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SB 820: Sacramento Extends California’s Best (Remaining) Tool For Brownfield Renewal

From timber country to the urban core, California is struggling to get its brownfield sites – land contaminated or believed to be contaminated by hazardous chemicals – back into productive use. The elimination of California redevelopment agencies in 2011-2012 set the process back dramatically, and the state’s best tool apart from redevelopment was set to expire at the end of 2016. Fortunately, a campaign spearheaded by the California Association for Local Economic Development (CALED) and Senator Bob Hertzberg secured passage of SB 820, saving California’s Land Reuse and Revitalization Act (CLRRA) from extinction.

CLRRA is Chapter 6.82 of the California Health and Safety Code. It was enacted in 2004 to help restore sites burdened by historically common, and unfortunately lax, chemical handling and disposal practices. All too often these sites sit unused, or badly underutilized, because the legal and regulatory challenges associated with them drive developers and local jurisdictions to focus on sites without such chemical problems – so-called greenfields.

The “greenfields before brownfields” cycle often reinforces downward socio-economic spiral in areas most needing economic renewal and investment, and it broadly undermines land use and environmental policies tied to reducing sprawl. Brownfield stagnation also frustrates the state’s efforts to build housing, both affordable and market-rate, in urban core areas. Many sites well suited to the production of urban housing were historically used for commercial and industrial activities that involved lax chemical handling.

CLRRA addresses these brownfield challenges by clarifying and simplifying the liability and regulatory framework applicable to brownfield sites. The fear of potentially joint and several liability for cleanup costs disproportionate to the anticipated redeveloped value of a site typically poses the first and biggest legal hurdle for brownfield redevelopers, whether private or public sector (or the public-private partnerships that have taken on the state’s most ambitious brownfield projects in places like Emeryville, downtown San Diego, and Carson and other formerly industrial areas in greater Los Angeles).

CLRRA addresses this challenge in multiple ways, most notably by conferring on “bona fide purchasers” a statutory immunity for cleanup work beyond the “response plan” needed to make the site suitable for a proposed redevelopment. As a practical matter, this enables brownfield redevelopers to understand ahead of time what their cleanup obligations will be. Clarity on this point allows a redeveloper to confirm that the cleanup obligations fit within a pro forma financial model that is viable to capital sources, both debt and equity. CLRRA also strengthens cost recovery leverage, another aspect of the liability framework that can be critical to the financial pro forma for complex brownfield sites.

Fear of a byzantine, even Kafka-esque, regulatory process that will swallow time, resources and sanity itself is the second legal hurdle that must be overcome at many brownfield sites. CLRRA addresses this challenge by laying out a procedural path that balances interests with inherent tensions – development efficiency, scientific certainty, and public input.

In general, the CLRRA process starts with a Phase I Environmental Site Assessment and an agreement to pay the oversight costs incurred by the Department of Toxic Substances Control or a Regional Water Quality Control Board. The statutory immunities trigger at this early juncture. Thereafter, the applicant works through four “streamlined” steps: site assessment, cleanup planning, public comment, and implementation/completion certification. The objective is to make the site safe for its intended use(s) as defined in local planning and zoning documents, not to evaluate and cure every conceivable issue associated with the historic chemical impacts.

Needless to say, the statute has technical intricacies. This brief survey should be taken as encouragement to work with experienced practitioners (both legal and technical) when pursuing a CLRRA site. It must also be noted that the legislative effort to enact the original CLRRA statute involved a good amount of awkward sausage making. Certain sites are ineligible for CLRRA treatment for reasons that defy logic and sound public policy. The statute clearly can be improved, hopefully in the upcoming legislative session now that SB 820 has resolved the looming sunset issue.

Nonetheless, CLRRA’s enactment and SB 820 represent huge steps forward for California’s ongoing efforts to revitalize urban areas, build affordable housing, and pursue smart growth management.