Report 2002-121 Summary - July 2003

California Environmental Protection Agency: Insufficient Data Exists on the Number of Abandoned, Idled, or Underused Contaminated Properties, and Liability Concerns and Funding Constraints Can Impede Their Cleanup and Redevelopment

HIGHLIGHTS

Our review of the entities under the California Environmental Protection Agency (Cal/EPA) that oversee the cleanup of contaminated sites, the Department of Toxic Substances Control (Toxics) and the State Water Resources Control Board (State Water Board), found the following:

RESULTS IN BRIEF

The Comprehensive Environmental Response, Compensation, and Liability Act, commonly referred to as the federal Superfund law, defines brownfields as real property where the presence or potential presence of a hazardous substance, pollutant, or contaminant may complicate its expansion, redevelopment, or reuse. This audit report discusses various issues relating to the cleanup and reuse of brownfield properties, including the liability provisions imposed under federal law. California does not have a uniform definition for brownfields. Further, state law does not require the entities under the California Environmental Protection Agency (Cal/EPA) that oversee the cleanup of sites with hazardous materials and waste contamination1, the Department of Toxic Substances Control (Toxics) and the State Water Resources Control Board (State Water Board), to maintain a database to capture information on brownfields, such as the number of sites and their potential for reuse. Consequently, we are unable to report how many brownfield sites exist in California.

This audit report also discusses the number of orphan sites and sites with orphan shares that exist in California. As of March 20, 2003, Toxics' Calsites database showed 46 orphan sites in California. An orphan site is generally defined as a property where the responsible party has either not been identified, cannot be located, or is unwilling or unable to fund cleanup. Also, as of January 1, 2003, Toxics' program that addresses orphan shares, the Expedited Remedial Action Program (expedited program), has three sites that are eligible to receive compensation. Orphan shares are those portions of a contaminated site with cleanup costs that are attributable to an insolvent or defunct party. Due to incomplete data relating to responsible parties in the State Water Board's Geotracker database, we were unable to identify the number of orphan sites under its jurisdiction. However, the State Water Board's unaudited data indicate that it has only seven orphan sites to which it has budgeted $1.4 million in state resources for cleanup. Additionally, the State Water Board told us that orphan shares do not exist since the nine regional water quality control boards (regional water boards) apportion liability for cleanup using a strict application of joint and several liability. Under this application there are no orphan shares because even though some share of the cleanup costs is not attributable to a responsible party, each must assume full responsibility for those costs.

Between July 1, 1998, and April 30, 2003, Toxics spent $9.7 million, less amounts recovered from responsible parties, on the cleanup of orphan sites. It anticipates needing an additional $124 million to $146 million to cover future costs associated with remediating sites it currently identifies as orphans. However, it is important to note that these future costs can vary since a site's orphan status can change over time as Toxics obtains additional information about the site and seeks out those who are liable for cleanup. Between fiscal years 1998-99 and 2001-02 the expedited program has paidout $1.2 million in orphan share compensation, and Toxics anticipates it will pay an additional $2.4 million in fiscal year 2003-04. Toxics receives the majority of its funding for cleanup from an environmental fee the State levies annually on corporations that use, store, or conduct activities relating to hazardous materials. Toxics has also received appropriations from the State's General Fund (General Fund) to cover cleanup costs; however, recently the State has significantly reduced the amount of General Fund appropriations made available. For example, the Cleanup Loans and Environmental Assistance to Neighborhoods Account received $85 million in General Fund appropriations during fiscal year 2000-01, but $77 million was transferred back to the General Fund in the subsequent fiscal year.

The redevelopment of brownfields faces challenges at both the State and national level. Specifically, the liability provisions imposed by the federal Superfund law on responsible parties may inhibit their cleanup or reuse. The courts have interpreted liability under the federal law as holding responsible parties strictly accountable for cleanup costs and being subject to joint and several liability; therefore, liability does not require proof of negligence and parties can pay the cleanup costs attributable to others. The courts have also interpreted liability as retroactive, so responsible parties can be held liable for cleanup costs even for activities that took place before the effective date of the law. State Superfund law differs from the federal law in that it is not retroactive and does not impose joint and several liability on responsible parties. However, state law allows Toxics and the Office of the Attorney General to pursue cost recovery actions under the federal Superfund law.

