At Issue

Closing out cleanups for good
Breaking free from environmental liability

By Brian Burke

A chain of title need no longer link property owners to unlimited liability for environmental contamination. That connection now can be broken.

Effective July 1, 1998, any business, individual or government entity that did not "intentionally or recklessly" cause the release of a hazardous substance can close the book for good on the state's spill law¹ - after cleanup occurs and the Wisconsin Department of Natural Resources (DNR) issues a certificate of completion.²

Once a certificate of completion is secured, the owner of the property where cleanup occurred no longer is responsible for taking subsequent action to restore the environment or minimize harmful effects of past discharges. Moreover, the property owner is not responsible for any expenses incurred if additional steps are needed later to clean up a site or remedy an emergency situation.³

This liberation from future liability applies even if environmental standards change, the cleanup action fails or additional contamination associated with the original discharge is found at some future time.⁴ Further, the liability protection is transferable and runs with the land.

Built on the footings of 1993 Wisconsin Act 453 (the Land Recycling Act) and associated administrative rules, which limited liability only for purchasers and certain "innocent" landowners, the new and more sweeping liability limits are not evidence of forgiveness for past environmental sins, but rather a circumspect reprieve to encourage remediation and recapture the economic potential of contaminated land.

Tucked away in the biennial budget act,⁵ this momentous shift in state policy is designed to end the fear of open-ended environmental liability that strangles the urban marketplace.

The choice is now clear: Do nothing, wait for a responsible party letter from DNR and face an uncertain future; or voluntarily enter the contaminated land recycling program, clean up the property and be done with it.

Grant and loan programs established

No matter how significant, however, liability changes alone will not move everyone's mountain. So, $10 million in grant funding now is available for businesses, government entities and individuals to redevelop "brownfields" and conduct associated environmental remediation activities.⁶

If grant funding runs out or eligibility is denied, municipalities can turn to the newly created land recycling loan program for surface water and groundwater cleanups. DNR will make $20 million available with interest at 55 percent of current market rates.⁷

For purposes of the grant and loan programs, and in general parlance, the term "brownfields" is considered to mean abandoned or underused commercial and industrial facilities or sites that are not being expanded or redeveloped due to actual or perceived environmental contamination.⁸

Other financial components of the new law include $4 million to support principal guarantees of private bank loans up to $500,000,⁹ $44.3 million for state-funded cleanups,¹⁰ $750,000 for DNR to provide municipalities with environmental assessment services for tax delinquent or bankrupt properties, and preference for brownfield projects in various local community block grant and state stewardship program categories.¹¹

Tax incentives

On the tax front, up to 50 percent of cleanup costs for projects in designated development zones now can be credited against state income and franchise taxes.¹² At the federal level, environmental cleanup costs for properties in targeted areas are fully deductible in the year in which they are incurred, rather than having to be capitalized.¹³

Counties and the city of Milwaukee are authorized to cancel delinquent taxes, interest and penalties on contaminated property,¹⁴ and the availability of tax incremental financing is broadened to include single municipal properties in need of environmental remediation.¹⁵

Off-site discharges and partial cleanups

Further augmenting an urban developer's arsenal in the battle to rebuild our cities, any person who owns property that is contaminated by a discharge originating on another property now is exempt from responsibility to clean up the contamination, and may obtain a written statement from DNR to that effect.¹⁶

In addition to off-site source letters, DNR may issue a variety of other redevelopment assistance (or deal-closing) correspondence, including prequali-fication letters for voluntary party status, liability clarification letters, technical assistance letters, no further action letters and partial cleanup close-out letters.¹⁷

Other less conspicuous but still significant modifications to the state's land recycling laws include expanded liability protection for municipalities and nonprofit economic development corporations,¹⁸ limited municipal civil immunity for discharges on previously owned property,¹⁹ creation of a reimbursement program for investigation and cleanup costs at dry cleaning facilities,²⁰ more options for lenders who acquire contaminated property,²¹ and opportunities for flexible cleanup enforcement agreements.²²

Conclusion

The state is taking bold steps to encourage remediation and break the economic paralysis caused by environmental contamination. With infrastructure, services and a workforce already in place, central city sites could become the new hotbed of economic growth and opportunity.

Endnotes

¹Wis. Stat. § 292.11.

²1997 Wis. Act 27, §§ 3662-3669; Wis. Stat. § 292.15. (Note: A partial veto was used to correct a drafting error and avoid a contradiction in the definition of voluntary parties that are eligible for liability exemptions. The veto leaves no definition of voluntary party in the statutes between the effective date of the budget act and July 1, 1998. As such, the governor has directed DNR to provide assurance letters to potential voluntary parties on a case-by-case basis during this interim period.)

³1997 Wis. Act 27, § 3674; Wis. Stat. § 292.15(2)(c). (Note: The owner is not exempt from the responsibility of notifying DNR or other appropriate agencies of belatedly discovered or future discharges. In addition, any person who possesses, causes or controls a discharge that occurs after issuance of a certificate of completion is responsible for all necessary response actions to restore the environment.)

⁴1997 Wis. Act 27, §§ 3672 & 3673; Wis. Stat. § 299.15(2)(b).

⁵1997 Wis. Act 27.

⁶1997 Wis. Act 27, § 4351; Wis. Stat. § 560.13.

⁷1997 Wis. Act 27, § 3569; Wis. Stat. § 281.60. (Note: The governor vetoed language expanding eligibility for the land recycling loan program to individuals, corporations, partnerships, associations and commissions.)

⁸See 1997 Wis. Act 27, §§ 764, 3569, 4351, 4444, 4478; Wis. Stat. §§ 23.09(19)(a)(1), 281.60(2), 560.13(a), 560.41(1), 560.60(1v).

⁹1997 Wis. Act 27, §§ 3377-3386; Wis. Stat. § 234.88.

¹⁰See 1997 Wis. Act 27, § 731; Wis. Stat. §§ 20.866(2)(tg), 20.370(2)(dv).

¹¹See 1997 Wis. Act 27, §§ 765, 768, 1140, 4344; Wis. Stat. §§ 23.09(19)(cm), 23.175(4m), 30.277 (3)(k), 560.045.

¹²1997 Wis. Act 27, § 2262; Wis. Stat. § 71.07(2)(dx).

¹³See Taxpayer Relief Act (HR 2014/PL 105-34), signed Aug. 5, 1997.

¹⁴1997 Wis. Act 27, § 2373; Wis. Stat. § 75.105.

¹⁵1997 Wis. Act 27, § 2216; Wis. Stat. § 66.462.

¹⁶1997 Wis. Act 27, § 3661; Wis. Stat. § 292.13.

¹⁷See 1997 Wis. Act 27, §§ 3670, 3678m, 3720; Wis. Stat. §§ 292.15(2)(am), 292.15(5m), 292.55.

¹⁸1997 Wis. Act 27, §§ 3656-3660c; Wis. Stat. § 292.11(9)(e).

¹⁹1997 Wis. Act 27, § 3683g; Wis. Stat. § 292.26.

²⁰1997 Wis. Act 27, § 3721e; Wis. Stat. § 292.65.

²¹1997 Wis. Act 27, § 3681; Wis. Stat. § 292.21(1)(c)1.d.

²²1997 Wis. Act 27, § 3651; Wis. Stat. § 292.11(7)(d).

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