Securing the “brownfield adder” in the Massachusetts SMART program is proving to be more challenging than first imagined for developers of solar projects on environmentally compromised sites. Obtaining the brownfield adder requires careful adherence to state regulatory requirements. In certain instances, the availability of the brownfield adder may turn on future changes in state policy.
Formally launched on November 26, 2018, the Solar Massachusetts Renewable Target program (the “SMART Program”) offers an adder on top of the program’s base compensation rate for solar energy projects with a generating capacity greater than 25 kW AC and that are sited on a “brownfield”. In line with the “declining block” nature of the program, the brownfield adder is currently set at $0.03/kWh for the first 80 MW of SMART units (Tranche 1) and declines by 4% with each successive 80 MW tranche. According to DOER’s April 26, 2018 Guideline Regarding the Definition of “Brownfield” (the “Brownfield Guideline”), “[a] primary focus of the SMART Program is to promote optimal siting of solar, away from greenfield and open space development.” Brownfield Guideline at 1.
But what exactly is a “brownfield”? Section 20.02 of the SMART program regulations defines “brownfield” as "[a] disposal site that has received a release tracking number from MassDEP pursuant to 310 CMR 40.0000: Massachusetts Contingency Plan, the redevelopment or reuse of which is hindered by the presence of oil or hazardous materials, as determined by [DOER], in consultation with MassDEP.”
Determining whether a property contains a disposal site that has received a release tracking number ("RTN") is fairly straightforward. Under the Massachusetts Contingency Plan ("MCP”), a release to the environment of certain amounts or concentrations of oil or hazardous materials must be reported to DEP. Each reported release is issued an RTN, which is then utilized by DEP and the public to track the progress of a site through the various phases of MCP investigation and cleanup activities. One readily available source for use in determining whether a planned project site has received an RTN is the Commonwealth’s publicly accessible Data Portal for Waste Site & Reportable Releases.
Determining whether redevelopment or reuse of a site is “hindered” by site contamination is substantially less straightforward. The Brownfield Guideline explains that the brownfield adder is “intended to recognize, and help overcome, the disincentives to appropriate reuse or redevelopment that may result from the presence of oil or hazardous materials in environmental media.” Brownfield Guideline at 2. The Brownfield Guideline provides examples of activities and expenses which may arise in relation to the redevelopment of a contaminated property and could serve as evidence of the hindrance factor – both predevelopment (e.g., the necessity of agreements to manage risk associated with the site, environmental due diligence) and during development (e.g., cleanup costs, compliance with environmental restrictions, necessary soil management measures).
The Brownfield Guideline also articulates a sliding scale of potentially qualifying scenarios. On one end of the scale – more likely to be considered a brownfield – are sites that are still open (i.e., have not received regulatory closure under the MCP due to lingering contamination or other requirements) where the open status is indeed a real hindrance to redevelopment. In the middle of the scale are sites that are closed under the MCP but remain subject to deed restrictions or activity and use limitations (“AULs”) that hinder other potential uses and make the site a good candidate for solar. Farther along the spectrum are sites that are considered “clean” and have no restrictions regarding allowable uses but where development would trigger the need for soil management measures to prevent exposure to contaminated soil that was previously inaccessible, and where that requirement would materially hinder redevelopment. On the other end of the scale – highly unlikely to be considered a brownfield – are sites that have been cleaned to a level that is sufficient for unrestricted use or to “background” (to levels of oil and hazardous materials that would exist in the absence of the disposal site).
According to the Brownfield Guideline, as of 2013, only 7% or so of sites with an RTN were “open” while more than 80% of sites with an RTN had reached some form of regulatory closure (to background conditions, for unrestricted use, or with a deed restriction/AUL). In other words, it seems likely that in most cases project proponents will be seeking the brownfield adder for sites that have reached some form of closure under the MCP. That’s not impossible but it is a harder case to make.