A recent change in federal law is designed to significantly affect liability issues. Specifically, the federal Small Business Liability Relief and Brownfields Revitalization Act (revitalization act) enacted on January 11, 2002, exempts certain contiguous property owners and prospective purchasers from liability under the federal Superfund law. Existing state laws also affect liability issues. For example, California's Land Environmental Restoration and Reuse Act of 2001 provides immunity to local agencies, property purchasers, developers, and financiers from liability for the satisfactory completion of releases identified in an investigation and remedial action plan certified by Toxics or a regional water board. Cal/EPA believes that the degree to which federal Superfund law liability is an impediment to the redevelopment of brownfields may have more to do with the prior experiences of the parties involved in such real estate transactions than with liability issues.

Limited opportunities exist for funding the cleanup of brownfields. Cal/EPA agrees that the state Superfund program does not have the fiscal resources to clean up and prepare all sites with contamination for development. Toxics considers its Voluntary Cleanup Program (voluntary program) and expedited program key drivers for addressing brownfields. However, the voluntary program requires a project proponent who will commit to pay all cleanup costs. The expedited program also requires at least one responsible party who is willing to pay all costs associated with responding to the contamination not paid by the State for orphan shares or another responsible party. The State Water Board's Spills, Leaks, Investigations, and Cleanup Program is set up to recover from responsible parties the reasonable expenses that it and the regional water boards incur in overseeing cleanup, but the program itself provides no funding for cleanup. The State Water Board's only program that provides financial assistance to orphan sites is its Underground Storage Tank Program.

The federal revitalization act authorizes funding for grants and loans relating to brownfield assessments and cleanup, establishing or enhancing state response programs, and establishing a program for states and other eligible participants to provide training, research, and technical assistance to individuals and organizations that desire to implement the act's provisions. On May 30, 2003, Toxics submitted its application to the United States Environmental Protection Agency (U.S. EPA) to receive a state response program grant. Toxics plans to use a portion of the grant to work with the State Water Board and regional water boards to maintain and display accurate geographical information on brownfield sites and other properties that pose environmental concerns. However, Toxics and the State Water Board have yet to apply for additional revitalization act grant funds available to assist with the State's assessment and cleanup costs for certain sites, such as mine-scarred lands.

RECOMMENDATIONS

If Toxics does not receive funding from the U.S. EPA, Cal/EPA should seek guidance from the Legislature to determine if it desires a database to track the State's efforts to promote the reuse of properties with contamination. If the Legislature approves the development or upgrade of a statewide database that includes relevant data to identify brownfield sites and their planned and actual uses, Cal/EPA should establish a uniform brownfield definition to ensure consistency.

To obtain a comprehensive listing of the number of orphan sites and sites with orphan shares, the Legislature should consider requiring Cal/EPA and its entities to capture the necessary data in their existing or new databases.

To reduce the State's brownfield assessment and cleanup costs, Cal/EPA should ensure that Toxics and the State Water Board apply for all available funding under the revitalization act.

AGENCY COMMENTS

Cal/EPA and its entities, Toxics and the State Water Board, provide comments on some of the information our report contains, but did not specifically address their plans for implementing our recommendations. Their comments and our response begin on page 39.


1 California Health and Safety Code, Section 25501(o) defines hazardous materials as any material that, because of its quantity, concentration, or physical or chemical characteristics, poses a significant present or potential hazard to human health and safety or to the environment if released. The California Superfund law defines hazardous waste as a waste, or combination of wastes, that because of its quantity, concentration, or physical, chemical, or infectious characteristics may cause, or significantly contribute to an increase in mortality or an increase in serious, irreversible, or incapacitating reversible, illness; or poses a substantial present or potential hazard to human health or environment due to factors including, but not limited to, carcinogenicity, acute toxicity, chronic toxicity, bioaccumulative properties, or persistence, when improperly treated, stored, transported, or disposed of, or otherwise managed.