October 2018 marked the twenty-fifth anniversary of Massachusetts’ first in the nation experiment with privatizing the process for identifying, assessing and cleaning up releases and threats of release of oil and hazardous materials (OHM). Launched amidst controversy and skepticism, the privatized program has by any measure done an extraordinary job addressing the maladies afflicting real estate financing, development and redevelopment that prompted legislative and regulatory reform in 1993.
In 1983, Massachusetts enacted Chapter 21E to govern the reporting, assessment and cleanup of OHM releases and threats of release in the Commonwealth. Like its federal cognate, known popularly as the Superfund Law, Chapter 21E was designed to hold accountable under strict (without fault) and joint and several liability parties deemed responsible for conditions at so-called “disposal sites”—defined as the horizontal and vertical extent of an OHM release. Chapter 21E charged the Department of Environmental Protection with responsibility to promulgate regulations and administer the law. DEP developed and issued regulations known as the Massachusetts Contingency Plan (MCP).
By the late 1980s, the number of sites reported to the agency had overwhelmed its personnel’s capabilities to evaluate and respond to environmental consultants’ reports of contamination and recommendations for cleanup. Experience had demonstrated that contamination at or near a subject property could implicate liabilities far beyond real estate values. This potential exposure, combined with a “superlien” provision where the Commonwealth’s claims to recover response costs would supersede mortgage and other security interests in real estate, severely affected willingness of traditionally conservative lenders to advance funds secured by mortgage financing. The greatest impact was upon properties in what traditionally had been urban industrial centers and commercial locations where OHM had been or was currently being used or stored.
Especially hard hit were redevelopment projects for vacant or underutilized properties which might otherwise benefit from Affordable Housing and Historic Preservation tax credits. By the early 1990s, the combined unintended impacts of Chpter21E had reached crisis proportions.
Widespread recognition of the fundamental problem of agency inability to manage the case load of existing sites and the continuing onslaught of reporting of new sites prompted representatives of real estate, legal, environmental consulting and environmental interests to convene to attempt to find a workable solution to the urgent problem. During negotiations, the concept of creating a new profession of independent environmental consultants to oversee and opine on compliance of OHM release reporting, assessment and cleanup was introduced. Debate about the feasibility of “privatizing” site cleanup was contentious. For many parties, and especially environmental groups, leaving the evaluation and approval of whether response actions at a disposal site adequately protected health, safety, public welfare and the environment was an anathema. How could environmental consultants working for a liable party paying the bills objectively judge their own work?
Invention of a Profession
To address the perceived inherent conflict of interest, negotiations evolved to establish Licensed Site Professionals (LSPs). LSPs are the essential component in Massachusetts’ privatized disposal site cleanup system. LSPs are state licensed environmental consultants qualified by education, experience and successful completion of a demanding exam.
Oversight and regulation by the governing professional regulatory body, the Board of Registration of Hazardous Waste Site Cleanup Professionals, impose a demanding, LSP performance standard derived from the Code of Ethics of the National Society of Professional Engineers: “A LSP shall hold paramount public health, safety, welfare and the environment in the performance of professional services.”
Licensure demands compliance with continuing education requirements and maintaining current understanding of policies, guidance and MassDEP site audit reports of opinions previously submitted by LSPs on behalf of the parties they represent at other disposal sites. The LSPA has played a vital role in the creation and sustenance of the privatization effort and instilling public and private confidence in the profession.
MCP Overhaul and Streamlining Risk Assessment
To guide and assist LSPs in the privatized program, DEP issued (and has since revised on multiple occasions) a completely revised MCP. The finer points of the amendments are beyond the scope of this discussion. Particularly significant, however, was establishment of the risk-based standards for specific contaminant constituents that allow for parties performing assessments and cleanups to “risk away” the need to clean up sites to pristine levels. The MCP provides means to determine exposure point concentrations and compare them to listed quantitative standards for different soil and groundwater conditions and determine conclusively if a site presents unacceptable risk. Alternative risk assessment methodologies are available for use in specific circumstances.
Notices of Activity and Use Limitations
The MCP revisions also created Notices of Activity and Use Limitations (AULs). AULs are emblematic of the intended objectives of the revised cleanup program. Simply stated, AULs allow parties to assess disposal site risk from sites based on realistic current or projected future conditions that can be locked in place with institutional controls, most often by deed restrictions recorded in Registries of Deeds or Land Court filings. Functional relief from having to clean up sites to pristine conditions while maintaining mandated levels of protection has meant savings of millions of dollars in cleanup costs.
How Privatization Has Performed
DEP issued at the close of FY2018 a statistical summary of site cleanup performance under the privatized system. On the one hand, as DEP acknowledges, the numbers are skewed by the rapid turnaround of sites involving spills that are immediately reported and assessed and closed within relatively short periods of time. Still, in absolute terms, the numbers are impressive.
