CounterPOINT:
AAI A Small Beacon in the Fog of Brownfields
By Mel Pins

One of the most anticipated follow-ups to the brownfield amendments has been EPA’s AAI rule. It would appear that the rule meets the purpose of defining what an “all appropriate inquiry” should consist of to establish protection from federal Superfund liability for bona fide prospective purchasers, innocent landowners and contiguous property owners.

However, one of the largest issues that continues to impede brownfield redevelopment is concern, anxiety, and confusion that prospective purchasers have regarding perceived contamination issues and liabilities at brownfield sites — AAI will not extinguish these impediments to brownfield revitalization.    

From a state regulatory agency perspective, I receive inquiries daily from developers and citizens who know they should be concerned about environmental issues in a pre-purchase context, but have no idea what they should be concerned about. I refer to it as the “Monsters Under the Bed” syndrome, where there is a captivating fear of something, but no one really knows who or what they should be scared of.  

Many prospective purchasers assume that the state requires some kind of testing or certification prior to the purchase. Many states do not have specific requirements for pre-purchase environmental assessments for liability protection, and by default, Superfund is really the only monster that these property owners have to worry about.

What’s the likelihood that a small town with a former machine shop on a half-acre lot will ever have an environmental issue that would call in to play the mechanisms of Superfund liability? Unless there is a direct issue of an immediate spill, release, or other environmental impact, most state environmental agencies are not asking property
owners to dig into the past of every site where past development and activity has ever been present.

Any property development involves some degree of risk: Will I be able to sell or lease the property once I develop it? Will I make a profit? Does the pro forma work? Unfortunately, these risks in property development often never come into play at brownfield sites, as prospective purchasers and developers are frightened away by the up-front “risk” they associate with environmental unknowns.

While conducting AAI can help to ease this risk factor, the new AAI rule will no doubt add considerably to the cost of conducting due diligence. EPA considered a figure of an increase of $41–47 per typical Phase I in their cost analysis, whereas the industry most likely will see an increase of 10 to 20 percent ($300–400 for a typical site).
As such, prospective purchasers fear a scenario that most likely will never come to pass, will spend an in-creasing amount of money to meet the terms of the AAI, and without skilled counsel or experience in this arena of environmental liability, they will move on to greener pastures (literally and figuratively). Redeveloping that shop will seem more expensive than ever.

While AAI clears up the definition of what an “all appropriate inquiry” should consist of, thus parting the fog of interpreting its intent, it does little to move brownfield redevelopment forward, as the same monsters under the bed still exist. This will keep prospective purchasers from firmly planting their feet on the floor of redevelopment and reuse at brownfield sites. BFN

Mel Pins is an executive officer with the Iowa Department of Natural Resources.

POINT: For Inquiring Minds Answers to Your AAI Questions
COUNTERPOINT: AAI Indeed for Inquiring Minds
COUNTERPOINT: AAI Raising the Bar

Learn more about AAI.