The Brownfields Program Authorization: Cleanup of Contaminated Sites

Congressional research reportJan 27, 2002

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The Brownfields Program Authorization:

Cleanup of Contaminated Sites

Updated January 27, 2002

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Analyst in Environmental Policy

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

The Brownfields Program Authorization:

Cleanup of Contaminated Sites

Summary

The Environmental Protection Agency (EPA) defines brownfields as abandoned,

idled, or under-used industrial and commercial facilities where expansion or

redevelopment is complicated by real or perceived environmental contamination. The

brownfields program was established administratively by EPA under the aegis of the

Superfund program; without explicit authority for it in the law, it has been financed

by the Superfund appropriation. The program provides financial and technical

assistance to help communities restore less seriously contaminated sites that have the

potential for economic development. A combination of potential environmental,

economic and social benefits gives this program broad support among governments,

environmentalists, developers, and communities.

The program began in 1993 and has grown to include 398 brownfields

assessment grants (most for $200,000 over 2 years); 151 grants of up to $350,000 (up

to $1 million beginning in FY2001) to establish revolving loan funds to help finance

the actual cleanups; 47 job training grants; and 28 Brownfields Showcase

Communities where technical and financial assistance from 20 participating federal

agencies is being coordinated with state, local and non-governmental efforts.

EPA also addressed some liability and cleanup issues affecting brownfields by

changing its hazardous waste site tracking system, and issuing guidance clarifying the

situations where it will not bring enforcement actions against brownfield property

owners.

FY1997 was the first year brownfields became a separate budgetary line item,

at $37.7 million. For FY2000 the appropriation was $91.7 million, in FY2001 the

appropriation was $91.6 million, and in FY2002 it is $97.7 million

The 106th Congress extended the brownfields cleanup tax incentive to December

31, 2003, and expanded it to make all brownfields certified by a state environmental

agency eligible for the tax break. The provision allows the costs of redeveloping

brownfields to be deducted in the current year rather than being capitalized over a

period of years. The administration favors making the provision permanent.

Congress passed H.R. 2869 on December 20, 2001, and the President signed it

on January 11 (P.L. 107-118). The act provides statutory authority to the

brownfields program, authorizes funding at $250 million per year, and protects certain

property owners from Superfund liability. Ten other bills have also been introduced.

This report provides background on the issue (including state voluntary cleanup

programs), surveys the Environmental Protection Agency’s current program, and

reviews congressional action, including a description of the new law. The report will

be updated as events dictate. For additional information on legislative activity, see

CRS Issue Brief IB10078, Superfund and Brownfields in the 107th Congress.

Contents

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Voluntary Cleanups vs. Brownfields . . . . . . . . . . . . . . . . . . . . . . . . . . 3

EPA’s Brownfields Program: Grant-Award Activities . . . . . . . . . . . . . . . . 4

Brownfield Assessment Pilot Projects . . . . . . . . . . . . . . . . . . . . . . . . . 4

Targeted Brownfield Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Supplemental Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Greenspace Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Brownfield Cleanup Revolving Loan Fund (BCRLF) grants . . . . . . . . 5

Job Training Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

State voluntary cleanup program grants . . . . . . . . . . . . . . . . . . . . . . . 6

Interagency Efforts and the HUD Program . . . . . . . . . . . . . . . . . . . . . . . . . 6

Showcase Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

HUD program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Non-grant Activities: Clarification of Liability and Cleanup Issues, and

Outreach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CERCLIS: Listing of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Outreach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Brownfields Tax Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Action in the 107th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

S. 350 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

H.R. 2869 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Other Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

List of Figures

Figure 1. Brownfields Funding: FY1993 to FY2002 Request . . . . . . . . . . . . . . 9

List of Tables

Table 1. Brownfield Bills in the 107th Congress . . . . . . . . . . . . . . . . . . . . . . . . 15

The Brownfields Program Authorization:

Cleanup of Contaminated Sites

The brownfields program to assist in cleaning up less seriously contaminated

sites has been popular since its inception in 1993, and has been funded by Congress

at about $91 million for the past 4 years. On January 11, 2002, the President signed

H.R. 2869 (P.L. 107-118), an Act which provides the statutory authority the program

currently lacks, limits Superfund liability for certain parties, and limits the

Environmental Protection Agency’s (EPA) authority to intervene at sites cleaned up

under state jurisdiction. (A separate title of the Act protects small businesses from

Superfund liability if they were responsible for only small amounts of contamination

at a site.) This report provides background on the brownfields issue (including state

voluntary cleanup programs), surveys EPA’s current program, and reviews

congressional action, including a description of the enacted law: the Brownfields

Revitalization and Environmental Restoration Act of 2001.1

Background

The Brownfields Economic Redevelopment Initiative is an effort begun in 1993

by the EPA to address sites that may be contaminated by hazardous substances,2 but

do not pose a serious enough public health or environmental risk to qualify for

cleanup under the Superfund program.3 The purpose of the program is to provide

seed money for activities prior to cleanup, but not to fund the actual cleanup (or

“remedial action,” as it is called in the Superfund program). The Environmental

Protection Agency (EPA) defines brownfields as abandoned, idled, or under-used

industrial and commercial facilities where expansion or redevelopment is complicated

by real or perceived environmental contamination.4 They range in size from a corner

gas station to abandoned factories and mill sites. Estimates of the number of sites

The name of the enacted law is the “Small Business Liability Relief and Brownfields

Revitalization Act.” Title I (originally H.R. 1831) is named the “Small Business Liability

Protection Act.” Title II (originally S. 350) is named the “Brownfields Revitalization and

Environmental Restoration Act of 2001.”

