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Will 2014 be the year that Michigan Brownfields take off?

30 Dec 2013

brownfieldFor the last 20 years, we have seen the innovative and aggressive Michigan brownfield liability and redevelopment laws move redevelopments forward.   While some of these projects have been big, all of them have been what I like to characterize as “low hanging fruit.”   This makes sense because, for all the incentives available, at the end of the day, if you rehab a building that no one wants to occupy, the incentives available won’t make the difference.  While not easy to redevelop, these sites have been redeveloped while other major environmental sites (either very large, very contaminated or in less desireable locations) continued to lay fallow.

So, it is logical that downtown Detroit and areas of Ann Arbor and Grand Rapids and Lansing have seen major brownfield redevelopment pushes and that smaller projects in outer ring suburbs with sound economies have also benefited from the State’s brownfield programs.

But now, we have some major projects that are not “low hanging fruit.”  The Packard Plant is paid for and soon will be owned by a Brazilian developer with big plans. He calls it the “best opportunity in the world” and he sounds serious.  Work on the long-stalled Uniroyal site is reportedly moving forward.  DTE recently sold its Marysville Michigan Plant to a St. Louis developer with experience in Brownfields.  There has been talk for years about Detroit looking at Turin Italy as a model for post-industrial redevelopment and the TV show, Morning Joe recently came to Detroit to tout its urban revival.  I saw this article about the creative redevelopment of a Spanish cement plant, and now I wonder whether we will see this sort of investment and creativity in Detroit and southeast Michigan brownfields which are not the easiest of sites to redevelop.  If so, it will be a very exciting time in Michigan.  Michigan clearly has the supply; now it is time to see if there is sufficient demand.

Watch where you plug in your car

5 Dec 2013

A recent story about a man charging his electric car at his kid’s school in Georgia caught my attention.  On a Saturday, while watching his kid’s tennis practice, the man plugged his car into an outlet outside the school.  The following week, he found himself arrested and charged with a crime for the theft of 5 cents worth of electricity.

Could that happen here?  It is certainly possible.  Michigan has passed a number of laws in the last 5 years relating to the theft of electricity, or sale of electricity stolen, from a utility.  That crime could be a felony punishable by up to 5 years imprisonment and/or a $5,000 fine. There can also be misdemeanor charges for someone who takes electricity from a utility by avoiding a meter.

While this story has gotten a lot of press, it is not clear what crime the man has been charged with.  In Michigan, it might be larceny or conversion. In all likelihood, if a crime, it would be a misdemeanor punishable by up to 93 days in jail and/or a fine of up to $500.00. That’s a big hit for 5 cents worth of electricity!

Given that electric cars are relatively new, the dynamics associated with charging them are clearly still developing.  In short, ask before you plug in or risk serious consequences.

 

Hot Sauce Nuisance?

5 Nov 2013

You may wonder why you’re looking at this photo of a fairly commonly found hot sauce. Well, based on recent reports, the manufacturer of this hot sauce has a fight on its hands because of complaints by its neighbors regarding the odors. While I can’t speak for California law, in Michigan, when you open a book on nuisance it gets all kinds of confusing.

This is in part because the doctrine of nuisance is an old one and it is intertwined with land rights as old (or older) than the United States. There are:

  • public nuisances;
  • private nuisances (which sometimes can be both); and
  • nuisances per se,

and so on….  Ultimately someone may be held liable for private nuisance (relating to an  invasion of another’s interest in their private use or enjoyment of land – when not a trespass) if: (a) the other person has property rights relating to the use or the enjoyment interfered with; (b) the invasion results in significant harm; (c) the defendant’s conduct “legally caused” the invasion; and (d) the invasion is either intentional and unreasonable or unintentional and otherwise actionable under the rules governing liability for negligent, reckless or ultrahazardous conduct.

There are not many defenses in Michigan to a nuisance claim and while discussing them all would make this post really long, I want to mention two: (1) coming to the nuisance and (2) the statute of limitations.

