Regulation of brownfield sites and their redevelopment over the last decade has been crucial to the increased re-use of blighted properties and the implementation of “smart growth,” however, balancing growth and construction with the regulations can often be difficult.  The difficulties are further compounded when one looks at the regulations that exist across the local, state and federal levels of government. In order to better navigate the climate for brownfield redevelopment and make sure your project is built quickly and efficiently, it is helpful to understand some of the major laws that regulate these sites at all levels of government, and their implications for redevelopment.  

At the federal level, the passage of Sarbanes-Oxley has required new reporting requirements related to corporate-owned properties.  Historically, corporations have typically known which of their properties are "non-producing," and therefore a drain on their bottom line.  Sarbanes-Oxley no longer allows corporation to sit back and let those sites remain on the negative side of their balance sheet.  The law requires that these corporations delineate the extent of the liability, creating the incentive to perform at least a preliminary assessment of the property. 

Upon completion, the findings of this assessment need to be reported to the Securities and Exchange Commission as per the accounting requirements outlined by FASB.

Once the liability is quantified, the corporation has to decide whether to conduct the remediation to remove the negative reporting on the balance sheet or to continue to carry it as a liability.  The full impact that this legislation is yet to be seen, and may have to be evaluated on a case-by-case basis.   

Tort liability is also a significant issue that affects landowners, particularly when they are seeking finality on a site after performing remediation.    As the Responsible Party, their culpability for the contamination is never resolved.  They are always a target for future action by neighbors, subsequent owners and regulators.  This may lead landowners to actually hold onto their properties after the remediation is complete in order to maintain control over the use of the site. 

While federal tax programs that have existed in various forms for the past decade, they have failed to become an effective tool in the brownfield redevelopment process.  Due to this shortcoming in tax structure, other federal programs have been created to assist in the process. The Federal Taxpayer Relief Act of 1995 allows non-responsible parties to perform a cleanup of a site, and then apply all of the costs associated with the cleanup as a tax deduction in the year they were realized (versus amortizing the costs over the life of the project).  In addition, the Federal government has a Tax Credit Program that allows developers to utilize a tax credit for the costs incurred for site remediation.   

Certain Federal programs substantially affect New Jersey. For example, the United States Environmental Protection Agency [USEPA] established brownfield grants with the 2002 Brownfield Small Business and Liability Act, which applied to state and local governments, in addition to non-profit organizations.  New Jersey communities have vigorously sought after these grants for assessment and cleanup.  Early in the program, New Jersey received a significant share of the grants awarded throughout the country. 

State Laws also affect the redevelopment of brownfields in the state of New Jersey. The New Jersey Department of Environmental Protection [NJDEP] has implemented stringent guidelines for vapor intrusion. Despite concerns raised that these guidelines would adversely impact brownfield redevelopment, the requirement to address potential vapor problems when volatile organic compounds [VOC’S] were present at a site already existed.   

In Fall 2005, the Highland Rules, which focus on protection of the State’s future water resources, came into effect for a period of one year.  This law affects brownfield redevelopment in addition to all redevelopment.  The Highland Rules included a process for brownfield sites that consists of applying to the NJDEP's Land Use Regulation Program and ultimate approval by the Highland Council for an exemption from some of development constraints imposed on existing undeveloped land. 

This spring, the New Jersey Supreme Court upheld the use of the ground water quality standards as remediation standards when faced with groundwater contamination.  This affirmation of remediation standards, however, has not had a significant impact on groundwater cleanup in the state since they are the same standards that have been in use for over the past decade.  The ruling does, however, codify the standard through precedent by ruling of the Supreme Court.    

For Mayors throughout the state of New Jersey, one of the most exciting regulatory changes over the last year were the increases in eligibility and funds to an already existing program - the Hazardous Discharge Site Remediation Fund [HDSRF], also known as S-277.  The changes allow a municipality to become eligible for funds and subsequently access grant money for remedial investigation without having an ownership interest in the property.  This has significantly increased the number of applications for this grant money.   

HDSRF provides the funds needed for a municipality to fully delineate the contamination at brownfield sites and establish a firm cleanup cost, in order to provide better market information to lure and hire a developer for the site.  

HDSRF changes also expanded the fund to allow a municipality to obtain grants for the actual cleanup of the site, contingent upon the end use as conservation, recreation or affordable housing.  Since the changes, there has been a significant increase in the applications submitted for funding, however, more are encouraged to apply.   

It is important that Mayors and municipalities across the state of New Jersey are aware of this aspect of the changes so that more can take advantage of the availability of expanded cleanup funds.   

The most significant impact on brownfield redevelopment is the creation of "an area of need of redevelopment,” which was the creation of a redevelopment plan and the possible use of eminent domain for facilitation of brownfield redevelopments.   In many cases, the owner would prefer to pass along the cleanup costs to a third party such as a municipality, and the changes to the HDSRF make this more feasible. 

The state of New Jersey has no shortage on regulations that affect redevelopment of brownfield and landfill properties.  When viewed against the backdrop of the federal regulatory climate and combined with local regulations, it can seem intimidating, but the key is to understand what regulations govern your redevelopment and affect your project.  The NJDEP and a qualified consultant can help you to determine what grants you have eligibility for and how to acquire them, in addition to navigating the regulatory climate to ensure your project is built safely and quickly.