The degree of contamination ranges from nonexistent to very contaminated but not serious

enough to warrant listing on Superfund’s National Priorities List.

The Superfund program was created by the Comprehensive Environmental Response,

Compensation, and Liability Act (CERCLA, P.L. 96-510).

See EPA’s brownfields home page for additional information, available at:

[http://www.epa.gov/swerosps/bf/index.html]

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range from 500,000 to a million;5 they are often in economically distressed areas.

Brownfield sites face a paradox: they are generally not eligible for remediation

funding under the Superfund program because they pose a low public health risk

while, at the same time, developers may avoid them because of cleanup costs,

potential future liability, or related reasons, thereby stalling economic development.

The brownfields program is not specifically mentioned in the Comprehensive

Environmental Response, Compensation, and Liability Act (CERCLA, or the

Superfund law) – it was created administratively by EPA. Congress has recognized

it through a separate line item appropriation since FY1997, and there is a desire

among many members to formally establish the brownfields program by law and

provide it with legislative guidance and structure. Brownfield issues have been the

subject of several hearings, and have been discussed in Superfund and appropriations

hearings.6 In the 106th Congress approximately 32 bills with significant brownfields

provisions were introduced, some of them with broad bipartisan cosponsorship. In

2001, the Senate passed S. 350 (S.Rept. 107-2), which would provide the statutory

authority for the program, $250 million per year for various brownfield initiatives, and

relief from Superfund liability for some property owners, among other things.

Support for the brownfields program as it has been operating comes from a wide

array of states and localities, environmental groups, business associations, developers,

and community activists. Proponents argue that the program has the potential to

leverage federal, state, local and private funds to improve the environment by

addressing low-level, low-risk contamination that otherwise might not be remediated.

Once the environmental problems are remedied, the economic potential of (previous)

brownfield sites can be realized, they argue. This might include a wide range of

economic uses, possibly creating jobs, recreational opportunities, and local tax

revenues. From this, there may be positive social benefits for communities negatively

affected by environmental contamination and economic decline.

“Remarks by the President in Signing of H.R. 2869, the Small Business Liability Relief and

Brownfields Revitalization Act,” found at the White House web site:

http://www.whitehouse.gov/news/releases/2002/01/20020111-3.html

Hearing testimony in the 107th Congress is available at the following committee Web sites:

for the Senate Environment and Public Works Committee hearing on February 27, 2001:

[http://www.senate.gov/~epw/stmts_0.htm]

for the House Energy and Commerce Committee hearing on March 7, 2001:

[http://energycommerce.house.gov/107/keywords/Superfund.htm]

for the Transportation and Infrastructure Committee hearing on March 15, 2001:

[http://www.house.gov/transportation/ctisub5.html]

For published hearings in past Congresses, see, for example: U.S. Senate. Committee on

Environment and Public Works, Subcommittee on Superfund, Waste Control, and Risk

Assessment. Brownfield Revitalization and Environmental Restoration Act, S. 2700.

Hearing, 106th Cong., 2nd sess. June 29, 2000; and U.S. House. Committee on

Transportation and Infrastructure, Subcommittee on Water Resources and Environment.

Brownfields Redevelopment and Superfund Reform Legislation. May 12, 1999.

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There are, of course, a variety of federal programs that target urban renewal,7

and the brownfields program is designed to supplement, not duplicate them. The

program itself, as it presently exists, does not aim to perform the cleanups. It

generally provides grants which are to serve as catalysts to bring together other

resources in the communities to provide the environmental cleanup component of

redevelopment efforts. Overall, the brownfields program is intended to fill a

previously unmet need and to offer hope for a cleaner environment, new jobs, a

stronger tax base, and economic recovery.

Voluntary Cleanups vs. Brownfields. One way states are dealing with

contaminated sites is through voluntary cleanup programs, which had been adopted

by 44 states as of the end of 1997. These programs encourage the owners or

developers to work cooperatively with the state outside of the state’s enforcementdriven cleanup program, thereby avoiding some of the costs and delays associated

with that approach. Cleanup standards are usually identical to those the states enforce

at other hazardous waste sites, according to the Environmental Law Institute (ELI).8

Most states provide incentives for participating in the program – most commonly

some form of liability release. Other incentives include a streamlined process,

financial or tax incentives, and technical assistance. States created voluntary cleanup

programs in the absence of federal legislation or standards, and these programs vary

considerably.