DEP records of release notifications begin in 1985, pre-dating the privatized program, but the sum is indicative of the size and scope of the disposal site notification, assessment and cleanup program. As of June 30, 2018, 50,425 OHM releases had been reported to DEP. As of the early 1990s only a small percentage of the sites reported up until that time could be considered “closed out.” Since 1993 and implementation of the privatized program, 37,187 sites have been cleaned up—averaging over 1400 per year—and the vast majority are resolved within the six-year time frame contemplated in the MCP’s multi-phased assessment and cleanup matrix.
As part of the compromises necessary to conclude negotiations successfully, it was agreed that DEP should maintain an active role in oversight of the most serious sites (Tier I) while sites seen as less threatening would be supervised by LSPs (Tier II). Chapter 21E requires DEP to audit a statistically significant number of the total submissions made to LSP. Most sites involve multiple submissions. As of June 30, 2018, DEP had performed over 48,000 audits. Not all audits are equal, however. The vast majority are summary reviews, followed by more comprehensive file audits. A significantly smaller percentage can involve actual site visits and subsurface investigation to confirm data and conclusions LSPs have submitted on their clients’ behalf.
Perhaps more significant than the numbers themselves is how the privatized program has affected commercial lending and other real estate and commercial lending market forces. Prior to privatization, there was a seemingly interminable logjam undercutting confidence in what might otherwise have been reasonable projections of what disposal site cleanup costs might be.
From the outset of the privatized system, environmental consultants could refer to the detailed provisions of the revised MCP and anticipate the likely scope of work necessary to evaluate site conditions and perform remedial actions. Level of confidence necessarily is proportionate to the availability of site information, and, without question, there remain instances where site assessment reveals surprise conditions increasing costs. But overall, LSP expertise and the MCP’s establishment of readily identifiable risk standards now allow parties to look to LSPs more confidently for budget projections. Privatization has contributed to a much greater level of predictability in transactions involving disposal sites.
Imitation as the Highest Form of Flattery
Other jurisdictions watched the development and implementation of Massachusetts’ privatized system, mostly with skepticism, but the success of privatization has prompted both Connecticut and New Jersey to legislate and implement comparable programs. The combination of LSPs and the MCP remain the nationwide benchmark of successful privatization, however.
Currently there are over five hundred LSPs. Not all are in Massachusetts, and some are dedicated employees of businesses that regularly must deal with spills and other OHM releases.
Establishment of a brand-new profession—and one subject to scrutiny by multiple and competing interests—presented a wide range of challenges. LSPs formed the Licensed Site Professional Association. Governed by an elected Board of Directors and with very limited support staff, the LSPA has been effective largely due to volunteering of members and other contributing professionals addressing specific subjects. From the outset, the LSPA looked to create committees to encourage and sustain the new cleanup system and provide assistance and guidance to members. Some of the committee titles show where efforts have focused: Continuing Education, Loss Prevention, Legislation, Regulations, Risk Management and Technical Practices.
There is also a committee devoted to LSP practice in Western Massachusetts. While one consideration for creation of the committee was to spare LSPs in the region from travelling to LSPA meetings inside I-495, another important consideration has been the demographic differences and range of issues with which western Massachusetts LSPs must deal. Most often, the Western Massachusetts Committee can arrange for previews or repeats of presentations made at the more distant meetings to the east.
The LSPA has served its membership and the public at large by its close attention to proposed legislative and regulatory changes. Most importantly, the LSPA brings the practical experience of the LSP community and clients to bear in influencing decision making around how to adjust and improve the privatized program. Not surprisingly, there remain disagreements among the competing interests that negotiated the privatized system, and the LSPA tries to protect its members from getting caught in the middle.
The LSPA has been very effective in maintaining the Brownfields Tax Credit available to parties who undertake cleanup in certain locations and for specific purposes. The credit, like the Low-Affordable Housing and the Historic Preservation tax credits, has been a significant factor fostering restoration of abandoned or underutilized real estate. Of course, LSPs themselves play significant roles in providing the opinions about the substance and sufficiency of site assessment and restoration at brownfields sites.
The privatized system is here to stay. Discovery of new disposal sites continues, but data indicate that improvement of OHM management practices and, more specifically, the regulatory requirements governing installation, maintenance and use of underground storage tanks are alleviating the operational legacy of current OHM transport, use and disposal. Unfortunately, one can be certain there are major disposal sites yet to be discovered. However, in Massachusetts, unlike many jurisdictions, there is a predictable system for addressing disposal site assessment and cleanup, that has been serving and continues to serve both public and private interests.