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So, what is exacerbation anyway?

29 Nov 2011

Michigan and federal law both bar “exacerbation” of contamination left in place.  By law,  exacerbation includes ‘‘a change in facility conditions that increases response activity costs,’’as well as off-site migration at a level of concern.  A nonliable owner who exacerbates conditions becomes liable for response activity costs and natural resources damages that are ‘‘attributable to any exacerbation of existing contamination.’’ 

But what really constitutes exacerbation? This has been largely unaddressed. Clearly, moving contaminated materials to an uncontaminated location is exacerbation but a recent decision in a Michigan federal court sheds some light on this issue when work is done on a site of contamination.

 A developer bought a portion of an old, contaminated industrial site that was under a RCRA consent order, and demolished the old building slab, allowing rainwater (which previously ran off the slab) to penetrate, causing contamination to migrate, as well as potentially exposing persons on the property to the previously “capped” area.

Cross-suits were filed by the developer and the former industrial owner (Johnson Controls) with the developer claiming Johnson had failed to comply with the consent order by not cleaning up the site and Johnson alleging that the developer had either exacerbated the existing contamination or caused a release giving rise to liability.  The federal judge agreed with Johnson, concluding that the definition of “release” is broader than that of “disposal” and migration is a release, even if it isn’t disposal. The Judge further held that the developer’s breaking up the old slab and testimony about the mobilization of contamination was enough to create a genuine issue of fact about whether the developer had caused exacerbation for which it could be held liable.

If you are a non-liable party, you certainly want to be careful not to take any steps that would make matters worse as it could cause you to be held liable when you didn’t spill a drop, possibly even when all you did is develop the site.  


MDEQ – part 201; deja vu all over again?

10 Nov 2011

Recently, the MDEQ proposed a rapid collaborative process between MDEQ staff and business stakeholders to try and improve the process under Part 201.  This process may begin as early as next year and end by April, 2012 (if the MDEQ can pull it together in time).   This process is to address concerns regarding the following issues, some of which have become problematic in slowing or preventing the closure of sites that have had extensive cleanup work done:

1. Groundwater/Surface Water Interface Pathway (GSI); 2. Cleanup Criteria; 3. Vapor Intrusion; 4. Free Product Recovery, Source Removal and Control, and C-Sat; 5. Brownfield Redevelopment; 6. Part 201 Rules; and 7. Due Care Obligations.

If this seems vaguely familiar, it’s because in 2007, Public Sector Consultants released a report aimed at many of those same goals.  Back then there was a year+ long collaborative process aimed at improving: (1) program adminstration; (2) brownfield redevelopment; (3) complexity and technical issues; and (4)  liability and compliance. From that sprung some positive changes to the brownfield program (many of which have now been wiped out due to Governor Snyder’s reorganization of that program) and a 2009 proposal by the MDEQ that was decidedly not what was collaboratively agreed to. That proposal went nowhere.

As you will recall, I, along with many others, worked hard on the 2010 amendments to Part 201 which were intended to resolve many of the above issues, but MDEQ has either failed or refused to implement many of those changes. We have heard that MDEQ is now looking for easy sites to “close” – to which I say, “great and it’s about time.”  While I am hopeful that this new fast-track approach will lead to a change in the zero-risk tolerance mind-set at MDEQ that has prevented cleaned sites from achieving closure, the cynic in me wonders….

Would a tax by any other name smell as bad?

8 Sep 2011

This October 1st, the price of garbage disposal in Michigan will likely go up as the State has enacted an increase in the “tipping fee” that gets charged on every yard of cubic waste disposed of in Michigan.  The bill hasn’t hit the Governor’s desk but is expected to shortly and he is expected to sign it.  

While the increase from 7 cents to 12 cents per yard doesn’t sound like much, the increase will result in waste generators paying $4.8 Million to Lansing, up $1.9 Million from the amount annually paid. 

This raises a few questions.  First, is this diversion from waste generators (you and me) to the government a good thing?  Are the programs funded by the “fee” something that we, the taxpayers, want to fund?  Next, should the State be funding its solid waste program in reliance on waste disposal – effectively making the State a pro-waste state? Also, is this “fee” a fee or a tax?