Coming to the Nuisance – first of all, this defense likely wouldn’t apply to the sriracha plant if its neighbors sue, because the plant is only two years old.  Generally, this defense is applied by the courts when the operations complained about have been going on for quite a while and those who are complaining moved toward it. This was very commonplace 50 and 100 years ago when cities expanded near industry and more recently as suburbs have sprung up next to farms.  Although many people think it’s an iron clad defense, in Michigan, it is not. As recently as 2006, the Michigan courts stated that:   “a party’s actions in coming to a nuisance does not, in and of itself, preclude recovery, but rather, is a “circumstance [that] may properly be taken into account in a proceeding of this nature in determining whether the relief sought ought, in equity and good conscience, to be granted.” A court will look at all the facts and circumstances involved and decide  whether it should act for the parties seeking relief.”

Statute of Limitations  – In Michigan, the general statute of limitations to sue over a nuisance is 3 years.  For most issues relating to dust, smoke and odors, that is no problem – one will know about it and be able to sue in plenty of time.  However, when dealing with less obvious nuisances such as contaminated groundwater which might go undetected for a long time (and finding the source might take even longer), it becomes problematic.  Michigan courts had for many years applied a “discovery rule” that started the statute of limitations when the plaintiff discovered or should have discovered both its injury and the causal connection between the injury and the defendant.

In the last 10 years, however, the courts have taken a stricter view, holding, based on statute that a nuisance claim accrues when the wrong upon which the claim is based was done, regardless of the time when damage results. While there is not a lot of case law under this doctrine, it seems the courts will hold the wrong of the nuisance is when a substance is released and not when it is detected.  The one exception to this is the so called “continuing wrong” doctrine but the Michigan courts have been reluctant to apply that exception and often seem to hold that multiple releases are not multiple wrongs each triggering a different statute of limitations.

 

EPA backpeddles on due diligence – now what?

31 Oct 2013

Tuesday, the EPA announced that it was withdrawing its August proposal to add the soon to be adopted ASTM 2013 due diligence standard to the possible acceptable approaches to meet the All Appropriate Inquiry due diligence standard.

Despite the fact that ASTM has not released the 2013 standard, EPA proposed to include this new “secret” standard as an alternative to the ASTM 2005 standard which it adopted almost exactly 8 years ago today.   One of the primary concerns expressed by the regulated community was, given that EPA was approving both standards, and given the differences between the standards, what should lenders and purchasers do when the standards differed?    Assuming that ASTM still promulgates this standard (which I expect it will), what does this mean?  EPA can certainly revisit this and perhaps dump the 2005 standard for the 2013.  EPA specifically said that it “will address the comments received in any subsequent final action.” Or EPA may let the 2005 standard stand.

Certainly, the introduction of a new standard may raise uncertainty in the field.  While we suspect that EPA’s failure to adopt the 2013 standard gives one “cover” to stick with the 2005 standard, one never knows what the Courts could do.  Certainly, it is worth considering further clarification of what a report means in discussing “Recognized Environmental Conditions (REC)” and “Historical Recognized Environmental Conditions (HREC).”

Further clarity is also advisable regarding past releases where some contamination remains in place but no cleanup is presently required and about what is and is not a  “de minimis” condition.

Certainly, one should consider seeking inclusion in Phase I ESAs information regarding vapor migration including the possiblity of vapor migration from off-site.  One point of contention and expense is likely to be whether one can rely on information obtained from database searches without reviewing agency files.  This practice would increase both the price of a Phase I and the confidence that users, or prospective buyers may place on site assessment results.  Merely relying on a database service has always been something of a tricky proposition in some cases.

Ultimately, if the new standard is viewed as more effective, the lending community will compel its use regardless of what  EPA says will satisfy CERCLA’s all appropriate inquiry standard.

The Ticking Reopener “Timebomb”

9 Oct 2013

For 18 years, Michigan has touted its BEA program as the best in the US for land purchasers.  It has been viewed as a virtual “get out of jail free” card relating to environmental contamination.  This May, the MDEQ issued a guidance document regarding vapor intrusion and closures.  I blogged about it previously.

This guidance poses a significant challenge to property owners because of the dramatically lower standards it imposes on volatile contaminants.  By example, MDEQ ratcheted down the level for dry cleaning solvents in groundwater from 25,000 parts per billion (ppb) to 9.4 ppb (and possibly as low as 5 ppb).

