Co-author: Evan Schube, Summer Student, Miller Thomson Edmonton
As brownfields are unused and unproductive contaminated lands, they present unique opportunities and challenges. The challenges, however, are being mitigated as the regulatory environment is trending towards more favourable liability conditions, municipalities are more dedicated to finding solutions, and the private sector has created financial products to minimize risk. Opportunity is knocking and it just may be time to open the door.
In 2009, Alberta adopted the Remediation Certificate Program (Program). The purpose of the Program is to provide liability closure when remediation efforts successfully remediate the area to environmental standards of either the proposed land use or adjacent uses. The Program requires an applicant to provide information including a map of the contaminated area, type and history of contamination, current and proposed land use, remediation process and records, and monitoring plan. Upon effective cleanup, the Director will issue a remediation certificate for the area and substance disclosed in the report. Even if the contamination has spread beyond the bounds of the remediation area, the Director may still issue a remediation certificate for the off-site area if there is a plan to monitor, prevent, or mitigate any adverse effects. Currently, ten applications have been filed and six certificates have been issued.
The amount of time it takes for the reporting and remediation process is site specific. It takes approximately one month for the remediation certificate to be issued after a satisfactory report has been submitted. Environmental site assessments are usually completed within two months. If the recommended methodology for remediation is off-site removal of the contaminated soil, the reporting period may take up the bulk of the time. If other methods of remediation are chosen, the remediation efforts may be similar to a recently issued certificate where the cleanup took almost three years.
Municipalities and Easing the Financial Burden
While the Province is approaching contaminated properties in a new manner, Alberta’s municipalities are moving forward with programs designed to provide a wide range of incentives to work in conjunction with Provincial legislation.
The City of Edmonton has formed a Contaminated Gas Station Task Force. The Task Force is charged with identifying opportunities and barriers to redevelopment and directing the City towards adopting policies that encourage redevelopment. Although no single incentive has been, or likely will be, adopted, several are under consideration and available for negotiation. If the incentives don’t work, Edmonton may drop the carrot and pick up a stick by increasing property taxes for abandoned and contaminated property.
An option not currently being discussed but may be negotiable is a “windfall lien.” A windfall lien occurs when the government undertakes cleanup efforts due to the owner’s unwillingness or financial inability. The government subsequently places a lien against the property for the lesser of unreimbursed cleanup costs or increase in fair market value of the property. The windfall lien typically works for scenarios where a potential purchaser or user is interested and committed to the property.
Windfall liens accomplish two major goals. First, it follows the “polluter pays” principle. Second, it maximizes the benefits for both parties while encouraging redevelopment. For the private sector, the financial burden of redevelopment is not so daunting that abandonment becomes the only prudent course of action. For the public sector, participation in the cleanup encourages re-use of existing properties by mitigating future liability concerns, protects the environment and public health through remediation efforts, and increases revenues through increased property and business taxes.
The confluence of financial incentives, regulatory liability closure, and the possibility of increased taxes make it more advantageous than ever to look at brownfields as an opportunity.
Limitations of the Remediation Certificate Program
Perhaps the biggest limitation to the Program is that the certificate does not cover the entire property. Remember, the certificate is issued for the substance(s) and area detailed in the application. If contamination extends beyond the bounds of the area or substances identified, the certificate does not provide liability relief. The accuracy and thoroughness of the environmental site assessment is fundamental to the effectiveness of liability closure.
Evaluate Environmental Site Characteristics for Suitability Before Transaction
It is possible to make the Program more applicable to the landowner at the onset of the transaction. Site characteristics can either help mitigate or exacerbate potential environmental liabilities. The types of chemicals used, soil characteristics, depth of the surface to the water table, proximity of the contamination to sensitive receptors, and the presence of wells are just a few factors to consider during the course of a transaction. To understand the potential scope of remediation efforts and future liability, the lawyer should have working knowledge of the operation of the client’s business as well as an understanding of the businesses that were on the property prior to the transaction.
In addition, the adjacent land uses, current and anticipated zoning, the presence of zoning controls such as buffers, easements and reserves all have the potential to render a site more or less suitable for brownfields redevelopment.