States define brownfield sites in different ways, but they usually echo EPA’s

definition, encompassing “urban industrial or commercial facilities that are abandoned

or underutilized due, in part, to environmental contamination or fear of

contamination.”9 ELI noted that a few states have different standards or cleanup

approaches for brownfields than they do for voluntary cleanup sites. For brownfield

sites, Florida provides for site-specific cleanup levels based on risk, allowing

institutional or engineering controls instead of the state-wide remediation levels

otherwise required. North Carolina allows for alternative cleanup strategies focusing

on removal of exposure pathways at certain brownfield sites. And Mississippi did not

set specific standards – the statute requires that risk assessment be used.10 The

difference between brownfields and voluntary programs in the states is often a matter

of semantics. The Environmental Law Institute distinguished them thus:

Typically, ... voluntary programs do not focus on redevelopment nor do they

target urban sites specifically. Rather voluntary programs are more often aimed

at getting simple, less contaminated sites cleaned up regardless of whether they are

reused. Brownfield programs, on the other hand, are more likely to focus on

For more information see CRS Report 96-503 GOV, Community Development Block

Grants: An Overview. 11 p.

Environmental Law Institute, An Analysis of State Superfund Programs: 50-State Study,

1998 Update. Washington, 1998. p. 40.

Environmental Law Institute, p. 43.

Environmental Law Institute, p. 46.

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redevelopment and be part of a broader State strategy or set of social policies

aimed at improving distressed urban areas.11

Prior to enactment of P.L. 107-118, the legal underpinnings of the brownfields

program were somewhat nebulous, since the program is not mentioned in CERCLA.

The authorized uses of Superfund monies are specified in section 111, and cleanup of

brownfield sites is not among them. Nevertheless, Congress appeared to tacitly

approve the program by providing it a line item in the FY1997 and subsequent

Superfund appropriations.

EPA’s Brownfields Program: Grant-Award Activities

EPA has redefined and expanded the brownfields program several times. The

number of grants to assess brownfields (which EPA calls assessment pilot project

awards) has been increased from the original 50 announced in 1995 to nearly 400;

brownfields cleanup revolving loan fund grants and job training grants have been

initiated; and the Brownfields Showcase Communities have been inaugurated. EPA

has also used “targeted brownfield assessments” to hire contractors to conduct

assessments, and beginning in FY2000 has provided supplemental awards, and awards

for greenspace enhancement.

In addition to these grant programs, EPA has taken several steps to relieve

uncertainty over cleanup liability. It has changed the way it keeps track of potentially

contaminated sites, and has issued guidances to clarify the situations where it will use

its enforcement discretion and not bring legal action to force cleanups, such as against

prospective purchasers of brownfields. Several of EPA’s actions relate to property

transfer, as the sale of real estate is frequently a central element to redevelopment.

Brownfield Assessment Pilot Projects. EPA provides funding for

brownfields through cooperative agreements with state, local and tribal governments,

as well as with multi-jurisdictional authorities such as regional planning commissions

and economic development agencies. The awards are for up to $200,000 over 2 years

to be used to bring together governmental entities, community groups, investors,

lenders, developers, and other affected parties to address site assessment and cleanup

planning issues.

The agency awards grants for the brownfields assessment pilots on a competitive

basis. In selecting projects, EPA focuses on firm redevelopment plans, as well as a

commitment from the public and private parties to both cleanup and redevelopment

after the brownfields assessment is completed. From FY1995 (October 1994)

through April 2001, $78.9 million was awarded to 398 grantees.

Targeted Brownfield Assessments.

The Targeted Brownfields

Assessment program is managed by each of EPA’s 10 regional offices. The selection

criteria include a strong development potential, a clear municipal-community vision

of and support for the property’s future use, and a crucial need for the assessment for

the project to move forward. The funds are used to hire contractors to identify the

Environmental Law Institute, p. 44.

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extent of contamination at a site when this appears preferable to making an

assessment pilot award. Targeted assessments might be used in the case of a small

town that does not intend to establish a brownfields program, for example, but does

have a site that is ripe for renewal. Through FY2000, EPA has awarded $32.8 million

to fund 500 targeted assessments.

Supplemental Awards. Beginning in FY2000 previous recipients of funding

for brownfield assessments can receive a supplemental award of $150,000 for

continuation and expansion of their efforts. These, too, are awarded on a competitive

basis, as are the greenspace awards.

Greenspace Awards. An additional $50,000 may be awarded to an applicant

to assess the contamination of a brownfield site that is or will be used for

“greenspace” purposes. Greenspace purposes may include, but are not limited to,

parks, playgrounds, trails, gardens, habitat restoration, open space, and/or greenspace

preservation. The $50,000 is available in addition to a brownfield assessment award

($250,000 total), or in addition to a supplemental award ($200,000 total).

Brownfield Cleanup Revolving Loan Fund (BCRLF) grants.