The “fee” may be used for such things as:

  • Guidance regarding the solid waste permit and license program or its implementation or enforcement.
  • Reviewing applications for permits or licenses, including the cost of public notice and public hearings.
  • Performing an advisory analysis of a proposed disposal area’s likely success.
  • General costs of the permit and license program.
  • Inspection of licensed disposal areas and open dumps.
  • Implementing and enforcing permits or licenses.
  • Groundwater monitoring audits at licensed disposal areas.
  • Reviewing and acting upon corrective action plans for licensed disposal areas.
  • Reviewing certifications of closure.
  • Postclosure maintenance and monitoring inspections and review.
  • Review of bonds and financial assurance documentation at licensed disposal areas.
  • Postclosure maintenance and monitoring of previously licensed closed disposal areas when the owner is no longer required to do so.
  • Conducting closure, or postclosure maintenance and monitoring and corrective action when the owner or operator has failed to do so.
  • If this sounds like a tax to you, as it supports general governmental functions unrelated to a licensee’s license, it does to me also.  There’s case law that says it is not but the Michigan Supreme Court hasn’t spoken on this subject.  Ultimately, the waste companies won’t complain – they will simply pass it on to you and me and our businesses, driving up the cost and allowing those in power to say that they haven’t raised “taxes.”

    Budget Battles Begin – Brownfield ox gored

    17 Feb 2011

    Tax credit exiting the stage?

    The governor announced his budget priorities today and clearly no one is happy.  The local municipalities, schools, universities, seniors, retirees, filmmakers, well, the list goes on and on.  As I predicted, the Governor had tough decisions to make involving brownfields and it appears that the brownfield credit is on the chopping block.

    I still think this is a bad decision.  The economy is important and driving development, particularly into core areas to create synergies that can foster more growth is a high priority for our State.  This was a unique program that competed well with other states.  Reportedly, these projects have generated over $6 Billion in investment in the State, new property taxes and many jobs – at a cost of about 10%.  This was not the State picking winners and losers -this program was open to anyone who had a qualifying site and a qualifying project, as long as the allocated credits were available. 

    While the brownfield tax increment financing (TIF) program appears to be safe (the budget details are still rolling out), that program allows developments to pay for their own cleanups out of the tax increment that they create – often over up to 30 years! 

    However, unlike the TIF program, the brownfield credit was almost an immediate rebate – build something, spend money, create value, document that expenditure and get a credit that you can then turn into cash.  Many times, those credits were all that stood between a project going and not going forward.  The Legislature needs to approve this but if the credit cannot be salvaged, I will be working toward some substitute incentive that encourages these redevelopments.

    Changed cleanup laws = environmental redlining? I think not.

    19 Jan 2011

    An environmental consultant I know took the position that the change to Michigan’s law regarding BEAs may cause environmental redlining.  While I agree that the change on BEAs appears to be a step “backwards,”  I strongly doubt that there will be much change in lending practices once the Michigan lending community gets used to the amended law.

    The old BEA, which was a cutting edge approach nationally, allowed a new owner, occupant, tenant or foreclosing lender of a piece of environmentally impaired property to get an environmental “get out of jail free” card with respect to the old contamination that was approved by the MDEQ.  This wasn’t easy and it wasn’t free.  It did make Michigan different from the rest of the country, which typically would not allow someone to take over contaminated property and not clean it up (although Michigan landowners and occupants were and are obligated to exercise “due care” with respect to the contamination).  

    As regular readers of this Blog know, Michigan amended its environmental laws to make it easier to achieve closure status following remedial work (without changing the standards for cleanups).  As the amendments were moving through the Legislature, the MDEQ urged a change that would move Michigan somewhat into line with the rest of the country – eliminating the BEA approval option and making the BEA more about assessing the current condition of property and not about ensuring that one could distinguish between past contamination and possible future contamination. The BEA itself was changed but not eliminated.

    If I had had my way, the BEA program would not have changed except that BEAs denied by the MDEQ would have been subject to the Review Panel program under the law.  As the MDEQ became more and more risk averse, it became almost impossible to get a BEA approved, killing deals, where hazardous substances were to be used in the future that overlapped those already at the site (Category S BEAs).

