developing renewable energy on contaminated land: regulatory...

Developing Renewable Energy on Contaminated

Land: Regulatory Challenges and Protecting

Against Liability ExposureReusing Lands and Facilities for Renewable Energy Projects; Siting, Permitting, Cleanup, EPA Liability Protections

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TUESDAY, OCTOBER 22, 2019

Presenting a live 90-minute webinar with interactive Q&A

Bonnie L. Heiple, Counsel, Wilmer Cutler Pickering Hale and Dorr, Boston

J. Barton Seitz, Partner, Baker Botts, Washington, D.C.

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Developing Renewable Energy on Contaminated Land

Strafford WebinarOctober 22, 2019

Bonnie L. Heiple

W ILMERHALE

6

Developing Renewable Energy on Contaminated Land:

Key Considerations

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Benefits of Developing Renewable Energy on Contaminated Lands

Affordable Land

Desirable Locations

Financial Incentives

Community Support

7

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Siting Considerations

Site Restrictions Physical Setting Energy Resource

InfrastructureClosure/Cleanup

Status

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Physical Setting

• Useable Acreage

• Slopes/Grading

• Existing Contamination

• Site Vintage and O&M Requirements

• Distance to Infrastructure

• Obstacles

• E.g. Groundwater treatment wells

• Setbacks

• Landfill-Specific Considerations

• Settlement

• Erosion

• Liner/Cap

9

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Liability Considerations

• Extent of existing contamination

• Status of cleanup

• Availability of liability protections

10

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Regulatory Considerations

11

Federal (typically EPA

or DOI)

Local Authorities

State Agency

Which regulators have jurisdiction?

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Policy Considerations• Tax Credits

• Grants

• Loans

• Rebates

• Liability Protections

• Net Metering Policies

• Renewable Portfolio Standards

• Renewable Energy Credits

• Third-Party PPA Policies

• Permit Streamlining

• Tax Increment Financing

• Renewable Energy Feed-in Tariff

• Public Benefit Funds

• Property Tax Incentives

12

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Economic Considerations

13

• Project Cost

• Risk of increased cost due to

delays

• Retail Electricity Prices

• Lender/Investor Buy-In

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Community Considerations

Benefits Concerns

14

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Site Control and Ownership Considerations

• Developer

• Priority: Execute project

• Concerns: Access, liability

• Site Owner

• Priority: Fulfill commitments to

regulators

• Concerns: Jeopardizing remedy,

financial assurances

• Solutions

• Clear delineation of responsibility

• Contracts/Agreements

• Ongoing coordination

15

CONFIDENTIAL© Copyright Baker Botts 2019. All Rights Reserved.

Strafford Webinar – October 22, 2019Barton Seitz

Developing Renewable Energy on Contaminated Land

RELEVANT FEDERAL AND STATE

REGULATIONS

BAKER BOTTS

Federal Landscape

Programmatic Support & Constellation of Regulation

• Programmatic Support

– RE-Powering America’s Initiative (EPA)

– Various financial incentives and loan guaranties (EPA, HUD, USDA, EDA, SBA, IRS)

• Constellation of Regulation

– Comprehensive Environmental Response Compensation and Liability Act

(CERCLA)

– Resource Conservation and Recovery Act (RCRA)

– Underground Storage Tank statutes and regulations

– Clean Water Act (CWA)

18

BAKER BOTTS

RE-Powering America’s Lands Initiative

• EPA-led program

• Collaboration and assistance from the National

Renewable Energy Laboratory

• 180,000 potentially contaminated land sites

identified

• 43 million acres of land available for renewable

development

19

“To facilitate

the use of

potentially

contaminated

sites…

when it is

aligned with

the

community’s

vision for the

site.” 19

BAKER BOTTS

RE-Powering America’s Lands Initiative

• Online tool kit for developers

• A “Handbook” and “Best Practices” guide

• Treasure maps, in collaboration with Google and DOE; atop contaminated site, the maps overlay

❑ renewable resource availability,

❑ interconnection and transmission, and

❑ proximity to load

• Separate maps for solar, wind, geothermal, biomass

20

“To facilitate

the use of

potentially

contaminated

sites…

when it is

aligned with

the

community’s

vision for the

site.” 20

BAKER BOTTS

RE-Powering America’s Lands Initiative

21

“To facilitate

the use of

potentially

contaminated

sites…

when it is

aligned with

the

community’s

vision for the

site.”