Communities, as well as state and tribal governments, that have received brownfield

assessment (or targeted assessment) grants are subsequently eligible for grants for

Brownfields Cleanup Revolving Loan Fund pilot projects (BCRLF). The grants, for

up to $500,000, are to enable the recipient to make low interest loans to public or

private entities to facilitate the cleanup and redevelopment of brownfields. Originally

limited to $350,000, BCRLF awards can now be made for up to $1 million over 5

years. Loans may be made to the owner or operator of a facility only if he or she is

not liable for the cleanup under CERCLA. It is intended that upon repayment, the

loans will replenish the fund to be loaned again for other sites. Some facilities are not

eligible for loans: sites on or proposed for the National Priorities List,12 sites requiring

a Superfund removal action within 6 months, and sites where a federal or state

enforcement action is planned or underway (including sites that are the subject of a

unilateral administrative order, a court order, an administrative order on consent, or

a judicial consent decree). Through April 2001, 151 BCRLF grants have been made,

totaling $64.8 million.

Job Training Grants. To assure that residents of brownfields communities

benefit from the industrial and commercial activities associated with site cleanup, job

training grants of up to $200,000 over 2 years may be awarded to colleges,

universities, non-profit training centers, and community job training programs as well

as to governmental entities. Their purpose is to train residents of the brownfields

communities in handling and removing hazardous materials. The grant recipient must

establish procedures to recruit participants from the neighborhoods and to employ

them in cleaning up hazardous waste facilities. To the extent possible the trainees are

The National Priorities List itemizes the most seriously contaminated sites in the U.S. being

cleaned up through the Superfund program. For more information, see CRS Issue Brief

10078, Superfund and Brownfields in the 107th Congress, and CRS Report RL30798,

Environmental Laws: Summaries of Statutes Administered by the Environmental Protection

Agency, p. 67-77.

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to include the unemployed, those in welfare-to-work programs, and members of

disadvantaged groups. Through December 2000, EPA made 46 awards totaling $8.7

million.

State voluntary cleanup program grants. EPA also provides funds to

state and tribal governments to enhance and develop voluntary cleanup programs.

Uses of the funds include writing regulations for voluntary cleanup programs,

purchasing equipment, paying the salaries of agency staff to develop program

procedures, building their own capacity to oversee cleanups, and promoting greater

community involvement. EPA has awarded $41.6 million in this category to the states

through FY2000.

Interagency Efforts and the HUD Program

In July 1996 EPA created a federal Interagency Working Group on Brownfields

to share knowledge on economic redevelopment and environmental principles, and

to coordinate agency efforts and resources. The most visible outgrowth of their

efforts is the Showcase Communities, described below, as is the program of the

Department of Housing and Urban Development. More than 20 federal agencies

continue to participate, and links to Web sites describing their activities can be found

at EPA’s “Brownfields Partnerships and Outreach” site:

[http://www.epa.gov/swerosps/bf/partnr.htm]

Showcase Communities. The Showcase Communities project is an effort

to develop a comprehensive, coordinated federal approach to dealing with brownfields

in local communities. Sixteen Showcase Communities were designated in 1998, and

another 12 were named in October 2000. These 28 communities of different types

(such as urban, rural, coastal) were selected to serve as national models and

demonstrate how collaborative support from a variety of federal agencies could be

applied successfully to redevelop their brownfields properties. GAO reported that the

10 federal agencies they reviewed had improved their coordination of brownfield

activities both within their own agency and between agencies. The showcase

communities also acknowledged improvement: “They are now better aware of the

federal resources available ... to support brownfield redevelopment and how to access

them and are getting more technical and financial help from agencies.... [A] major

reason for this success is that EPA loaned a staff person to each city under the

Intergovernmental Personnel Act, for 2 years.”13 According to GAO, four

professional associations involved with brownfield issues agreed with this

assessment.14

U.S. GAO. Environmental Protection: Agencies Have Made Progress in Implementing

the Federal Brownfield Partnership Initiative. April 1999. 20 p. (GAO/RCED-99-86)

Hereinafter cited as GAO 1999 report. p. 9-12.

The professional associations are the Association of State and Territorial Solid Waste

Management Officials, the National Association of Counties, the National Association of

Local Government Environmental Professionals, and the U.S. Conference of Mayors. GAO

1999 report, p. 11.

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HUD program. In addition to EPA’s program, the Department of Housing and

Urban Development (HUD) has its Brownfields Economic Development Initiative

(BEDI). BEDI provides start-up funds to attract private financing for brownfield

cleanup and redevelopment. The program works through and in conjunction with the

Community Development Block Grants and the Section 108 Loan Guarantee

programs. BEDI provides funds and loan guarantees to clean up and redevelop

brownfields.15 Congress appropriated $25 million for BEDI for FY2002.

Non-grant Activities: Clarification of Liability and Cleanup

Issues, and Outreach

EPA has also made an effort to address liability and cleanup issues that lenders,

developers, and property owners see as barriers to brownfields development.

