5 ways to flip a brownfield
Brownfields, the common term for abandoned or underutilized sites that have been contaminated through industrial pollution, are the polar opposites of greenfields, a phrase used to describe unspoiled tracts of land. The U.S. Environmental Protection Agency (EPA) estimates there are between 500,000 and 1 million U.S. brownfield sites, which represent an estimated $2 trillion of undervalued real estate, according to industry experts.
Yet despite the abundance of brownfield properties and their rock-bottom price tags, many developers have until recently avoided the risky business of brownfield redevelopment — for good reason. Due to ever-evolving technologies, cleanup costs can be difficult to predict. A number of unknowns inherent to abandoned properties have the potential to become a liability. Brownfield redevelopment almost always involves public involvement, and often requires partnerships between federal and state agencies, as well as city and county governments: In other words, they can take a long time. Developers also have to shake the stigma that brownfields are dangerous places.
“It’s not formulaic,” says Jonathan Philips, senior director for Raleigh, N.C.- based Cherokee Investment Partners, which has acquired over 520 brownfield properties since 1990. “It’s communityspecific, site-specific and market-specific.”
Philips notes Cherokee, whose latest investment fund totaled $1.74 billion, has historically not relied on government assistance for remediation costs. “We operated under the premise that this is a private sector answer to a public problem.”
Yet for smaller companies, federal and state assistance can make or break a potential brownfield redevelopment project. EPA funded its first brownfield pilot project in 1994, and in the last seven years, Congress doled out $163 million annually to EPA’s competitive brownfields grant program, not including the federal Superfund program. Numerous state agencies and many local governments also provide financing for brownfield redevelopment projects. And to further incentivize brownfield development, the U.S. government offers tax deductions for cleanup costs the year they are incurred. All state and federal assistance for brownfield renovation are only available to non-liable parties.
As a result of increased funding and public awareness, revitalized brownfields in some cities are beginning to become as prevalent as abandoned ones. Yet only 10 - 15 percent of U.S. brownfield sites have been addressed, according to Brownfield News, leaving over 80 percent of the market untapped.
“What’s important to note is the lost opportunity of not developing these sites,” says Sharon Kophs, brownfields coordinator at the Washington Department of Community Trade and Economic Development. “When a city council says they don’t want the liability, I tell them, ‘You’re losing all the revenue in the meantime.’
Seizing a bright opportunity
|Sunny side of the street: A residence sits near the Brockton, Mass., brownfield-to-solar plant.|
Home to the Columbia Generating Station, the region’s only commercial nuclear power plant, the reservation also contains the region’s largest grid-connected solar system. Known as a “brightfield,” White Bluffs Solar Station utilizes 242 ground-mounted BP Solar panels to generate 39 kilowatts of electricity annually. While the pilot project is small-scale, there are nearly 1,000 additional acres of land at the site that are suitable for solar generation, according to Bonneville Environmental Foundation (BEF).
Because of their proximity to electric transmission lines and, in many cases, the absence of trees and other shade producers, brownfields are often ideal locations for solar power plants, such as the one at Hanford. Numerous public and private organizations, including the U.S. Department of Energy’s brightfields solar grant program, contributed a combined $230,000 for the While Bluffs solar project, which was completed in May 2002. The station is owned and operated by Richland-based power supplier, Energy Northwest, which sells renewable energy certificates from the project to BEF.
Despite the West Coast’s reputation for solar success, the East Coast is home to country’s largest brightfield. Trying to polish its image, the city of Brockton, Mass., turned a contaminated gasmanufacturing plant into a 425- kilowatt solar power plant. The high levels of coal ash and tar on the site would have been too expensive for the property’s owner, Brockton Gas Works Co., to completely remove, says Lori Colombo, the company’s brownfields coordinator.
“There’s not much else that could have been done with this property,” she says. “That’s why it was perfect for a brightfield. We were looking for ways to develop the site that were sustainable, that did not re-create the same problem.”
Brockton Gas Works paid to cap the materials underground — a much less expensive option than completely removing all the contaminants — and then leased the property to the city.
The project, which started feeding the main power grid in August 2006, required five years of feasibility studies, legislative approvals, contract negotiations, and $3 million in financing, including $2.1 million in loans from the city of Brockton, the Massachusetts Technology Collaborative (MTC) and the U.S. Energy Department.
The project was a good candidate for MTC support for a number of reasons, says program manager Nils Bolgen. “It re-used a brownfield site with very limited other re-use options, demonstrated and tested the process and mechanics for municipal ownership of a commercial power project, serves as a focal point for solar energy awareness and education, and, like all solar projects we support, it helped expand the market for solar.”
Rail yard revamp
The Kendall Yards project aims to transform a 78-acre polluted rail yard into a $1 billion real estate development.
