housings, fields filled with weeds, some old rundown military buildings, the Village of Hope and two massive blimp hangars. Your prospective determines whether this is a success or failure of a Brownfield redevelopment. Certainly, it is not the shinny and new master development, but it has a good start and with time they might have a triving community. More of a concern is what will happen over time with the long term containment of the contaminated plume and restricted use of the contaminated parcels.

The Lenders Perspective on Environmental Insurance Products

The perceived risk associated with a Brownfield transaction is both market driven and very real. That perceived risk has increased with the downturn in real estate in general. In the early 1990’s environmental risk was seen as the boogieman. The perceived risk was blown out of proportion to the real risk, as a result; there were properties to be cherry picked at quite a discount. Then the pendulum swung the other way. All real estate was seen as forever rising in value and any risk was acceptable . Today, the market is reevaluating all risk and environmental risk is once more of concern. Somewhere in between the extremes is a rational model of risk evaluation.

Environmental insurance can be a viable tool. Some of the most aggressive insurers in the market are no longer underwriting risk. Using environmental insurance as a liability control mechanisms is one of several tools available to the lender or commercial real estate purchaser. Using environmental insurance in selective situations where it is an enhancement, not the dependant source of repayment, appears the most appropriate use and a very powerful one. For example; an appropriate use of insurance is where the estimated cleanup costs are place in escrow or otherwise held back, there is an approved work plan, but to eliminate uncertainty “Cleanup Cost Cap” insurance is added to the package because the financial flexibility or additional available resources are limited. A Second example is would be obtaining pollution liability insurance on a site that has received closure and does not have an environmental indemnity (this could be an instance when the bank is selling REO property, or simply acting as a lender), or where there may be concern for the quality of the cleanup, the regulatory risk of a closure, or the resources of the indemnitor.

Adding insurance to some situations can have an impact on the form of financing for a project and on the property cost and value itself. The insurance product appropriately used can restore impaired value due to “stigma” after a remediation has been completed or substantially completed. We are only now rediscovering “stigma” may exist after all. Remember though, value impairment due to maintenance of engineering controls are dollar value discounts that have to be paid and can not be restored through insurance. Value loss, due to use restriction cannot be restored with insurance. Also, negligence and stupidity are just not insurable conditions.

Insurance, like land use covenants and institutional controls, has been used to facilitate the financing and remediation for the redevelopment of Brownfields and the sale of REO. However, these are not appropriate in all situations and their use should not be taken to extremes. In truth, the market has grown as all markets do at first exponentially during a period when real estate values were growing at an incredible rate. As the real estate market got hotter in what was perceived as a waning regulatory environment, there was less and less concern for environmental impairment. Now are we seeing a shift in the real estate market, the increase in non-performing loans and a strengthening in the regulatory environment. In the next few years we may see, how some of these insurance products actually perform against expectations and promises. Whether they indeed provide the perceived protection is about to be seen.