MDEQ rescinds vapor intrusion guidance – uncertainty reigns – what is clean enough?

21 Jun 2017

Back in the 1990’s, there was uncertainty about when a cleanup was truly completed – “how clean is clean?” was the question and it seems that those days may be returning – at least for a while.

The MDEQ announced Tuesday that it was rescinding major parts of its May 2013 Vapor Intrusion Guidance which we blogged about when it was published.  This 2013 guidance addressed part of the question of how clean is “clean enough” when a brownfield redevelopment or cleanup does not reduce the residual contamination to zero.  Vapor intrusion is explained in this link but, basically, it is the threat that some contaminants may migrate upward from soils and groundwater into buildings at unsafe levels.  For the last four years, people in Michigan have relied on and been guided by the 2013 Guidance.

MDEQ has been trying for years to update its clean up rules and standards which have been in place for some 15 years.  The thought was that new data and studies were available and the cleanup standards which were largely driven by conservative assumptions should be brought up to date.  Due to somewhat arcane legal reasons, MDEQ set October 27, 2017, as its date for promulgating these new rules and have been working hard (and continues to work  hard) to meet this deadline (the most current version available at the moment can be found here but updates are expected soon).

Review your BEA or due care plan (if you have one); if your site doesn’t have volatile compounds – rest easier. If it does, your BEA might be subject to an EPA evaluation if there is a concern about vapors migrating into occupied spaces – even off-site spaces. 

Until MDEQ adopts its new rules, MDEQ will include a standard caveat in approval letters issued moving forward that screening levels used “may not reflect the best available science.” That level of uncertainty may chill many deals and plans under consideration or drive them to more expensive cleanups.    

Logically,  MDEQ argues that they should similarly update the vapor intrusion standards and include them in the rules package.  Vapor intrusion has been in the press a lot recently including this article that discusses 4,000 sites which the State might be looking to address an issue which was thought put to bed or wasn’t simply an issue when the site was granted closed status.

This is where the uncertainty kicks in.  MDEQ doesn’t typically address direct human health threats – that would be the State Health Department.  The same State Health Department that allegedly missed the Flint Water Crisis and whose director and chief medical officer have been indicted. The State Health Department takes a fairly conservative approach to vapor intrusion and has told MDEQ that its standards are too lenient.  MDEQ has developed new hyper-conservative standards that could cause sites which previously passed to now fail.

What is a property owner/developer to do?  First, review your BEA and due care plan (if you have one); if your site doesn’t have volatile compounds – rest easier.  If it does, it is possible your property might be subject to EPA action if there is a concern about vapors migrating into occupied spaces – particularly off-site spaces.  The owner of the site profiled in the MiLive article above found their BEA protection weaker than they had thought and are now dealing with an EPA demand for payment.

For future deals, buyers and lenders may want more aggressive due diligence and cleanup programs to ensure that vapor intrusion is not a risk. This may sideline properties which, until recently would’ve been accepted using the MDEQ’s 2013 Guidance.

Until MDEQ adopts its new rules (which may not take effect until next Spring), the MDEQ will be reviewing and approving requests to approve “no further action” based on current standards but MDEQ will include a standard caveat in approval letters issued moving forward that screening levels used “may not reflect the best available science.”   That level of uncertainty may chill many deals and plans under consideration or drive them to more expensive cleanups or site-specific cleanups which require far more and expensive justification.

Infrastructure funding in the age of austerity – just don’t call it a “tax”

17 Jan 2017

As demands for municipal services increase, costs go up and tax revenues flatten or fall, what is a municipality to do?  Most Michigan politicians have decided that even to suggest more taxes is the kiss of death.  Everyone agrees Michigan’s roads need work.  The gas tax went up on January 1 and even that increase was widely viewed as an inadequate to fully improve our sub-par roads. Recently, a Michigan State study indicated that nationally, roughly 12% of households cannot afford the cost of water services and, if water rates rise to cover repair and upgrade expenses due to the aging of our systems and other factors, that unaffordability factor may go up to almost 36% in the next five years.

The Governor’s 2016 Infrastructure Commission, appointed in the wake of the Flint Water Crisis, reported that we need a modern infrastructure system to compete globally, to have economic prosperity, and to have healthy citizens and a healthy environment.  However, the Commission did not answer the all-important question of how to fund all of this work.  The Commission reports that Michigan lags behind every other state in the region in capital funding for infrastructure and that Michigan needs to spend $4 Billion more every year than it currently does just to align with an average state and the State’s needs.  This would be a 7% increase in spending.  The Commission did not address how Michigan should fund this shortfall.