When the rail yard at Kendall Bridge was built in the late 1800s, Spokane, Wash., had just 500 residents — and no rules for disposing of toxic materials. Today, the polluted rail yard in the city’s West Central neighborhood, which sat dormant for thirty years, is undergoing the city’s biggest redevelopment since the 1974 international expo spurred a waterfront renovation.
Coeur d’Alene, Idaho-based Black Rock Development is transforming the 78-acre former rail yard into an “infill” residential development, which includes 2,600 residences and 1 million square feet of commercial space, worth up to $1 billion.
With Spokane’s population exceeding 450,000, urban real estate such as the Kendall Yards site is both hard to come by and increasingly expensive. Many cities are suffering due to a recent shift in state tax initiatives, according to Sharon Kophs, brownfields coordinator for the Washington Department of Community, Trade and Economic Development.
“Cities have lost state revenue,” she says. “A lot of them are having financial difficulty, which is generating more interest in infill development. Cities need to generate business within the inner core of the city.”
For the past seven years, Kophs has managed an EPA brownfields fund, which is currently worth $6.8 million. Black Rock purchased the land from Metropolitan Mortgage Co. and went on to receive a $3.4 million loan to remove 230,000 tons of contaminated soil, the largest EPA brownfield loan to date. Kendall Yards is expected become a tax increment financing district, which will help Black Rock pay for streets, sidewalks, water and sewer lines, and other improvements. The project is expected to generate 500 construction jobs and 2,500 permanent jobs, and over $3 billion in revenue over 30 years, according to Kophs.
Black Rock is considering pursuing a Leadership in Energy and Environmental Design for Neighborhood Development (LEEDND) from the U.S. Green Building Council [see “There goes the neighborhood,” SIJ, May 2007].
“This project is a poster child for that kind of approach,” says Tom Reese, Kendall Yards’ project manager and former Spokane economic development director.
EPA awarded Kendall Yards the 2006 Outstanding Brownfields Team Award, and Washington Gov. Christine Gregoire claims, “the Kendall Yards team is a great example of an effective public-private partnership.”
Potential buyers have so far shown no concern over moving onto formerly contaminated soil, according to Kophs. But take a look around Kendall Yards’ Web site and you won’t see any mention of contamination or clean-up of the site.
“The only concern is that the property values of a neighboring area that has a high crime rate, will push people out,” she says. Because brownfields are often located in communities of color and low-income areas, redeveloping brownfield sites inherently creates an opportunity for stakeholders to reverse patterns of injustice.
The Summit-Bridge Alliance, a group of west central Spokane residents, last August presented to city officials a list of recommendations, which included a push for affordable housing within the development. Reese says he’s held over 90 meetings with neighborhood associations to involve existing neighbors in Kendall Yards’ planning process.
However, “this kind of opportunity doesn’t lend itself to low-income housing, because there is so much already in neighboring communities,” Reese says. He notes, however, that Black Rock is working with the city to incorporate “workforce” housing within Kendall Yards.
Brownfields to biofuels
Michigan State University researchers are aiming for a trifecta by producing biofuels from plants that contribute to bioremediation on a brownfield site.
While farmers in Indiana and Illinois are tilling land for corn production to help supply the burgeoning ethanol and biofuels industry, researchers in Michigan are testing a way to grow oilseed crops in once-contaminated soil. Increasing concern over U.S. dependence on foreign oil has sparked a number of federal and state mandates, tax credits and rebates for biofuels in recent years [see “Biofuels make a comeback in Oregon,” page 34].
In his 2007 State of the Union address, President Bush called for 35 billion gallons of biofuel production annually by 2017, which is nearly five times the target currently mandated for 2012.
In 2006, U.S. biodiesel production nearly tripled, reaching 250 million gallons, according to the National Biodiesel Board. While it pales in comparison with the nation’s 140-billion-gallon annual appetite for gasoline, biofuels will represent approximately 15 percent of projected U.S. gasoline consumption by 2017, if the country meets the president’s goal, and ethanol will account for most of the total.
The rapid growth of the biofuels industry is good news for many farmers, but using land to grow crops for fuel, rather than food has raised public concern about the impact on food prices in the United States and beyond. So what if farmers started growing oilseed crops such as soybeans, sunflower and canola, and ethanol crops such as corn, on land that isn’t suitable for growing food?
Michigan State University professor Kurt Thelen is experimenting to find out whether such crops can thrive in previously contaminated soil. Even more, Thelan’s group is testing whether or not the plants can actually assist in site clean-up by taking in contaminants from the soil, a process known as phyto-remediation [see “Blue skies ahead for phytoscience,” SIJ, March 2003].
Funded by DaimlerChrysler (NYSE: DCX), NextEnergy, a Detroitbased nonprofit that supports energy technology development, and the university, Thelan’s group last summer planted a two-acre plot of oilseed crops, corn and ethanol on a 120-acre former Superfund site in the greater Detroit area.
