Court of Appeals Rejects NYSDEC Interpretation Of Brownfield Statute

In my March 2009 Environmental Update, I examined the Appellate Division, Fourth Department’s decision in a case involving the New York State Department of Environmental Conservation’s (DEC) denial of a developer’s applications to enter into New York’s brownfield cleanup and financing scheme, known as the Brownfield Cleanup Program (BCP).  On February18, 2010, the Court of Appeals in the Matter of Lighthouse Pointe Property Associates LLC, v. NYS Department of Environmental Conservation, et al., ___N.Y.3d___, 2010 WL 546058, 2010 N.Y. Slip Op. 01377, issued a lengthy and well-reasoned decision, fully resolving the question of what is or is not a “brownfield site” under the BCP.

The Petitioner, Lighthouse Pointe Property Associates, LLC (Lighthouse), applied for entry into the BCP in order to clean up and redevelop two contiguous contaminated sites in Rochester, New York.  These properties had historically been used, among other things, as a municipal landfill and wastewater treatment plant.  Refuse, ash, slaw, sewage sludge, construction debris and other fill materials were deposited at the site.  Prior to applying to the DEC, Lighthouse Pointe investigated the environmental conditions of the site and found that contamination exceeded DEC’s soil and groundwater standards for several contaminants.  Nonetheless, DEC denied Lighthouse Pointe’s applications into the BCP primarily arguing that these properties were not “brownfield sites” under the State’s brownfield law.

Lighthouse commenced an Article 78 proceeding against the DEC.  The Supreme Court ruled in Lighthouse’s favor and ordered the DEC to admit Lighthouse into the BCP.  DEC appealed and the Appellate Division reversed, relying on an affidavit of a DEC engineer who opined that, despite the fact that there were exceedances of DEC’s own cleanup standards, that the "exceedances revealed by both historical and current sampling data were few in number, were limited in magnitude, were widely dispersed throughout the property, and did not indicate the need for remedial action."   Stating that courts cannot “second-guess a reasoned agency determination,” the Appellate Division deferred to DEC and upheld its denial of Lighthouse’s BCP application. Judge Smith dissented, arguing that DEC's determination to deny the application was unreasonable in light of the facts and was arbitrary and capricious due to a lack of standards.

The Appellate Division granted Lighthouse Point’s request for permission to appeal to the Court of Appeals.  The Court of Appeals reversed the Fourth Department and reinstated the Supreme Court’s order that the DEC approve Lighthouse’s application for entry into the BCP.

The Court of Appeals began its analysis with a detailed examination of the legislative history and purpose of the statutory creation of New York’s brownfield cleanup program in 2003.  The Court noted that the brownfield statute was intended to promote redevelopment of abandoned and contaminated properties by overcoming impediments such as developer’s fear of environmental liability, cost of cleanup and reluctance of lenders to extend credit.  The Court reviewed the statutory framework of the new brownfield program: a party must apply for entry and, after acceptance, clean up of the brownfield site.  Such party will then receive a liability release from the State and can obtain significant tax credits based on the cost of cleanup and the cost of redevelopment. 

The crux of the dispute in this case is whether or not the Lighthouse properties meet the statutory definition of a brownfield site.  A “brownfield site” is defined in the Environmental Conservation Law (ECL) as “any real property, the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant.”  The Court of Appeals, while recognizing that there are some instances where deference to the interpretation of the governmental agency charged with administering a statute is appropriate, found that in this case the meaning of the term brownfield site was one of pure statutory reading, without the need for any special agency expertise. 

Thus, the Court examined the precise meaning of the term “brownfield site” and noted that there are two elements to the statutory definition: that there is the presence or potential presence of a contaminant (defined in the statute as a hazardous waste or petroleum) and that such presence or potential presence complicates the property’s redevelopment and reuse.  Relying on common English usage of the term “present” (since it is not defined in the ECL), the Court held that a contaminant is present or potentially present when it exists  or may exist within a property’s limits.  Significantly, the Court found that the definition “does not, on its face, mandate the presence of any particular level or degree of contamination.”   Similarly, the Court found that the word “complicate,” also not defined in the ECL, meant by common usage “to make complex, involved or difficult.”  Thus, Court ruled that “a real property qualifies as a ‘brownfield site’ for purposes of acceptance into the BCP so long as the presence or potential presence of a contaminant within its boundaries makes redevelopment or reuse more complex, involved or difficult in some way.”

Reviewing the definition in the context of the statute’s legislative history, the Court concluded that the Legislature intended the definition of the term brownfield site to be interpreted “as broadly as its words suggest.”  The Court emphasized that a low eligibility threshold for entry into the BCP was consistent with the legislature’s aim to alleviate environmental and economic problems associated with these types of sites by creating the financial incentives and liability relief available under the program. 

Examining the facts in this case, the Court found that the properties contain numerous contaminants in excess of the DEC’s soil and groundwater “cleanliness levels.”  The Court found that Lighthouse produced “undisputed evidence” that the presence of such contamination complicated redevelopment or reuse, noting the Monroe County Public Health Department’s refusal to sign off on any development of the site unless there is a DEC-approved cleanup and that financing for the project is “contingent” upon DEC’s approval of the cleanup measures and Lighthouse’s receipt of a release of liability from the State.

Finally, the Court ruled that it did not need to remit the case to the DEC for further consideration. Instead the Court found that the record was sufficiently developed for the Supreme Court to have properly concluded, as a matter of law, that Lighthouse was eligible for acceptance into the BCP.   The judgment of the Supreme Court was, therefore, reinstated.

For legal practitioners representing clients applying for entry in the BCP, this decision is exactly what was needed.  Finally, developers, lenders and environmental professional now know precisely what evidentiary material is needed to show that their potential redevelopment site is a “brownfield site,” eligible for inclusion into the DEC’s Brownfield Cleanup Program.  Hopefully, this ruling will help to spur the much needed cleanup and redevelopment of hundreds of abandoned and contaminated sites throughout New York State.