The business group, Business Leaders for Michigan issued a report earlier this month. That Report reached the same conclusion and proposed that the State ramp up its spending and opened a door to creative and novel financing approaches including user fees which the Report indicated may be used to fund costs of “services, enhancements to increase the quality of life, and … administrative and regulatory processes.”  This report discusses such fundraising approaches as: fees per mile traveled (vs gasoline taxes); public-private partnerships; fees based on property value increase; fees which take into account all lifetime system costs; selling or leasing systems to raise funds for new infrastructure improvements; toll roads and other more “outside the box” approaches.

We have seen this before but not on a statewide approach such as when municipal governments try to fund environmental initiatives, such as stormwater management (required by federal law). The cities of Lansing, Jackson and Detroit all adopted stormwater “fees” based on the paved acreage of various properties within their jurisdiction.  Clearly, to the municipalities, this seems like a good idea – otherwise, why would they keep doing it? Reportedly, nine Michigan communities have created stormwater utilities to impose such charges (Adrian, Ann Arbor, Berkley, Chelsea, Harper Woods, Jackson, Marquette, New Baltimore, and St Clair Shores).

The Michigan Supreme Court established a three part test to distinguish between a fee and a tax: (1) “a user fee must serve a regulatory purpose rather than a revenue-raising purpose;” (2) “user fees must be proportionate to the necessary costs of the service;” and (3) “user fees must be voluntary.”  Bolt v Lansing, 459 Mich 152, 161-162 (1998)

Unfortunately for the municipalities, the Michigan Courts keep striking these fees down as illegal, hidden taxes.  In the case of Jackson County v City of Jackson, the plaintiffs challenged a stormwater management charge imposed by the Jackson City Council. The Court of Appeals ruled that the charge was a tax imposed in violation of §31 of the Headlee Amendment to the Michigan Constitution. The court held that the charge: (1) did not serve a regulatory purpose because it shifted funding of certain activities from the general fund to the charge; (2) was disproportionate to the benefits conferred upon the payor as there were no payor-specific benefits; and (3) was not voluntary because there was no way to avoid the charge by doing, or not doing, something.   The Court of Appeals cited Bolt v Lansing, which invalidated a similar stormwater charge on similar bases. Ultimately, both courts held these “charges” to be taxes subject to, and failing to meet, Headlee Amendment requirements.

Last year, the Michigan Legislature saw the introduction of a bill that would authorize such “fees,” regarding water and sewer, ostensibly to make them harder to defeat in Court under the Bolt test. The need is real and I am a big believer in top quality infrastructure which needs to be paid for.  My question is, with the 1978 Headlee Amendment that puts the size and cost of government in the hands of the taxpayers, and with a backdrop of fees rising beyond what some citizens can afford – can and should our Legislature try to pass this off by various “fees” without getting the voters’ approval as well as other “creative” solutions, some of which may cost the taxpayers less in the short run but more in the long run?  I’m all for the efficiencies in purchasing and scheduling that Governor Snyder has been pushing for but, as we watch more and more systems fail (like the recent Fraser sinkhole), it is clear that we cannot continue to push this off – if the citizens see that, they should be willing to pay for it. If these expenses get passed on in the form of fees which are not voted on and the citizenry gets hit with larger fees that they were not told about, who thinks that will play well at the voting booth?

Brownfield Funding Legislation Enacted

5 Jan 2017

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The bills passed.  At last.  As you may recall from two years ago, I served on an MDEQ-led task force to  review and improve the “patchwork quilt” of statutes and rules regarding brownfield redevelopment incentives, grants and loans.  A CSI II group (of which, in full disclosure, I chaired the Legislative Committee) met regularly in 2014.  The changes certainly would’ve been introduced earlier but the Flint Water Crisis happened and everyone’s attention was diverted. Earlier this year, a package of six bills was introduced in the Legislature; on the 15th they were passed and on  January 5, 2017, the Governor signed them.  They take effect in 90 days and are now 2016 Public Acts 471-476.

These changes streamline, simplify and speed up the process for loan, grant and TIF approvals to enable projects to get started faster than ever before while supporting a greater range of eligible activities than previously available.