The Brownfield Guideline also makes it clear that sites may not qualify as a brownfield “where the presence of contamination, or the costs and other disincentives associated that contamination, are merely speculative or are de minimis in comparison to the overall development project, or where the presence of oil or hazardous materials does not otherwise reasonably hinder reuse or redevelopment.” In our experience, this guidance offers important insight relating to the DOER/DEP evaluation of properties as potential brownfields.
Where there is some uncertainty about the presence of contamination or associated costs, it can be critical to try to ensure that the evidence is solid enough to avoid having the claims be characterized as “merely speculative.” This arguably creates a bit of a Catch-22 if redevelopment of the site is truly being hindered by a dark cloud of speculation about contamination at the site. What about a property that once housed a munitions plant (a red flag for potential contamination) but the environmental investigations and cleanup only occurred on a portion of the property? Should the property qualify for the brownfield adder based on solid evidence that it would take a $50,000 environmental study to determine whether the rest of the property is contaminated and that an extra $50,000 expense is a hindrance to redevelopment of the site? Or should the parcel qualify only if such a study has been conducted and identifies significant contamination?
And how might the de minimis concept come into play? Consider a scenario in which a project proponent has a 100 acre site that was assigned an RTN after a release of a mere 12 gallons of oil to soil was reported to DEP. The area impacted by the releases is less than ¼ of an acre and was ultimately cleaned to background. The contamination and any associated costs or disincentives are de minimis in comparison to the overall development project and do not reasonably hinder reuse or redevelopment of the site. Note that a change in scenario could make a big difference. For instance, assume the same scenario but a release of ½ gallon of a chlorinated solvent that has contaminated the groundwater at the site. That type of contamination could be much more challenging to assess and remediate, and could have a very significant adverse impact on the reuse or development of the site.
The Brownfield Guideline lays out the process and requirements for submitting a Brownfield Pre-Determination Request (“BPDR”) to DOER to persuade DOER that the project likely does meet the definition of brownfield and therefore may qualify for the brownfield adder. Appended to the Brownfield Guideline are the Brownfield Pre-Determination Request Form (the “Request Form”) as well as a Sample Brownfield Pre-Determination Letter that would be issued by DOER in response to the request. The Request Form summarizes the requirements explained in the Brownfield Guideline and provides concrete examples of documentation that may serve to support the request.
- Trap for the unwary. Although the Brownfield Guideline states that parties may wish to obtain guidance from DOER as to whether a project is likely to qualify as a brownfield, the Preliminary Statement of Qualification Application (“SQA”) for participation in the SMART Program requires that a copy of a qualifying Brownfield Pre-Determination Letter from DOER be uploaded as part of the initial application process. The failure to submit a Brownfield Pre-Determination Letter with an SQA will not prevent a project from qualifying to receive the base compensation rate portion of the SMART incentive but it will preclude the project’s qualifying for the then-applicable brownfield adder tranche.
As might be evident from the discussion above, at least under the current Brownfield Guideline, there may be relatively few sites that are strong candidates for the brownfield adder and it can be challenging to assemble the right evidence to support a successful BPDR. Indeed, it appears that, of the roughly 769 MW AC of projects greater than 25 kW AC that have received SMART Statements of Qualification through July 29, 2019, only roughly 1% are for projects that qualified for the brownfield adder. In addition, of the nine projects that were the subject of a BPDR through May 2019, just five projects have received a favorable pre-determination letter according to public records obtained from DOER.
DOER is now poised to review and potentially modify the SMART Program in the course of the Department’s so-called “400 MW Review.” Perhaps that review process will provide an opportunity to explore whether changes to the Brownfield Guideline might better enable the Commonwealth to steer more solar development away from greenfield sites and toward environmentally compromised sites.
FURTHER INFORMATION
For further information about these matters, please contact Jonathan Klavens at jklavens@klavenslawgroup.com or 617-502-6281.
ACKNOWLEDGMENTS
We wish to acknowledge the valuable contributions of former KLG Senior Counsel Dawn Stolfi Stalenhoef in the research for and drafting of this article.
DISCLAIMER
This document, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Klavens Law Group, P.C. or its attorneys. Please seek the services of a competent professional if you need legal or other professional assistance.
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