There is a serious risk that owners of former gas stations, manufacturers and dry cleaner sites, even those with BEAs, may have to investigate and even remediate contamination that, for the last 18 years was deemed “ok.”

Michigan law requires even non liable landowners to exercise due care including conducting response activity to mitigate unacceptable exposures and allow for the intended use of the facility in a manner that protects the public health and safety.  We are starting to hear that lenders and the MDEQ are making noises about applying the new vapor closure guidance as a due care reopener.  The MDEQ reports that it has received over 17,000 BEAs.  This new guidance (which may be subject to a number of challenges) opens the possibility that anyone who bought a property and thought their BEA protected them could be in an expensive fix.

Is the 18 year ride over?

New ASTM due diligence standard – Deadline to comment on EPA approval – Due Diligence Part 4

12 Sep 2013

A bucolic scene or something more ominous and will your Phase I ESA tell the difference?

Monday, September 16, 2013 is the last day to comment to EPA on a proposed new standard for environmental due diligence – ASTM E1527-13.  EPA has said that it will not require anyone to use the 2013 ASTM standard and that consultants may continue to use the current standard, ASTM E1527-05.

The challenge of the moment is that ASTM has not released the 2013 standard to the public and so only the EPA and the ASTM committee working on it know precisely what’s in it.  EPA has prepared a summary of the changes, found here.  Of particular note are the following changes (which is not a comprehensive list):

1. An updated definition of “Recognized Environmental Condition (REC)” aligning it with CERCLA’s direction to identify “conditions indicative of releases and threatened releases of hazardous substances on, at, in, or to the subject property.”

2. An updated definition of “Historical Recognized Environmental Condition (HREC)” tying it to past releases that have been somehow addressed to allow unrestricted residential use. A new term “Controlled Recognized Environmental Condition” includes past releases where some contamination remains in place but no cleanup is presently required.  Further, ASTM clarified that a CREC should not be called a  “de minimis” condition. As to the terms, I care less about what the consultant calls things than in understanding why they were or were not included in the report.

3. ASTM included vapor migration as a migratory concern to be identified in a Phase I. This continues to grow in prominence as an issue to be wary of.

4. ASTM revised the scope of the “User Responsibilities” section to clarify the aspects of a site assessment investigation that may be the responsibility of the report’s user (often the proposed purchaser), and not necessarily the responsibility of the environmental professional. This reflects my point about reading the whole report and not just the conclusions.

5. ASTM provided a standardized framework to verify information obtained from key databases.  Agency file reviews are expected to increase Phase I prices but also confidence that users, or prospective buyers can place on site assessment results.  This is something that I’ve been asking consultants to do for years. Merely relying on a database service has always been something of a tricky proposition.

Ultimately, if the new standard is more effective, the lending community will compel its use and while EPA says that either method is acceptable to satisfy CERCLA’s all appropriate inquiry standard, economic efficiencies (think Betamax and VHS) will lead to one method surviving.

Would a tax by any other name smell the same? Funding in the age of austerity

26 Aug 2013

As demands for municipal services increase, costs go up and tax revenues flatten or fall, what is a municipality to do?  In most places in Michigan, politicians have decided that even to suggest more taxes is the kiss of death.  For example, everyone agrees Michigan’s roads need work.  Governor  Snyder proposed increasing the gas tax and registration fees some 8 months ago and it has gone nowhere.  Some legislators are talking about asking the voters to approve an increase in the State sales tax to 7% – this might come before the voters next year.

So, when municipal governments try to fund environmental initiatives, like managing stormwater (required by federal law), what is a municipality to do?  Well, the cities of Lansing, Jackson and Detroit have all adopted stormwater “fees” which are 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).

Unfortunately for them, the Michigan Courts keep striking them down as illegal taxes.  In the recent case of Jackson County v City of Jackson, Case No. 307685, 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 the 1998 case of Bolt v Lansing, 459 Mich 152 (1998), 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.

Interestingly, one City, Adrian, has reportedly voted to refund the fees it collected.

Will the Detroit “fee” fall to a similar challenge? Every case is different but the recent history would indicate yes – if the City wants to have a stormwater “charge” based on acreage, it will have to go to the voters and make the City’s case.  Otherwise, the City will have to fund these expenses out of general funds.