CERCLIS: Listing of Sites. In a key move in 1995, EPA revamped the

Comprehensive Environmental Response, Compensation, and Liability Information

System (CERCLIS), the Superfund program’s database of sites suspected of being

contaminated by hazardous substances. As required by law, the worst of the

CERCLIS sites (which numbered about 38,000 at the time) are placed on the National

Priorities List (NPL) to be cleaned up under the Superfund program. However, no

procedures existed to remove less seriously contaminated facilities — many of them

brownfields — from the registry, and the stigma of being associated with the

Superfund program reputedly often prevented sale or development of CERCLISlisted properties, even if they had never been contaminated in the first place. Since

then more than 32,000 CERCLIS sites have been archived. Procedures are now in

place to remove from CERCLIS those sites where no further response action is

planned.

Liability. EPA issued guidances that addressed the liability status of

prospective purchasers of contaminated property, and of property owners with

groundwater contamination that originated on neighboring property. The current

Senate vehicle, S. 350, would put these protections against liability into law, and

would also clarify CERCLA’s innocent landowner defense.16 Other guidances

addressed the transfer of federally owned property, aspects of the underground

storage tank cleanup program, soil testing, and the RCRA corrective action

program.17 In addition, EPA and the Department of Justice clarified enforcement

policy regarding lenders and governmental entities that acquire contaminated property

involuntarily. (The 104th Congress enacted the Asset Conservation, Lender Liability,

and Deposit Insurance Protection Act18 in December 1996 which essentially

incorporated the policy into law.)

Applications and other information are available at the BEDI website:

[http://www.hud.gov/nofa/suprnofa/supnofa2/bedi.html]

For a detailed discussion of these issues, see CRS report RS20869, The Liability

Exemptions in the Senate Brownfields Bill (S. 350). Mar. 30, 2001. 6 p.

This program of the Resource Conservation and Recovery Act (RCRA) exists to clean up

currently operating hazardous waste treatment, storage, and disposal facilities.

Public Law 104-208, Omnibus Consolidated Appropriations Act, 1997, §2504.

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Outreach. EPA is also working to improve communication with minority

communities, and to increase their involvement early and meaningfully in the

brownfields effort. The Agency’s National Environmental Justice Advisory Council

(NEJAC) held a series of public hearings in five cities, and released a report

containing a number of recommendations to incorporate the communities’ own

visions of the future and to identify ways to create healthy and sustainable

communities.19 A June 1999 report found that “the quality and scope of community

involvement ... minimizes the likelihood that ... complaints [of discrimination under

Title VI of the Civil Rights Act] would be raised at brownfield sites and hinder

redevelopment of these areas.”20

Congressional Action

The popularity of the brownfields program led Congress to approve its rapid

expansion from $8 million in FY1996 to $87.4 million 2 years later. It also prompted

a number of legislative proposals to provide the program with legislative authority and

direction, and to give it funding outside the Superfund framework.

Appropriations

To date, all funding for brownfields has come from Superfund appropriations.

For the first years of the program, FY1993 - FY1996, EPA funded brownfield

activities without a line item but from money appropriated for the Superfund program.

(See Figure 1.) In FY1997, proposing major expansion of the program, the agency

requested and received $37.7 million in a line item, specifically for brownfields. That

amount was 2.6% of the Superfund appropriation for that year. In addition to

continuing the grants for site assessment and other pre-remedial activities, EPA used

FY1997 appropriations to support revolving loan funds (RLFs) to help finance actual

cleanups. Through these RLFs EPA funded 24 $350,000 grants to communities.

The FY1998 appropriation (P.L. 105-65) increased EPA’s brownfields program

by $50 million, to $87.4 million (5.8% of the Superfund appropriation). It also

provided $25 million for HUD’s Brownfield Economic Development Initiative

(BEDI), the amount requested by the Administration. However, questioning EPA’s

authority to use Superfund monies for revolving loan funds (RLF) “to clean up sites

National Environmental Justice Advisory Council. Environmental Justice, Urban

Revitalization, and Brownfields: The Search for Authentic Signs of Hope. November 1996.

U.S. EPA. OSWER. Brownfields Title VI Case Studies: Summary Report. June 1999.

p. 23. (EPA 500-R-99-003). Available at:

[http://www.epa.gov/swerosps/ej/pdf/Report.pdf].

See also: [http://es.epa.gov/oeca/main/ej/nejac/index.html]

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Figure 1. Brownfields

Funding: FY1993 to FY2002

Request

Millions of Dollars

120

97.7

87.4

100

91.3

91.7

91.6

37.7

8.2

0.2

0.7

1993

1994

1995

1996

1997

1998

1999

2000

2001

Fiscal Years

2002

Request

Source: EPA, Office of Solid Waste and Emergency Response

which are neither emergency in nature nor eligible for NPL listing,”21 the conference

committee denied the request unless RLFs were specifically authorized in subsequent

legislation.

For FY1999 Congress approved the $91 million requested by the Administration

for the brownfields program, which included funds to capitalize RLFs in 100

communities. HUD’s request to double its brownfields funding to $50 million was

rejected; it remained at $25 million. For FY2000 Congress appropriated $91.7

million, for FY2001, $91.6 million, and for FY2002 $97.7 million, matching EPA’s

request in all 3 years. HUD’s appropriation has remained steady at $25 million.

