As noted in our previous post, in passing the recent Brownfield Cleanup Program Reform Legislation, the legislature did not amend the program's eligibility requirements. As previously discussed, NYSDEC has narrowly construed the Act's eligibility provisions and New York courts have been loath to overrule a NYSDEC decision of non-eligibility. (See our prior post, dated April 26, 2008: "New York Brownfields Law Update: Denial of Eligibility Decisions Mostly Upheld").
However, new case law out of Onondoga and New York Counties suggests that courts may not be so willing to uphold DEC determination of non-eligibility as they previously were. See Destiny USA Development v. New York State Department of Environmental Conservation, No. 08-1015, 2008 Slip Op. 51161 (N.Y. Sup.Ct. Onondaga Cty. June 10, 2008) and HLP Properties, LLC v. New York State Department of Environmental Conservation, No. 08-115969, __ N.Y.S.2d __, 2008 N.Y. Slip Op. 28337 (N.Y.Sup.Ct. New York Cty. Sept. 12, 2008). Both of these cases hold that the agency's use of its own guidance to deny the applicants acceptance into the program was contrary to the letter and spirit of the brownfield cleanup statute and NYSDEC's own duly promulgated regulations.
In Destiny USA Development ("Destiny"), the applicant was a developer that sought to build a "major research, retail , entertainment, dining, hospitality and tourism venue" on the very polluted shores of Onondaga Lake in Syracuse, on several parcels of land that belonged to gasoline manufacturers and cement plants. Some of the parcels sought to be developed were also part of a previous project, a shopping mall adjacent to the current redevelopment site. The NYSDEC denied inclusion into the program on the basis that the parcels were the subject of on-going federal enforcement action. With regard to the Carousel parcels and relying on agency guidance, the NYSDEC denied program inclusion because the parcels were previously developed and that, since Destiny had been in the planning stages for years, the property would be developed regardless of the contamination and, therefore, the contamination would not complicate redevelopment (an element of both the statutory and regulatory brownfield definition).
Ultimately, the Onondoga Court held that the agency's decision was directly contrary to the intent and language of the statute because the guidance factors upon which the agency relied in deciding that the existing contamination would not complicate redevelopment were not contained in either the statute or the regulations and, furthermore, do not support the intent of the statute. Indeed the statute and regulations are broadly worded to include many development sites in the program. While the court acknowledges that an agency decision requiring specialized knowledge is entitled to deference, it held "an agency is not entitled to deference when the question is one of pure statutory reading and analysis dependant only upon an accurate apprehension of legislative intent."
The court was rather brusque when it said, "the so-called 'guidance' was nothing more than an enabling feature to allow the DEC to make decisions at their whim." The criteria in the guidance, an internal agency document, that contamination will not complicate redevelopment of a site if the site is idle, if surrounding properties show indicators of economic distress and if the costs of a remedial program is likely to be significant in comparison with the value of the site as redeveloped allowed the DEC to decide that the potential presence of pollutant would not complicate redevelopment. The DEC determined that the on-site contamination did not complicate the redevelopment because the project had been in the planning stages for years, part of the parcel had already been developed (the adjacent mall) 19 years ago and the cost of redevelopment far outweighed the cost of remediation. The court believed this reasoning was absurd when the subject property remained contaminated and undeveloped for decades.
With regard to DEC's determination that other of the parcels were subject to on-going federal enforcement action and therefore excluded from the program under the statute (ECL § 27-1405(2)(e)), the court held that the DEC misapplied this section of the statute. The court found that the developer entered into voluntary cleanup agreements for some of the parcels and distinguished this voluntary cleanup from the word "action" used in the statute and commonly interpreted as a lawsuit. Because there was no state or federal enforcement action, the court held that the provision of the ECL did not apply. For these reasons, the court vacated the DEC's determination and granted the proposed development inclusion into the brownfield program.
As if this were not enough, the court then went onto discuss other similar developments around the state that were granted inclusion into the program and then held that the DEC applied its "guidance" unevenly (allowing some developments into the program and not others) and, therefore, violated the Equal Protection Clause of the New York State Constitution and the 14th Amendment of the U.S. Constitution.
The decision of the New York County Supreme Court in HLP Properties v. New York State Department of Environmental Conservation will be treated in our next post.