On February 18, 2010, New York's highest court overturned the DEC's denial of an upstate New York development's application for admission into the State's Brownfield Cleanup Program ("BCP" or "Program"). In the Matter of Lighthouse Pointe Property Associates, LLC v. New York State Department of Environmental Conservation, 2010 NY Slip Op 1377, 2010 N.Y. LEXIS 35, (Ct. App. Feb. 18, 2010). As the first Brownfield Cleanup Act ("BCA") case to reach the Court of Appeals, this decision may have implications for how New York State courts interpret the BCA, how DEC makes eligibility determinations, and therefore for an easier entry into the Program.
Developer, Lighthouse Pointe ("Lighthouse"), planned to build a mixed-use waterfront development along the Genessee River in Monroe County that would include residential units, shops, restaurants and a hotel. For purposes of its application to the Program, Lighthouse divided the site into a Riverfront Site and an Inland Site. Historically, much of the Inland Site was operated as a city landfill for 30 to 40 years. The Inland Site was placed on the Registry of Inactive Hazardous Waste Disposal Sites in the 1980s. If the property were currently on the Registry, that listing would automatically make it ineligible for participation in the BCP. However, the Inland Parcel was taken off the Registry in 1994 and later included in a database of hazardous substance waste disposal sites, which does not bar it from the Program.
The Riverfront Site contains construction debris, sewage sludge and residential refuse that was deposited there during a Department of Transportation (DOT) project to replace a bridge across the Genessee River that is accessed from the Riverfront Site and built a road across the Inland Site. DEC allowed the DOT to redeposit the excavated material from the project onto the Riverfront Site.
Tests on both Sites revealed that soils on the property exceeded the DEC's restricted use residential Soil Cleanup Objectives ("SCOs") throughout; all monitoring wells showed exceedances of NYS Ambient Water Quality Standards; and soil vapor levels for volatile organic compounds and methane were elevated. The estimated cost to remediate both Sites was estimated to be between $4 and $8 million. The total assessed value of both Sites was $2.5 million.
After a long delayed decision, DEC denied the Sites' application for entry in the BCP. The agency determined that the Sites did not meet the definition of "Brownfield" because, while there are some exceedances of the residential SCOs, "there is no indication that contaminants ... are present at levels that would complicate the redevelopment of this property, nor is there any indication that there is a source of such contaminants." The DEC's denial letter went on to state, "The Department recognizes that large portions of this property were formerly used as solid waste landfills, and that redevelopment of these properties is complicated by such prior use... However, these complicating factors are typical of solid waste landfills rather than specific sources of hazardous waste or petroleum contamination." DEC concluded, "For purposes of the BCP applications, there is no reasonable basis to believe that contamination..., as defined in ECL Article 27, Title 14 [BCA] ..., is complicating redevelopment or reuse of the property."
Lighthouse brought this suit to challenge DEC's determination.
Lighthouse's arguments emphasized the broad statutory language in the eligibility requirement (that is, "any real property the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant"). Lighthouse also argued that the contamination complicated redevelopment in that, prior to seeking entry into the BCP, DEC and the Monroe County Department of Health ("MCDOH") objected to development of a large part of the parcel containing the former landfill. In fact, the MCDOH suggested that the Site is suited to participate in the BCP. Furthermore, the development could not be financed without DEC's approval of the investigation and remediation of hazardous wastes at the Sites, and that, without the resulting release of liability, the risk for lenders is too great because of the relatively low value of the upstate New York property.
The DEC argued that its SCOs should not be used to determine eligibility into the BCP (even though these same standards are used to determine whether a BCP participant receives a liability release after the site has been cleaned up). However, the trial court struck down that argument and held that the SCOs should be used as a benchmark to determine eligibility. It noted that the statutory language indicated that there is a low threshold for eligibility and, despite DEC's argument otherwise, an investor's reluctance to invest in a project absent DEC's approval is a complication of redevelopment.
On appeal to the Appellate Division, the Court reversed the Supreme Court's decision, deferring to DEC's judgment. Lighthouse then appealed to the Court of Appeals, NY's highest court.
Our next post will discuss the Court of Appeal's ruling and the implications of that decision.