Liability Relief — A Corporate Perspective
By Chris Olson

How do you spell “relief”? Sounds like an old antacid commercial, which is perhaps very appropriate given the propensity for overeating around the holidays.  Even though you are perusing this article after the holiday fests have wound down, you may want to reserve an extra tablet or two before putting away the Rolaids® or Tums®.

Not all Brownfields Are Created Equal
“Brownfield” is certainly a trendy term these days and often loosely slung around, almost generically, in conversation. There are most certainly distinctions that separate one brownfield property from another, not the least of which is the varying shades of the color “brown.” I would contend that taking an old warehouse, turning it into condos, and calling it a brownfield redevelopment because some heating oil tanks were removed from the basement is a bit of term-stretch. It’s clearly quite different from the regeneration of a former 800-acre oil refinery property, both in terms of scale and remedial complexity. 

Perhaps one way to mentally visualize the spectrum of brownfield sites is to look at it from an ownership and activity level, and imagine the diversity of properties along the arc of a swinging pendulum.

Close your eyes and imagine at one end of the arc, say the far left … oops, that isn’t going to work from a reading perspective, so open your eyes.  Anyway, on the left would be our traditional abandoned, contaminated industrial lands in blighted neighborhoods that are orphaned, seemingly with no financially viable owner. This end of the spectrum features the poster-child brownfield sites —  ones that most often win the hearts (and funding dollars) of brownfield grantors, and rightly so.

On the far right of the arc swing would be the inactive, closed industrial properties, but importantly, those that still reside on the asset ledgers of public and private corporations. While some would argue that the pendulum could be pushed even further to include contaminated properties that are still operating, such as leaking gas stations, or the retail strip center dry cleaners, many would agree that while there are spill issues to be addressed, these sites don’t meet the brownfield definition. 

Coming out of the Closet
The National Brownfield Association’s position paper, “Bringing Corporate Brownfield Properties to Market” (at www.brownfieldassociation.org), accurately points out that many underutilized corporate lands never see the light of day from a market standpoint. This is due to the corporation’s actual or perceived lack of regulatory certainty and finality on these sites.

Defining remedial end points that provide regulatory certainty and protect against reopeners has clearly been articulated as a change that needs to occur in order to encourage corporate property owners to offer more of their properties to the marketplace. More effort is certainly needed around the entire issue of liability relief.

Remediation 101: The Polluter Pays ... and Pays 
At first blush, it’s a relatively easy concept.  If you spilled it, you clean it up — my mother drilled that into my cranium during my wonder years and quite frankly, who could argue the logic?

Let’s return to our swinging pendulum analogy for a moment.  On one end was our abandoned, poster-child brownfield property example with spills that nobody has fessed up to.  My mom used to complain about these all the time at home, as everyone in the family shifted their eyes around in order to not have to meet her stare, or worse, we suddenly disappeared. She grumbled about why she had to spend her time and energy cleaning up somebody else’s mess. Sound familiar? This is exactly why orphaned brownfield sites require additional assessment and cleanup funding and resources in order to encourage cleanup and redevelopment in communities across the nation.

Let’s shift our focus for a second to the other end of the pendulum arc.  Terminology aside, the contaminated, but actively owned and operating properties seem fairly straightforward from a liability standpoint. Assuming the current owner caused the problem, the owner cleans up the problem. If it’s a spill, the issue is dealt with as spill response, and if it becomes more involved, the owner sets an environmental provision and begins the longer remediation process — end of story … maybe.

Now let’s move back down the arc to the closed, corporate-owned industrial properties, the ones that have become surplus, non-strategic, non-performing assets.  These are most certainly the ones that the NBA is speaking about in their position paper.  If they are closed and considered non-strategic to the company, what keeps these dusty jewels from the marketplace of redevelopment opportunity? The simple answer is liability relief. 
In part two of this series, we’ll investigate the issues around regulatory closure, and what liability relief might look like in order to move brownfields to the next level. Get ready to pop that antacid! BFN

Chris Olson is manager of real estate reuse at Atlantic Richfield, a BP-affiliated company.