The most significant changes include:

  • demolition, lead abatement, asbestos abatement dredging and excavation of uncontaminated but unusable soils may be eligible for grant and loan funding, subject to certain criteria and prerequisites (such as a threshold that at least 51% of the eligible activities are part 201 type expenses);
  • one can be technically liable under Part 201, TSCA or RCRA and still be eligible for grant, loan or TIF funding – previously, even someone who submitted a technically deficient BEA was barred from eligibility – with a renewed emphasis on remediation and redevelopment, only those who actually caused contamination are barred from eligibility, again, subject to certain criteria and prerequisites;
  • while the definition of “eligible property” was changed very little, activities eligible for funding through TIF are broadened to include such things as due care expenses, UST removals, solid waste disposal, sediment removal and disposal (where either the sediments or the upland are contaminated), plan preparation and implementation costs (subject to certain conditions and caps), including the costs to track plan compliance and a clearer set of sheeting and shoring costs;
  • overall streamlining of the application and review processes in an effort to speed up the TIF process including giving greater authority to the Michigan Strategic Fund to approve plans of up to $1 Million without waiting for a Fund Board meeting.

There was some tension between those championing redevelopment and those focusing on environmental remediation but, ultimately, the set of changes to the rules and statutes clarifying the process for obtaining loans, grants and tax increment financing for brownfield redevelopment. Not every issue was agreed upon and there was a list of so-called “parking lot issues” (either because they were discussed at length in the parking lot after the meetings or because we “parked them” there as we couldn’t reach consensus).  Hopefully some of these will be addressed in the near future but these changes should streamline, simplify and speed up the process for loan, grant and TIF approvals to enable projects to get started faster than ever, while supporting a greater range of eligible activities than previously available.  Given the Legislature’s unwillingness to approve other similar bills, this was a real accomplishment for brownfield redevelopment in the State of Michigan.

Reduce, Reuse and Recycle Homes in Detroit

4 Jan 2017

table1“Would you cut down an old growth forest just to put the lumber in a landfill? That’s what typical demolition of a neighborhood does.” This was our introduction from Kevin at Workshop  – a Detroit-based furniture manufacturer that uses lumber reclaimed from Detroit’s vacant and abandoned building stock.  Detroit has been trying to save homes that can be saved but is moving quickly to demolish homes which are beyond repair to stabilize the remaining neighborhoods as the City continues to reinvent itself.

Detroit has reportedly demolished 10,700 homes since 2014 and has another 2,436 in the pipeline.  The bulk of these homes are demolished the way you’d expect – wrecking ball, dumpster, landfill.  However, some houses are being “deconstructed” rather than demolished. Reclaim Detroit is working to fight blight, create jobs for Detroiters, and prevent resources from being landfilled by using deconstruction and reuse techniques.  Their crews dismantle parts of buildings that would otherwise be destroyed, saving antique doors to old growth lumber, while training workers in the green construction and demolition industry. I’ve been told that the average Detroit house has some 10,000 board feet of reusable lumber which would normally go to waste.  Some sources I’ve read indicate that would equal some 20 tons, or roughly  1-3 acres, of trees.

My family and I have been trying to live our espoused values and, while separating our recyclables, trying to be more energy efficient and composting is a start, when we decided to get a new kitchen table (don’t worry, the old one has a new home), we explored options and found Workshop.  The table is old made new again and even is stamped with the address that was the source of the wood.   We’re looking forward to using it for many years to come.

What will 2017 Bring? Dramatic Change?

20 Dec 2016

edit_calendar_ssk_47433454In prior years, we knew that regulatory and environmental change was coming but we expected it to be slow and incremental.  With an unknown quantity like President Elect Trump, one thing is clear – no one really knows what may happen.  Here are a few possibilities:

1.  Coal/Cleaner Energy Generation – revitalizing the coal industry was part of Mr. Trump’s midwest stump speeches.  Will Mr. Trump be able to reverse Barack Obama’s Clean Power Plan? What about the Paris Climate Accord?  Certainly, his team is looking at both of those right now. The dispute in Michigan v. EPA, decided in June 2015, continues to rage.  In 2015, the US Supreme Court ruled that the EPA didn’t properly justify its rule governing mercury and toxic pollution (MATS) from power plants because it did not specifically address costs at the initial stage of the rulemaking process. In April, the EPA announced it was standing by its MATS rule and concluded that the benefits far outweighed the costs.  Petitioners continue to litigate whether the EPA properly evaluated costs.  Here in Michigan, new legislation has been passed (and is awaiting the Governor’s signature) intended to encourage additional investment in energy generation and transmission while balancing consumer choice and a greater percentage of renewable energy generation.  Will it work? At a reasonable cost?