    This change to the 15 year old BEA program has caused some lenders to review their lending practices but, as they realize that the “new” BEA program still provides liability protection for new owners, operators, tenants and foreclosing lenders, I expect that they will continue to make loans based on properly conducted BEAs.  In short, if a borrower can still document that it can distinguish between past contamination and future contamination, lenders will still lend.  One difference is that, rather than relying on MDEQ  approval, lenders may narrow the field of consultants whose work they approve, as reliability will be more important than ever.

    Black Market for Incandescent Bulbs?

    13 Jan 2011

    IKEA recently announced that it is no longer selling or stocking incandescent light bulbs in its U.S. stores, instead only offering compact fluorescent light bulbs (CFLs), LEDs and halogen and solar powered lamps.  IKEA’s action comes ahead of federal legislation banning the sales of different wattages of incandescent bulbs from 2012 to 2014.  Under the Energy Independence and Security Act of 2007, 100-watt incandescent bulbs will be banned starting January 1, 2012, followed by 75-watt bulbs in 2013, then 40-watt and 60-watt bulbs in 2014.

    In removing incandescent bulbs from stores, IKEA also commissioned a survey which found that 61 percent of people surveyed were unaware of the federal legislation.  That finding is similar to that by Osram Sylvania’s latest Socket Survey, in which 64 percent of people were not aware of the upcoming ban.

    Energy will certainly be saved, but it will be interesting to see whether there is rampant dissatisfaction with lighting as a result.  Good lighting is crucial for certain tasks and CFLs and LEDs are not an equivalent to an incandescent in all applications.  CFLs, for example, likely don’t work with the current dimmer in your house, take some time to obtain full brightness, and are not good for focused lighting (and contain mercury).  LEDs, on the other hand, are presently very expense, often cannot be used in existing lamp sockets, and tend to give off light in a specific direction – providing less ambient light from a single bulb.  It should be amusing to watch people at Home Depot fill up their carts with cases of 100-watt bulbs come later this Fall.

    Top Seven Green Michigan Stories of 2010

    3 Jan 2011

    1. Oil leaks here and in the Gulf. Of course, the Gulf oil leak got lots of attention but the Enbridge oil leak near Battle Creek raised the consciousness of the entire State to the number of rapidly aging pipelines in the State and the lack of followup on their condition, risking yet more spills.
    2. Michigan’s Cleanup Law Get Amended. After a number of years, the law was finally amended to bring Michigan into line with the rest of the Country in terms of closures as the “standard” for funding and dealmaking.  Implementation may be 2011’s top story.
    3. MDNRE reorganizes.  With a new Governor comes new organization and new priorities and how those shake out and how much change Governor Snyder and Dan Wyant can effect in this typically unmovable agency will be interesting to watch.
    4. Michigan was all in for green technology.  Michigan saw the future and began investing heavily in new battery and green energy technologies.  Michigan is not the only state to do so but, certainly, its early successes with a number of automotive battery manufacturers, the new Chevy Volt, and some recent steps forward with wind power manufacturing show that Michigan is most definitely a place for green technology investment.    
    5. The climate bill dies in the U.S. Senate. This issue has been on the world stage since Kyoto and at present, despite the continued evidence of weird weather and confirmation by almost every scientist, Congress continues not to act.  Interestingly, the States push forward on their own renewable energy standards.
    6. Renewables are for real but may still have some bumps in the road. Portugal, Germany, and other places around the world invested in heavily subsidized renewables but here in the US, concerns over climate change (as noted above) still haven’t pushed the US into the renewable market in as big a way as say, China.  Google backed a large scale windfarm operation on the east cost and, as described above, Michigan has been working hard in this field.  In some respects, our short-term economic world view keeps businesses shying away from making the long-term payback investments that most renewables require.
    7.  LEED under fire.  While the darling of grants and even some building codes earlier this year, some building owners complained that LEED certification wasn’t saving them any energy or money; a lawsuit followed and we shall see how it plays out as the Courts review LEED’s viability and value.  The flip side is that energy and water saving techniques that have short paybacks are still in demand.