On January 11, 2002, the day the Brownfields Revitalization and Environmental

Restoration Act of 2001 was signed, EPA announced it would seek $200 million for

FY2003, and the administration would ask for $25 million for HUD’s brownfields

program.

H.Rept. 105-297, Conference report to accompany H.R. 2158. p. 121.

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Legislation

Brownfields Tax Incentive. A tax incentive allowing the costs of

redeveloping brownfields to be deducted in the current year was enacted in the 105th

Congress as part of the Taxpayer Relief Act of 1997 (P.L. 105-34). Initially good for

3 years, until December 31, 2000, the tax break was extended to the end of 2003 by

the 106th Congress, and expanded to include all brownfields certified by the

appropriate state agency. The administration has announced that it will seek to make

the provision permanent, as part of its FY2003 budget request.

The 1997 act limited

eligibility for the tax break to the

76 brownfield pilots announced

prior to February 1, 1997, areas

with a poverty rate of 20% or

more, adjacent industrial or

commercial areas, and

Empowerment Zones and

Enterprise

Communities

(EZ/ECs). The Tax Extenders

Act of 1999 (P.L. 106-170)

added a year to the life of the

incentive to December 31, 2000,

and the Consolidated

Appropriations Act, 2001 (P.L.

106-554) extended the

brownfields tax incentive for an

additional 2 years, to December

31, 2003. The latter act also

broadened eligibility for the tax

break to include any site

containing a hazardous

substance that is certified by the

appropriate state environmental

agency; Superfund sites are

excluded.

Tax Incentive Background

A 1994 ruling by the Internal Revenue

Service, Revenue Ruling 94-38, held that the

costs of cleaning up contaminated land and

groundwater are currently deductible, but only

for the person who contaminated the land.

Also, the cleanup would have to be done

without any anticipation of putting the land to

a new use. Further, any monitoring equipment

with a useful life beyond the year it was

acquired would have to be capitalized. On the

other hand, a person who acquired previously

contaminated land, such as a brownfield site,

would have to capitalize his cleanup costs,

spreading them out over a number of years.

Cleanup costs are a major barrier to

redevelopment, and the IRS ruling made a

challenging situation even more difficult for

developers. The Taxpayer Relief Act thus had

the effect of overturning the ruling and allowing

developers who had not caused the

contamination to deduct cleanup costs in the

current year, rather than to have to capitalize

them.

Congress enacted this incentive to resolve an issue that arose from the tax

treatment of costs of cleaning up contaminated land. In general, costs incurred for

new buildings or for permanent improvements to increase the value of a property must

be capitalized (that is, the cost must be deducted over a period of years). Some

expenses, such as repairs, are currently deductible (that is, deductible in the year in

which the cost is incurred — this is also called expensing). It is a considerable

financial advantage to be able to fully deduct a cost in one year rather than many.

However, the benefit of the brownfields tax incentive is reduced to a certain

degree over time by what is called in tax terminology the “recapture” provision.

Recapture mandates that the gain realized from the value of the property when it is

later sold be taxed as ordinary income (rather than at the generally lower capital gains

rate) to the extent of the expensing allowance previously claimed. In effect, the tax

CRS-11

incentive helps to encourage development of brownfield sites by postponing a certain

amount of the developer’s tax liability in the early days of a project when the

developer is spending money to clean up the property. When the developed property

is later sold, the deferred tax “comes due” by reason of the recapture provision. As

a stimulus to development, the overall value of the brownfields tax break is dependent

on a number of factors, including the total cost of the project, the cost of cleanup,

how long the developer intends to hold the property before selling it, and the

developer’s individual tax situation.

Action in the 107th Congress.22 Eleven brownfields bills have been

introduced in the 107th Congress, and one of them, S. 350 (subsequently H.R. 2869)

was enacted as P.L. 107-118. See Table 1 on page 15 for a summary of their major

provisions.

S. 350. Senator Lincoln Chafee, then chairman of the Superfund, Waste

Control, and Risk Assessment Subcommittee of the Committee on Environment and

Public Works introduced S. 350 on February 15, 2001. The full committee reported

it on March 12 (S.Rept. 107-2) with the understanding that negotiations on the “state

finality” question would continue. Hearing witnesses have testified over several

Congresses that a barrier to cleanup and development at many brownfield sites is the

concern that even though a site might meet state cleanup standards and be released

from liability under state law (thereby achieving “finality”), the U.S. Environmental

Protection Agency could still intervene (or “overfile”) and require a second cleanup

to meet more stringent federal requirements.

S. 350 has such finality language, but it also contains exceptions that are meant

to provide an “environmental safety net,” allowing EPA to step in if a threat to public

health or the environment is not being met by a state. Some Senators felt that these

exceptions to the finality language in the bill were too broad, and that the state should

have an opportunity to act before EPA initiates an enforcement action.23 The postmarkup negotiations led to a managers’ amendment satisfying their objections which

was adopted in the Senate debate on April 25, 2001.

