Recently I went to a well-attended presentation in Chicago covering the new vapor intrusion (VI) rules that are now a part of Illinois’ risk-based Tiered Approach to Corrective Action Objectives (TACO) regulations. The discussion that spontaneously ensued among those in attendance moved away from the specific nitty-gritty of the new rules and on to the nuance of contaminated property liability – the room was filled with smart, savvy, and sophisticated scientists, engineers, lawyers, lenders, property managers, insurance agents, municipal officials, and other professionals, all experienced and intimately familiar with the perils and risks associated with contaminated real estate.
The new VI rules are important because, as everyone in the room recognized, the VI rules add a new layer of complexity to obtaining No Further Remediation (NFR) letters issued by the Illinois Environmental Protection Agency (IEPA) through its voluntary Site Remediation Program (SRP). The new VI rules also can disrupt the status quo with respect to previously issued NFR letters. Until recently, NFR letters were based on site analyses that did not include consideration of the VI pathway.
“Are old NFR letters now worthless or less valuable?” some of the attendees asked.
Listening for a while and seeing what I perceived to be an elephant in the room, I asked the question, “What is so great about an NFR letter anyway?” Not to the fault of any of the thoughtful presenters and attendees, I never did get a satisfactory answer. All I could conclude was that lenders and buyers like to see NFR letters before closings because such letters are seen by many as certifications that properties are clean, safe, and without risk. Owners and operators of contaminated property are comforted by having NFR letters in their files because they think these letters will keep the environmental enforcers away. And the IEPA is thrilled to see contaminated properties cleaned up without having to compel responsible parties into action.
For practical purposes though, while you should see your NFR letter as beneficial, you should not see it as a panacea. Never forget that an NFR letter really just provides an acknowledgement by the IEPA that it will leave you alone, for now, until the IEPA changes its mind, and it might never change its mind, although it possibly will change its mind. An NFR letter also means that if the IEPA is leaving you alone, the U.S. Environmental Protection Agency will probably leave you alone too, unless of course, it decides not to. And as to individuals and businesses who allege that they have been adversely affected by your site’s contamination, your NFR may serve as some limited persuasive evidence in your favor.
And remember that an NFR letter can be rescinded if additional data or information contradicting what was known at the time of the site investigation later becomes available. A site can be also be reopened when the rules change and a new risk is brought to the IEPA’s attention (e.g., the new VI rules). It is important to notice here that the IEPA’s position is that it is not looking to reopen sites, but it will do so in appropriate situations when it believes it is necessary to do so. So much for the clarity and finality sought by the holders of NFR letters.
Also be aware of one significant thing that has not changed. An NFR letter can be as narrow or as broad as the applicant for that letter wants it to be. Entering the SRP is little like going to those new yogurt stores. Instead of picking your dish size, flavor, and toppings, you select the contaminants you want to focus on, the future land use and the types of activity restrictions and engineered controls you can live with. In theory, if a site was originally used by a pesticide manufacturer and later used as a steel mill, and the site investigation focused only on the metals, an NFR letter could be issued that effectively says something like, “So long as a concrete cap is maintained throughout the property, then the metals contamination in the soil is not a concern for future industrial and commercial uses.” Is such a letter helpful?
The answer is dependent on the location of the site and all of the surrounding circumstances. The letter says nothing about the pesticides, but maybe the buyer has already tested for pesticides, did not find any pesticides, and does not feel like it needs the IEPA to tell it that there are no pesticides at the site. The letter also narrows the pool of potential buyers to industrial and commercial interests, but perhaps the seller already knows that residential development is unlikely in the part of town where the property is located. The letter also requires that contaminated soil be covered with a barrier, but the site may be in a highly urbanized area and such a requirement will not have any practical limitation on redevelopment.
So why enroll your site? Participating in the SRP can be like asking for punishment when no one cares what you did. Applying to the SRP is breaking into jail, the investigation and remediation work is the time served, and the NFR letter is a certificate memorializing your probation.
Having said all of this, you should not be discouraged from obtaining NFR letters for your contaminated properties. Generally driven by the market, the SRP often achieves good results. Society is better off when contaminated properties are voluntarily cleaned up to any conditions better than their present conditions.
There is the perception that a site is clean when an NFR letter has been issued, and this perception, rightly or wrongly, allows contaminated properties to be bought, sold and financed. Also, there is nothing wrong with doing the right thing, asking someone to agree with you that you did the right thing, and then telling people that you did the right thing because that is the kind of person (or business) that you are.
So get your NFR letters. It probably will not hurt and it may even help. But know that the most important things to have are good data, good science, good counsel, good motives and a healthy understanding of your tolerance of risk.
Matthew E. Cohn is an attorney with Arnstein & Lehr.