BAKER BOTTS

Financial Incentives, Loan Guarantees, Tax Incentives

EPA Brownfields

Program

Grants for environmental

assessments and clean up

U.S. Department of

Agriculture

Grants and loans for

projects in certain regions

U.S. Department of

Commerce, Economic

Development Administration

Grants for resiliency projects

Small Business

Administration

Loan guarantees for certain

business concerns

Opportunity Zones

(IRS)

Tax credits for development

in opportunity zones

22

BAKER BOTTS

Comprehensive Environmental, Response, Compensation, and Liability Act (CERCLA) • Administered by EPA

• Enforced by DOJ

• Enacted in response to catastrophic

land disasters of national significance

• Policy: “Cleaning up hazardous waste,

and doing so at the expense of those

who created it.” Kelley v. DuPont, 17 F.3d

836 (6th Cir. 1994)

• Potentially Responsible Parties (“PRPs”) include:

– Owners or operators of contaminated sites

– Those who arrange for the disposal of contaminants at sites

– Transporters of hazardous materials to sites

Liability is joint and several

Liability is strict

Liability is retroactive 23

23

BAKER BOTTS

Comprehensive Environmental,

Response, Compensation, and

Liability Act (CERCLA) (cont.)

• Superfund Amendments and

Reauthorization Act of 1986

– New enforcement and settlement tools

– Increased State involvement in every phase

of the program

• Small Business Relief and Brownfields

Revitalization Act of 2002 (collectively,

the Brownfields Amendments)

– Added the Bona Fide Prospective Purchaser

(BFPP) defense

• Brownfields Utilization, Investment and

Local Development Act of 2018

– Reauthorized Brownfields Program and

granted further liability protection

24

BAKER BOTTS

Resource

Conservation

Recovery Act

(RCRA)

• Administered by the EPA and authorized state agencies

• Enforced by the DOJ and state attorneys general

• “Cradle to grave” authority over control of hazardous waste, including hazwaste landfills and disposal sites

• Governs operation, closure and post-closure care for municipal solid waste landfills and other nonhazardous waste landfills

• Agency and citizen suit enforcement authority for penalties and injunctive relief, including cleanup

25

BAKER BOTTS

Underground Storage Tank Regulations

• Federal regulations implement mandates under RCRA and Energy Policy Act of 2005; authorized programs in 44 states and territories

• Rules govern construction, operation, closure and cleanup for underground storage tanks, including financial responsibility

• Financial incentives for cleanup – LUST trust fund

26

BAKER BOTTS

Clean Water Act (CWA)

• Prohibits discharge of any pollutant from a point source into “waters of the United States” without a permit

– Directly applicable to discharges to surface water and wetlands, including landfill leachate and stormwater flows

– Federal appeals courts split on whether CWA covers discharges to groundwater, where pollutants eventually reach surface water

• Broad agency and citizen suit enforcement authorities

• Criminal liability for violations caused by simple negligence, as well as knowing misconduct

27

BAKER BOTTS

State and Local Landscape

Programmatic Support & Constellation of Regulation

• Programmatic Support

– Grants

– Adders

– Program Offices

– RFPs

– Loans

• Constellation of Regulation

– State environmental protection agency

– County environmental and permitting authorities

– Municipality environmental and permitting authorities

28

BAKER BOTTS

Patchwork of State Programs

Grants

• NY - NYSERDA grants for

landfill sites

• RI – Grants for former

industrial sites

Adders

• MA – SREC II adder for landfill

sites

• NY – VDER adder for brownfield

sites

Program Offices

• MD: Task Force on

Renewable Energy

Development and Siting

• City of Oakland: Brownfields

program

RFPs

• IL: Illinois Power Agency

• DC: DC Water Authority

Loans

• NJ: Brownfields Loan Program

for project development costs

• WA: Brownfield Revolving

Loan Fund for clean-up

Thousands of state and local programs are in place to support renewable

development on potentially contaminated lands. These are common flavors of

incentives in sample markets.

