Change in property sales law could spark redevelopment
“These thousands of different brownfields ... in urban centers and village centers in these prime areas that are close to transportation hubs — it means those can become really attractive investment opportunities. There’s a lot of promise with a lot of these legacy industrial sites, that I think a release-based system can finally unlock.” Katie Dykes, Department of Energy
and Environmental Protection commissioner
As Pam Elkow recollects, it took $80,000 several years ago to root out what was causing elevated readings of contaminants at a commercial printing operation in Naugatuck.
The usual suspects like ink storage containers and a power transformer passed the eyeball test with flying colors, but soil samples still came back positive.
The culprit? Snowplows, in all likelihood, scraping up flecks of oil-soaked asphalt on their rounds, just as we would find along many driveways in the Northeast. But in the months of delay that it took to pinpoint the cause, two buyers walked away from buying the printing plant.
In the end, the seller was unable to recoup that $80,000 outlay in the final sale, which fetched less than $700,000.
That was just one of thouands of property deals that failed in large part due to a Connecticut law known as the Transfer Act, which was instituted in 1985 to force the cleanup of polluted properties before owners could sell them. The law instead has left many properties as idle brownfields.
Ranking state officials are trying to change that — perhaps as soon as this month in a special session of the General Assembly. Lawmakers and the Lamont administration are putting the finishing touches on a sweeping change they say will still address industrial contamination, while easing the way toward property sales that will lead to redevelopment.
Elkow, an environmental law expert and partner in the Stamford office of Carmody, Torrance, Sandak and Hennessey, is co-chair of the Transfer Act working group along with and Katie Dykes, commissioner of the state Department of Energy and Environmental Protection, which would craft fresh regulations from any new law.
Under the current Transfer Act, property owners must disclose any record of significant amounts of hazardous waste generated or stored by a business prior to transferring the parcel. The Transfer Act is invoked automatically in the cases of dry cleaners, auto body shops and furniture refinishing studios.
Dykes dubbed Connecticut’s Transfer Act a “broken regulatory framework” that forces property owners to spend money to “prove the negative” that contamination does not exist.
Former Gov. Dannel P. Malloy had his own commissioners working on the issue as well, without moving ahead prior to Gov. Ned Lamont taking office at the start of 2019.
Under the legislation taking shape, Connecticut will end up with a “release-based” system in use in all 49 other states. Property owners will still be required to report accidental releases of chemicals or other toxins, but no longer subject to randomized testing in every corner of a property at the time of a sale to comply with the letter of the Transfer Act law.
Instead, the state would rely on licensed environmental professionals to use their professional judgment to check likely problem spots — for instance, staining near a tank or grounds where plant life is not growing.
“You don’t have to go and turn over every rock on the property — but if you do look in an area where you would have reason to look, then you have to clean up what you find,” Elkow said. “It’s much more targeted.”
In a Tuesday interview, Dykes said only about a quarter of the more than 4,000 Connecticut properties that have come under Transfer Act review have completed needed environmental steps, equating to roughly 30 a year.
“That’s bad for the environment — it’s also bad for business,” Dykes said. “Under a release-based system, the obligation is to clean up contamination when you find it, when it is discovered . ... That frees up (DEEP) resources to focus on high-risk contamination.”
Dykes acknowledged the possibility of property owners brushing spills under the figurative rug and not disclosing them in subsequent sales transactions. But buyers have the option of demanding environmental testing as a condition to purchase a property and working out the financials of any cleanup of contamination with the seller..
“Banks and other lenders in the private market, they don’t want to have property owners taking on risks of known contamination,” Dykes said. “The market itself is driving some of that investigation and cleanup as they weigh the potential for liability.”
Regardless of the timing for any legislative bill being sent to Gov. Ned Lamont, Dykes said it will likely take DEEP a few years to work up regulations. She said the department will borrow elements from other state schedules — “thick as a phone book” in her words — that specify regulatory interventions according to chemical toxicities and spill locations, among other factors.
The New Haven-based environmental nonprofit Save the Sound is on board with the changes, according to Roger Reynolds, senior legal counsel, provided that Connecticut adopts reporting and audit requirements in line with that of Massachusetts — auditing at a rate of one in every five reports or more.
“Most of our reservations relate to the reliance on licensed environmental professionals,” Reynolds said. “They have the responsibility to certify that (a property) is in compliance with the law and meet the standard. It creates a perverse incentive because the person who is hiring you is the person ... who you would have to say is not doing this correctly and force them to do it correctly.”
DEEP upped its enforcement entering Dykes’ first year as commissioner, completing 1,285 informal actions over 12 months through September 2019 — about 225 more than its annual average over five years — and reaching 40 formal consent orders. The vast majority of cases were more environmentally hazardous than Elkow’s example of the stalled sale in Naugatuck that racked up $80,000 in testing and legal costs.
“These thousands of different brownfields ... in urban centers and village centers in these prime areas that are close to transportation hubs — it means those can become really attractive investment opportunities,” Dykes said. “There’s a lot of promise with a lot of these legacy industrial sites, that I think a release-based system can finally unlock.”