2. Power Generation Subsidies/Oil/Gas Generation – Mr. Trump’s attacks on “crony capitalism” would seem to mean that he will stop financial incentives for solar and wind generation.  Will he also attack oil and natural gas supports in the tax code?  Will he open up ANWAR to oil/gas exploration?  Will he scale back attempts to regulate fracking?  This will be difficult in light of the December EPA Report  which concluded that fracking posed problems such as:  fracking water withdrawals compete with other water needs; spills of hydraulic fracturing fluids and chemicals or produced water may impair groundwater resources; injection of hydraulic fracturing fluids into wells may allow gases or liquids to move to groundwater resources; discharge of inadequately treated hydraulic fracturing wastewater to surface water resources; and contamination of groundwater due to disposal or storage of fracturing wastewater.

3. Pipelines – will Mr. Trump reverse the Obama administration’s dim view of oil and gas pipelines such as the Keystone XL and Dakota Access Pipelines?  How will this affect Michigan where public awareness of two 60+ year-old pipelines under the Mackinac Straits has galvanized both sides of the political spectrum into action.  In 2014, Michigan convened a pipeline task force which issued a report in 2015.  In September, 2015, the State entered into a written agreement with Enbridge to prevent the transport of heavy crude oil through the Straits Pipelines.  The task force also recommended that the pipelines be independently evaluated and that additional financial assurance be provided.  The State solicited Requests for Information and Proposals (RFPs) and Enbridge agreed to pay $3.6 Million for the evaluation of the Straits Pipelines.  An independent evaluation of alternatives to the Line 5 pipelines is also underway.  When those will be completed is not known.

4. Infrastructure – Mr. Trump campaigned on infrastructure (although to hear him tell it, that only encompasses airport quality), and Governor Snyder appointed a 21st Century Infrastructure Task Force which concluded that the State needed to be investing $4 Billion more than it was in infrastructure to address roads, bridges, internet, water, sewer and other infrastructure needs.  Given the recent nationally publicized Flint Water debacle, will Michigan find the intestinal fortitude to fully invest in infrastructure or will we continue to patch and delay?  Given the State’s recent fight against a federal judge’s order to deliver clean water, and Michigan legislators “default anti-tax setting,” the future does not bode well.

5. Brownfields – as previously reported, Michigan adopted legislation streamlining its brownfield funding laws and deferred action on Dan Gilbert’s “transformational” brownfield funding legislation.  Will that resurface in early 2017?  I expect it will.

6. Other issues – there are a number of other issues on the horizon including cleanup standards, the maturing of the Great Lakes Water Authority and its ability to deliver clean water and septic services at a reasonable price, Michigan’s effort to reimagine its solid waste program, water withdrawals and protection of the Great Lakes from invasive species and nutrients leading to algal blooms.

Gilbert Transformational Brownfield Legislation Stalls

12 Dec 2016

MOnroeblock9Dan Gilbert’s team drafted legislation based on the current Brownfield law.  This legislation was  moving rapidly through the Michigan Legislature until the Michigan Speaker of the House announced that the House would wait until next year to move the bills forward.  While this seems to have killed the bills for now, some are still lobbying for them to become law before 2017.

Articles had appeared in the local papers describing two proposed towers for the Monroe block of downtown Detroit (pictured), These articles include statements that the buildings won’t be built without this legislation being enacted (and presumably implemented in their favor).

The legislation is based on an existing approach – when a project increases property value, the taxes on that increased value can be captured and used to pay for  “eligible expenses.” Typically, these TIF (tax increment financing) programs put the risk of failure on the developer (where it belongs) while they increase the potential return by reimbursing the developer for expenses it would otherwise absorb.  The current brownfield law allows communities to issue bonds and pledge their full faith and credit, but in the brownfield “universe” that almost never happens.

The brownfield TIF law allows reimbursements for cleaning up contamination and taking protective measures and, in more urban communities, for costs of site preparation and infrastructure improvements.   This State, like many others, has decided that these incentives are necessary to entice developers to take desired risks. This is not a tax credit, nor, do the taxpayers of the State front any money to the developer.  If the development does not result in the increase in taxes expected, the developer loses. Without a bond, if there is no tax increment, the community/state owes the developer nothing.  Further, the community is held harmless because the predevelopment property taxes continue to go to the government as they did before project development. In short, this is a kind of “deferred gratification” for the taxing authorities as they must wait until the developer is repaid to get taxes on the increased property values (certain taxes are exempted from the TIF program and so there is some immediate benefit to the community).