As passed by the Senate, Title I of S. 350 directs EPA to establish: (1) a

program to provide grants to characterize, assess, and conduct planning at brownfield

sites, and to perform targeted site assessments; and (2) a program to provide grants

to capitalize revolving loan funds, or to be used directly to remediate one or more

sites. Characterization grants are limited to $200,000, which EPA may increase to

$350,000 based on the anticipated level of contamination, the size, or the status of

ownership of the site. The remediation grants may be awarded on a community-wide

or site-by-site basis, and are limited to $1 million. The bill authorizes $200 million for

each of 5 years for these programs, and dedicates $50 million per year (or 25% of the

amount appropriated if less than $200 million) for the assessment and cleanup of

relatively low-risk sites contaminated with petroleum or petroleum products.

Also see Issue Brief IB10078, Superfund and Brownfields in the 107th Congress, for regular

updates on legislative activity.

“Minority Views of Senator Voinovich,” p. 23, and “Minority Views of Senators Inhofe,

Crapo, and Bond,” p. 31-32, in S.Rept. 107-2.

CRS-12

The bill’s Title II provides protection from Superfund liability for owners of land

contaminated by a source on contiguous property, and for prospective purchasers of

property that is known to be contaminated. These provisions essentially codify

existing EPA policy.24 In addition, the bill clarifies the Superfund law’s “innocent

landowner” defense. CERCLA provides a defense against liability for a person who

unknowingly purchased contaminated land, provided the person made “all appropriate

inquiry” prior to the transaction. The bill spells out what comprises all appropriate

inquiry for the purchaser to qualify as an innocent landowner under the law.25 These

provisions would apply to all contaminated sites, not just brownfields.

Title III of S. 350 authorizes $50 million per year for 5 years to assist states in

establishing or enhancing their voluntary cleanup programs. States may also use these

grants to capitalize a revolving loan fund, or to develop a risk sharing-pool, an

indemnity pool, or insurance mechanism to provide financing for response actions.

Title III also addresses the finality issue, forbidding enforcement by the federal

government at sites being cleaned up under a state program, except where: (1) the

state requests assistance; (2) the contamination has or will migrate across state lines,

or onto federally owned or controlled property; (3) EPA determines, after taking into

account the response actions already taken, that a release or threatened release may

present an imminent and substantial endangerment to public health or welfare, or the

environment; or (4) EPA, after consultation with the state, determines that

information not known by the state has been discovered that requires further

remediation to protect public health or welfare, or the environment. The federal

enforcement ban is contingent on the state maintaining a public record of sites where

response action is completed, and sites that are scheduled to be cleaned up in the

coming year.

The Environment and Public Works Committee noted in the bill report that, “The

committee expects this [Title I] money to be funded through general revenues and to

be in addition to appropriate Superfund funding.”26 Until now brownfields funding

has been part of the Superfund appropriation, at least half of which has come from the

Superfund trust fund. The report did not comment on the source of funds for the

state voluntary cleanup programs in Title III.

H.R. 2869. After the Senate unanimously passed S. 350 on April 25,2001, the

House unanimously passed H.R. 1831 on May 22. That bill dealt with the Superfund

liability of small businesses and other small contributors of hazardous wastes at sites

on the National Priorities List. On September 10 Energy and Commerce Committee

Chairman Paul Gillmor and Ranking Member Frank Pallone merged the two bills and

introduced the result as H.R. 2869.

Policy Towards Owners of Residential Property at Superfund Sites, OSWER Dir. No.

9834.6 (July 3, 1991), and Final Policy Toward Owners of Property Containing

Contaminated Aquifers, 60 Fed. Reg. 34790 (1995).

For more information, see CRS Report RS20869, The Liability Exemptions in the Senate

Brownfields Bill (S. 350).

Brownfields Revitalization and Environmental Restoration Act of 2001. Report to

accompany S. 350 (S.Rept. 107-2). p. 5, 9.

CRS-13

There were two substantive issues that held up passage. The first was the “state

finality” question, that is, the circumstances under which EPA should be allowed to

intervene at a site that has been or is being cleaned up under a state program. This

was the same issue that had proved a problem in the Senate. House Energy and

Commerce Committee Chairman Billy Tauzin said he wanted a bill with stronger

language than S. 350 to bolster state authority.27 The second issue was whether the

Davis-Bacon Act, which requires that workers be paid prevailing union wages in the

area, would apply at brownfield cleanups. Davis-Bacon has been applicable at

brownfield sites all along because the brownfield grants were made under CERCLA

authority, and CERCLA requires it in Section 104(g). House Speaker Dennis Hastert

reportedly used his influence in both cases to persuade reluctant members to go

forward, and ultimately pass H.R. 2869.28

Other Bills. Ten other bills have been introduced in the 107th Congress and

two of them, S. 23 and H.R. 324, would provide statutory authority for the

brownfields program. S. 23 (introduced by Senator Specter) is an urban economic

development bill, one title of which would approve EPA’s existing program. H.R.

