developing renewable energy on contaminated land: regulatory...
TRANSCRIPT
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
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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
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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
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Liability Considerations
• Extent of existing contamination
• Status of cleanup
• Availability of liability protections
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Regulatory Considerations
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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
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Economic Considerations
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• Project Cost
• Risk of increased cost due to
delays
• Retail Electricity Prices
• Lender/Investor Buy-In
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Community Considerations
Benefits Concerns
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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
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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)
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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
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“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
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“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
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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
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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
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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
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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
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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
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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
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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.
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BAKER BOTTS
Patchwork of State Programs (cont.)
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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”
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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
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Community Engagement
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Community Engagement
• Engage early and often
• Understand unique concerns
• Frame benefits
• Include regulators where appropriate
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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
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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
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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
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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
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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
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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
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
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BAKER BOTTS
Q: What is most typical?
A: There is no “typical.” Need to determine where project is along two
different axes:
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Environmental Matters Development Cycle
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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
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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
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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
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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
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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
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