So what’s the fuss about the Gilbert legislation?  These bills take the Brownfield TIF and put it on a massive dose of steroids. In addition to capturing real property taxes,  the Gilbert team proposes to capture both income taxes and sales taxes generated on a property following its redevelopment, if the project is “transformational.” This legislation vastly broadens the eligible expenses which can be reimbursed.  Instead of covering only environmental cleanups, environmental due care and communal benefits like infrastructure, the Gilbert legislation would allow a developer to be reimbursed for all of its construction costs. This is bold and would almost certainly lead to new, riskier developments. A developer could wind up with a significant competitive advantage because his costs are could be fully reimbursed. This could allow such a developer to undercut the market or amass significant profits.  The potential for market distortion appears to have been overlooked by the few commentators who have spoken on the subject.

The legislation includes a cap on the number of such transformational projects per year and per community and with a maximum of $50 Million in the first year’s capture for new projects. It is tiered so what is transformational (based on a dollar amount) varies based on the size of the community. This was a sop to smaller communities to get their support for this legislation as was a provision putting funds into the State’s Brownfield revolving fund. There are also some exemptions from the spending requirements including one that seems directed right at Flint.

“Transformational” can mean many different things  but the legislation’s focus is whether a project will transform local economic development, community revitalization, growth in population, commercial activity and employment.

The legislation received little notice until recently. Interestingly, it has been criticized by those on the left and on the right. A Free Press column calling this legalized “serfdom” for employees seems over-the-top. Yes, taxes will be collected and ultimately reimbursed to the developer.  I don’t see that equaling employee slavery. The Mackinac Center piece is a bit closer to the mark. They complain of “crony capitalism.”  The fact that only a few developers can get these projects approved per year and one per community per year does seem like the sort of favoritism inherent in crony capitalism. Further, the fact that the projects are limited to extremely expensive ones (on a range between $15 Million and $500 Million depending on county population), again, seems to mean that only the elite get benefits that are not available to the ordinary developer. In that regard, as the Mackinac Center points out, this is no different than any TIF financing model (and there are many of them in use throughout Michigan and the US).  This is the world we live in as evidenced by President-Elect Trump’s efforts to keep a Carrier plant in Indiana.

The capture of sales and income taxes would be new to Michigan and would put Michigan in the minority of states that allow such capture.

What has not been commented on is the need for a mechanism to ensure that the taxpayers of the State of Michigan are held harmless – so that the income and sales taxes to be captured are truly new to the State and not the result of a business moving its operations from one place to another.  This mechanism (and others needed) are to be developed later.  This is a practical consideration with large implications.  The State’s review of this legislation thus far includes an admission that the Legislature has no idea how much this might actually cost the State in revenue if it passes as is.

Will this package of bills pass?  I expect it will.  If not this month, then early next year.  If the Legislature doesn’t address some of the concerns expressed above, we may find ourselves with some major projects and some unintended consequences not too far down the road.

Protect the lakes – don’t flush your medicines – here’s how

24 Jun 2016

A few y13445475_10208142314013787_6103794917851915726_n (1)ears ago, the University of Michigan confirmed that it is a bad idea to put old medicines down the drain.  The State of Michigan agrees.  Here  is a link to the MDEQ’s website on this topic.  There have been concerns regarding the impacts of pharmaceuticals on wildlife, as most wastewater treatment plants are not designed or equipped to treat for medicines.

A few years ago, we had to rely on special programs to properly dispose of old medications,  but while recently helping my father-in-law, I learned that there are many more local drop off sites than before.  Here is one website that you can use to locate take-back locations. The Michigan State Police are now taking back medications at their 29 posts. The Oakland County Sheriff has launched Operation Medicine Cabinet with 33 locations across the County – these will accept all dry medicines.  If you have to put medications in the trash, here are instructions on how best to prepare them for disposal.

Why is flushing medicine a bad idea? The UM report talks about creating antibiotic resistant superbugs and there have been other reports about hormonal changes in fish, and finding traces of various prescription substances in drinking water (yes, what we flush can wind up in someone else’s drinking supply).