324 (Representative Boehlert) is a Superfund reauthorization bill identical to one

reported in the 106th Congress (H.R. 1300). They both address the state finality issue,

and H.R. 324 also contains the liability relief provisions.

Another set of bills would promote brownfield programs in other agencies.

Representative Quinn’s H.R. 2064 would give specific statutory authority to three

agencies, enabling them to provide direct federal funding, loans and loan guarantees

for brownfields within the context of their agency missions and existing programs. The

three are the Department of Housing and Urban Development (HUD), the Small

Business Administration, and the Economic Development Administration (EDA).

Senator Levin’s S. 1078 and Representative Gary Miller’s H.R. 2941 address HUD’s

brownfields program, and Levin’s S. 1079 provides authority to EDA, with S. 1079

employing the same language as H.R. 2064's EDA provisions.

These same three bills, along with S. 350, would expand the list of sites eligible

to receive brownfield grants. They would include former illegal drug labs, petroleumcontaminated sites, and mine-scarred lands within the definition of a brownfield site,

making them eligible for federal assistance. For a petroleum-contaminated site to be

eligible, it would have to be of relatively low risk, as compared to other petroleum-only

sites in the state; have no viable responsible party; be assessed, investigated, or cleaned

up by a person that is not potentially liable; and not be subject to a cleanup order under

the leaking Underground Storage Tank program. The drug labs and mine-scarred

lands have no other qualifying requirements.

The Quinn bill and three others would address the expensing of cleanup costs (see

pages 10-11 above). The bills are Senator Torricelli’s S. 1082, Representative

Weller’s H.R. 2264, and Representative Coyne’s H.R. 1439. All four bills would make

“House to Differ with Senate on Brownfields,” Congressional Green Sheets Weekly

Bulletin,” April 30, 2001. p. 11.

Rebecca Adams. “Brownfields Redevelopment Measure Clears,” Congressional Quarterly

Weekly, December 22, 2001, p. 3091.

CRS-14

the tax break permanent (it is due to expire at the end of 2003), a position the

administration is backing. S. 1082 and H.R. 2264 would also eliminate the “recapture”

provision, and would include additional substances in the definition of hazardous

substances that may be cleaned up and be eligible for the tax break: asbestos, oil,

pesticides, radon, and lead-based paint. And H.R. 2064 would make the expensing

provision available to those who lease sites for more than 30 years.

H.R. 2064 would add four new tax breaks to stimulate brownfields

redevelopment. The first is a 50% tax credit for cleanup costs incurred at a brownfield

site. The credit is limited to $50,000 per site, and must be taken over 5 years. A

taxpayer would have the option of using this credit or the expensing provision, but

could not take advantage of both.

Secondly, H.R. 2064 authorizes the establishment of “Brownfield IRAs.” The site

owner could put up to $1 million per year free from federal taxation into a special

savings account (the IRA) for future use in brownfield assessment and cleanup. The

money would have to be used within 10 years. The third tax incentive in the bill is

aimed at banks and other lenders to encourage them to make loans for brownfield

redevelopment. Interest earned on brownfield loans would be exempt from federal

taxation, up to $100,000 per year. The fourth tax break would provide a 20% tax

credit for the costs of research and development of environmental remediation

technology.

Representative Andrews’s H.R. 3170 would provide a limited tax credit for

qualified brownfields cleanup bonds issued by state or local governments.

Outlook

As noted previously, the administration has backed the idea of making the

brownfields tax incentive permanent, and will include it in the budget request. With

no vocal opponents, prospects for passage appear good.

CRS-15

Brownfields Cleanup Grants and/or

Revolving Loan Fund Grants

Establish or Expand State Voluntary

Cleanup Programs

No Federal Enforcement at State

Cleanup Sites, with Exceptions

Include Illegal Drug Labs, Petroleum

Sites, and Mine-Scarred Land

Brownfield Programs in:

Dept. of Housing and Urban Dev.

Economic Development Adm.

Small Business Administration

Liability Relief for:

Contiguous Property Owners

Prospective Purchasers

Landowners

Defer NPL Listing at State’s Request

Expensing of Cleanup Costs:

Make It Permanent

Eliminate the “Recapture” Provision

Make Additional Substances Eligible2

Make 30-Year Leases Eligible

H.R. 3170 (Andrews)

H.R. 2941 (Gary Miller)

H.R. 2264 (Weller)

H.R. 2064 (Quinn)

Brownfields Characterization Grants

Program or Activity

H.R. 1439 (Coyne)

H.R. 324 (Boehlert)

S. 1082 (Torricelli)

S. 350 (Chafee)

S. 1079 (Levin)

S. 23 (Specter)

S. 1078 (Levin)

Table 1. Brownfields Bills in the 107th Congress

50% Tax Credit Taken Over 5 Years

Brownfields “IRA”

No Tax on Interest from Brownfield

Loans

Tax Credit: for Cleanup R & D

for State and Local Gov. Cleanup Bonds

Notes: 1 S. 23 provides no exceptions to the ban on federal enforcement.

The substances are asbestos, oil, pesticides, radon, and lead-based paint

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