Impact of Recent Environmental Regulations on Land Use Sean M. Sullivan Williams Mullen 301 Fayetteville Street, Suite 1700 Raleigh, NC (919)

Topics Chesapeake Bay TMDL. Uniform Environmental Covenants Act. Recent Changes to Ambient Air Quality Standards. Superfund Bona Fide Prospective Purchase Defense.

Chesapeake Bay TMDL New regulatory program designed to improve water quality in the Chesapeake Bay. New rules function by limiting the total amount of Nitrogen, Phosphorus and sediment that enters the Bay each day. Program applies in – Virginia, Maryland, DC, Pennsylvania, Delaware, West Virginia and New York.

Chesapeake Bay TMDL Bay TMDL Basics –TMDL is a cap on discharges of each regulated pollutant. –Implementation is in three phases. –Each state must develop, and EPA must approve, a Watershed Implementation Plan (“WIP”) for each phase. –The WIP describes the regulatory programs each state will use to achieve compliance with the TMDL.

Chesapeake Bay TMDL EPA Approved Virginia’s Phase I WIP when it issued the final Bay TMDL. The agency expressed concern about the sufficiency of the Phase I WIP. EPA threatened to impose federal “backstop” requirements if the Phase I WIP is ineffective. –Backstop is even more stringent than the Phase I WIP.

Chesapeake Bay TMDL Major Consequences of Phase I WIP. –Wastewater treatment plants must make upgrades to meet stricter discharge limits. Higher utility fees and property taxes. Plants in the James River watershed face even stricter requirements in 2016 via a James River TMDL. City of Lynchburg said compliance with EPA’s preferred option would cost $50MM.

Chesapeake Bay TMDL Major Consequences of Phase I WIP (cont’d). –Stricter requirements for onsite sewer / septic systems. Must achieve 50% reduction in Nitrogen discharges via alternative systems. Promote use of community-wide onsite systems rather than individual systems. Tax credits and loans to encourage upgrades and repairs to existing systems.

Chesapeake Bay TMDL Major Consequences of Phase I WIP (cont’d). –New / re-development cannot cause increases in pollutant discharges. –State will require additional stormwater controls and increases in utility fees to fund improvements to municipal systems. –Restrictions on commercial and private application of non-agricultural fertilizers.

Chesapeake Bay TMDL Major Consequences of Phase I WIP (cont’d). –Virginia will expand its nutrient credit trading program. New discharges must have offsets to comply with the cap. Allow other sources of pollutant discharges to generate credits through reducing their discharges. –Voluntary reductions for agriculture.

Chesapeake Bay TMDL Broad consensus in the regulated community that EPA has overstepped its authority under the CWA. One lawsuit is already pending and others are likely coming. Significant compliance costs of the Bay TMDL couldn’t come at a worse time for developers or local governments.

Chesapeake Bay TMDL Phase II WIP development is ongoing. Phase III WIP is due by Phases II and III allow states to develop more localized requirements where broad-brushed approach of Phase I WIP is insufficient.

Uniform Environmental Covenants Act Virginia adopted this model act in Goal is to standardize language and procedures for recording restrictive covenants for: –Land use restrictions associated with cleanups. –Closure of hazardous waste sites. –Brownfields projects.

Uniform Environmental Covenants Act Troubling provisions regarding subordination of security interests. –Unless cleanup achieves residential standards, DEQ will require recordation of land use restrictions. –Act authorizes DEQ to refuse to approve restrictions unless every entity with property interest in site subordinates claim to those restrictions.

Uniform Environmental Covenants Act If SI holders refuse to subordinate, DEQ can force cleanup to residential standards. –Potentially huge effect on project economics and feasibility. Due diligence prior to loan closing may take on even more importance to lenders.

Changes to Ambient Air Quality Standards EPA strengthened standards for oxides of nitrogen (NOx) and sulfur dioxide. Any facility burning fossil fuel could be in violation of the new standards. –Must show operations do not cause a violation of standards at fence line. Environmental consultants are having trouble showing anyone meets the NOx standard.

Superfund Bona Fide Prospective Purchase Defense Two decisions from end of 2010 re BFPP defense (South Carolina and California). –Ashley II of Charleston (S.C.) Substantial compliance with All Appropriate Inquiries was sufficient. –Strict compliance not required. Court still rejected defendant’s assertion of defense based on failure to exercise due care after acquisition of the property. –Defendant’s conduct was not exemplary in this case.

Superfund Bona Fide Prospective Purchase Defense Two decisions from end of 2010 re BFPP defense (South Carolina and California). –3000 E. Imperial LLC (California) Court did not address compliance with AAI. Agreed with assertion of BFPP defense by defendant and found that removal of USTs storing solvents was not required to satisfy due care requirement. –Emptying the tanks was sufficient.

Contact Information Sean M. Sullivan Williams Mullen 301 Fayetteville Street, Suite 1700 Raleigh, NC (919)