29

BAKER BOTTS

Patchwork of State Programs (cont.)

30

BAKER BOTTS

State Regulations

• State environmental protection agency

– Scope of jurisdiction and statutory authority varies

– Certain States have MOUs between agencies to designate a single “lead agency” and set timelines for exchanges between agencies

– Voluntary cleanup programs

• County environmental agency

– May or may not be a county authority

– Even where they may not be a county environmental authority, the County may serve as the “lead agency” for permitting, implementing any state regulations and having final approval authority with respect to any environmental assessments

• Municipality

– May or may not be a municipal authority

– Similar to the County, even where they may not be a municipal environmental authority, the municipality may serve as the “lead agency”

3131

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Developing Renewable Energy on Contaminated Land: Development Process

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Development Process

Site Selection

Environmental Assessment/

Feasibility Analysis

Design, Permitting, and Development

Construction Operation Decommission

33

Community Engagement

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Community Engagement

• Engage early and often

• Understand unique concerns

• Frame benefits

• Include regulators where appropriate

34

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Pre-Screening/Site Selection

Map SiteConsider

Restrictions on Redevelopment

Assess Financial Viability

Identify Necessary

Permits

Assess Cleanup Status

Evaluate Physical Site

Characteristics

35

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Site-Specific Feasibility Analysis

• Environmental Site Assessment

• Phase I

• Phase II (if necessary)

• Assess Load

• Financial Screening

• Site Access

• Evaluate Incentives

36

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Policy Incentives Case Study: Massachusetts

• Brownfield Redevelopment Incentives

• Liability relief

• State-subsidized insurance

• Low-interest loans

• Tax credits

• Renewable Energy Incentives

• Aggressive renewable portfolio standard

• SMART Program with brownfields adder

• Net metering policies

• Mapping and Technical Resources

• Approximately 100 sites

37

Solar and Wind Projects at Massachusetts LandfillsSource: http://maps.env.state.ma.us/dep/arcgis/js/templates/RenewablesAtLandfills/

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Policy Incentives Case Study: New York

• Brownfield Redevelopment Incentives

• Tax credits

• Liability Protection

• NYC Voluntary Cleanup Program

• Grant funding

• Renewable Energy Incentives

• RFS 50% by 2030

• Megawatt Block Program with brownfields adder

• Streamlined Permitting Process for Solar on Brownfields

38

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Policy Incentives Case Study: New Jersey

• Brownfield Redevelopment Incentives

• Remediation cost reimbursement up to 75%

• Low-interest loans

• Tax credits

• Renewable Energy Incentives

• RFS 50% by 2030; 4.1% solar

• SRECs for solar on brownfields

• Net metering

• Streamlined Permitting

• Technical Guidance

• #1 in U.S. for Installed Solar PV/Square Mile

39

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Design and Development

• Design Project

• System Type

• Treatment Technologies

• Institutional Controls

• Obtain Permits & Interconnection

• Obtain Financing

• Establish Agreements

• Site Access

• Power Sales

• O&M40

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Thank You

41

Bonnie L. HeipleCounsel

WilmerHale Bonnie.Heiple@wilmerhale.com

CONFIDENTIAL© Copyright Baker Botts 2019. All Rights Reserved.

