In response to Peter's question, we tried to determine the percentage of
costs relative to the development costs because some were suggesting that a
percentage could be used to identify projects that were worthy of the BCP or
that the the amount of tax credits that a developer could claim should be based
on the percentage of the costs. It seems like some might have been looking
to the percentage as a surrogate metric for the quality or amount of the
cleanup, or perhaps the validity of the project as a brownfield site.
What we found was that the percentage had little relationship to the
quality of the cleanup. Large developments tended to remove the source materials
more frequently than smaller projects because of the depth of excavation. The
fact that the cleanup costs only represented say 1% of the project costs does
not mean that the project was not a valid brownfield project or that the
contamination did not complicate the reuse. In many cases, the BCP was
the factor that tipped the developer towards going forward with its project
and assuming the risk of the cleanup.
In contrast, if the BCP project was a one-story retail building that
was formerly a gas station, a risk-based cleanup that leaves residual
contamination might range 20% to 40% percent of the total project. Did a fairly
simple petroleum cleanup representing 20% of the project costs complicate the
reuse more than the $10 million remediation that represented 1% of a that total
project?. It depends on the site-specific factors. Certainly, the massive
cleanup at a large project poses significantly more risk to a
developer because of uncertainty of costs, the numerous variables that
can change the scope of the cleanup and the associated project delays
which can be extremely costly than a site where there are less variable and less
things to go wrong since the developer only has to pull out some
tanks, remove contaminated soil and do some groundwater monitoring for a
few years.
My point was that the percentage by its own does not serve as a good
surrogate or barometer of a project's value. We collected the information
because we felt it was an important piece of information to have but when we
looked at the results, it was fairly clear to us that this alone should not be
used to determine if a site should be admitted into a brownfield program or what
tax credits it should be allowed to claim.
My personal opinion is that It might be more useful to establish a cap or
have a sliding scale of tax credits set at a certain amount of cleanup
dollars spent on a project with perhaps a higher level allowed
for affordable housing projects, than use a percentage of cleanup approach
since this will have an adverse impact on larger sites that are taking on
greater cleanup risk.
With respect to excavation costs, the normal excavation costs would be
based on how much soil would have to be removed based on the project design and
geology, and then what it would cost to dispose of non-contaminated
soil. If additional soil has to be removed because it is contaminated or if
the soil that would normally be excavated is contaminated, there would be
additional costs for properly managing that impacted soil either as
"contaminated or special waste" or as "hazardous waste". This "delta"
or additional costs are the costs that we used in our calculations.
A more tricky question to when the project would only normally
excavate say 15 feet and this would be acceptable from an environmental
standpoint but the developer wants to be able to achieve an unrestricted
residential cleanup since this would eliminate the need for filing deed
restrictions and also allow them to claim an extra 2% in tax credits so they dig
down to bedrock at 20 feet. Is this costs to excavate the additional five feet
the environmental"delta" of extra costs or is it just the normal costs of
construction since this was not REQUIRED. One could argue this particular
issue either way and I would be delighted to read your responses.
Larry
Lawrence P.
Schnapf, Esq.
55 E.87th Street #8B
New York, NY 10128
212-756-2205
(office)
212-876-3189 (home office)
203-263-5212
(weekends)
212-593-5955 (fax)
LSchnapf@environmental-law.net
www.environmental-law.net
(website)