Strafford Webinar – October 22, 2019Barton Seitz

Developing Renewable Energy on Contaminated Land

PROTECTING AGAINST LIABILITY

EXPOSURE

BAKER BOTTS

Examples of Liability Exposure

Liabilities Related to Possible

Contamination

• CERCLA and other federal

liabilities

• State statutory liability

• County or municipality liability

• Creditworthiness risks associated

with counterparties responsible

for clean-up

• Contractual risks associated with

counterparties responsible for

clean-up

• Risks associated with due inquiry

into former uses of the land

Project Risks Associated with Site

Constraints

• Timeline slippage due to

assessments, clean-up, or

permitting

• Suboptimal system designs due to

physical constraints or restrictive

covenants on the land

• Reductions in system size due to

clean-up or maintenance

structures

• Added operations and

maintenance costs

44

BAKER BOTTS

Q: What is most typical?

A: There is no “typical.” Need to determine where project is along two

different axes:

45

Environmental Matters Development Cycle

45

BAKER BOTTS

CERCLA Liability

• Government-led or mandated

clean-ups

• Damages to natural resources

• Costs related to health

assessments and governmental

oversight

• Injunctive relief (i.e. TRO on

development; required clean-up)

Applies to:

Potentially

Responsible

Parties

46

BAKER BOTTS

CERCLA Liability Protections

• Statutory protection

– Bona Fide Prospective Purchaser (BFPP)

– Secured Creditor Exemption

• Permit protection

– No Action assurance from the Assistant

Administrator for Enforcement and

Compliance Assurance of EPA

• Agreement

– Prospective Purchase Agreement with the

DOJ and EPA (for sites on the National

Priorities List)

• Superfund Task Force Reforms

– Model comfort/status letters; 2019 Common

Elements Guidance 47

Cert

ain

ty o

f p

rote

cti

on

BAKER BOTTS

Bona Fide Prospective Purchaser

• Statutory Requirements

1. Not be potentially liable for contamination on or at a

property

2. Acquire the property after January 11, 2002

3. Establish that all disposal of hazardous substances

occurred before the person acquired the facility

4. Make all appropriate inquiries into previous ownership

and uses of the property prior to acquiring the property

5. Not be affiliated with a party responsible for any

contamination

• Critical Steps for Developers

1. Phase 1 Environmental Site Assessment, and Phase 2 (if

necessary)

2. Conduct “All appropriate inquiries” specific to site

3. Additional support (i.e. lead agency, State or local,

approval)

• Fulfill continuing obligations for notices, appropriate

care, no exacerbation, cooperation, etc.48

BAKER BOTTS

Secured Creditor Exemption

• Excludes lenders and lienholders from CERCLA owner/operator

liability

• Statutory Requirements

– Hold “indicia of ownership” for protecting a security interest in a site or

facility

– But, do not “participate in management”

• Permissible activities:

– Holding or releasing security interest

– Having unexercised authority to control facility activities

– Including environmental compliance condition in credit instrument

– Monitoring/enforcing terms of credit instrument

– Foreclosing on instrument while abiding by statutory limits

49

BAKER BOTTS

State and Local Liability Protection

• State “Superfund” laws

and hazardous site

response statutes

• Voluntary Cleanup

Programs (VCPs)

• Memoranda of Agreement

or Understanding between

US EPA and State agencies

50

BAKER BOTTS

Contractual Protections

• Contractual indemnities; reserves/escrows

• Environmental liability transfers

• Assignment of financial assurance mechanisms

from current/former owner/operator

• Ground lease covenants

– But, CERCLA operator liability risk even for mere

tenants

51

BAKER BOTTS

Insurance

• Risks to be addressed

– Transactional/deal

– Operational

– Passive

• Available coverages

– Pollution/Site Legal Liability

– Combined General Liability and

Pollution

– Contractor’s Pollution Liability

– Reps and Warranties

• Common exclusions

• Specialty coverages

– Tax credit protection

– Site lender environmental asset

protection5252

BAKER BOTTS

Questions?

53

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