“Yieldwise, we had a very good year,” Thelan says. “And we don’t expect to find contamination — the remediation work was done years ago. But we know that just by having plants, we are increasing the microbial activity in the soil, and that has some bioremediation effects.”
The No. 1 question on people’s minds, according to Thelan, is whether growing oilseed crops in once-contaminated soil causes health and safety issues. So far, he doesn’t have a clear answer, but he suspects his study will dismiss people’s concerns. He notes the liabilities associated with brownfield sites will most likely scare most farmers away from actually purchasing a brownfield for crop production.
“I don’t think growers would be too anxious to go out and buy this land,” he says. “But I think they would lease it.”
Thelan has received numerous calls from cities and counties that are looking for innovative ways to turn brownfields into productive sites. While people are researching biofuels, bioremediation and brownfield cleanup techniques, “I don’t know of anyone else combining the three,” he says.
Trash heap turned putting green
A hole in one: The Meadowlands Golf Resort Village aims to clean up a former landfill while providing an upscale amenity for the 785-acre real estate development near New York City.
Redeveloping a landfill might sound like dirty business, but golf course developers are proving it can be an ace for the economy.
Golf courses, like landfills, have not always harnessed public approval. Often, the criticism golf course developers receive is linked to public opposition to community growth, especially on farmland or other open space. Some golf course developers, attempting to win over public support, are taking the stance that two wrongs can make a right.
“It’s a creative solution to the landfill problem,” says Jonathan Philips, senior director for Raleigh, N.C.-based Cherokee Investment Partners. “It’s turning a liability into an amenity.”
EPA estimates the number of U.S. landfills has fallen 78 percent since 1988 (yet the size of the average landfill has increased). Thousands of landfills reached capacity in the past 20 years, and only a small percentage gained approval for expansion. Of those that were safety capped, some have been used for public parks [See “Heron’s Head Park gets living classroom,” SIJ, April 2007], but many remain untouched.
Landfill sites often include adjoining lands in urban settings, which are getting harder and harder to come by. In recent years, developers have taken an interest in such properties, turning brownfields into shopping malls, business parks and golf resorts.
“Golf courses won’t pay for themselves,” Philips notes. “You need to find some other areas to improve and allow that to drive the project.”
A Cherokee Investment Partners company, EnCap Golf Holdings, is leading a multi-billion-dollar transformation of 785 acres of landfills and surrounding property into homes, golf courses, hotels and parks in Rutherford and Lyndhurst, New Jersey. Located just 30 minutes outside of New York City, the Meadowlands Golf Resort Village is expected to include 2,000 housing units and two luxury hotels with a total of 750 rooms. The project is expected to create 7,080 jobs over 11 years, and generate $1 billion in income and sales tax over the same time period.
But the work isn’t easy — or fast. EnCap plans to import 8 million cubic yards of dirt and sediment dredged from New York Harbor to cap six landfills. EnCap received some assistance from EPA for the cleanup, but the vast majority of funding is from private sources.
The Department of Environmental Quality is keeping close watch on the project. Since EnCap began working on the landfills in 2004, the state has issued more than 10 notices of violations to the company, according to media reports. The project is expected to take up to 10 years to complete.
Gas station renovation
A few years ago, commuters in Eugene, Ore., didn’t pay much attention to a neglected gas station along one of the city’s major transportation arteries. Long abandoned by its original owner, the lot held a crumbling old building, dozens of spare tires, noxious weeds and discarded drug needles.
Today, customers zip in and out of a new biofuels station that runs partially on solar power, and includes a 2,000-square-foot living roof and a bioswale designed to prevent pollutants from flowing into the nearby Willamette River. While they might not realize it, the same commuters that sip organic lattes from the station’s “all-natural” convenience store also helped foot the bill for the site’s costly cleanup.
EPA estimates there are 705,000 underground storage tanks nationwide that store petroleum or hazardous substances; an estimated 200,000 are abandoned gas stations in rural and small communities.
Modern gas station owners must adhere to strict underground storage tank capping laws that were adopted in the 1980s, along with a string of other cleanup laws, after the discovery of severe contamination in Love Canal, a residential area of Niagara Falls.
“There used to be a gas station on every corner,” says Sharon Kophs, brownfields coordinator for the Washington Department of Community, Trade and Economic Development. “In large part because of the new highway system, gas stations off the main highway had to shut down.”
Lane County acquired the property in 2004 through tax foreclosure after it had been abandoned by its original owner, Franko Oil Co., as well as subsequent owners.
Meanwhile, Eugene-based SeQuential Biofuels’ founders, Ian Hill and Thomas Endicott, had begun ramping up production of various blends of biodiesel. While the privately held company was selling 250,000 gallons of biodiesel a year to 20 retail stations throughout Oregon and Washington, it was looking to open a full-service station of its own.
“It provided us an opportunity to be able to purchase the site at 25 percent of the clean value of the site, or essentially a 75 percent discount,” Hill says. “We had a clear redevelopment business plan, which gave us good leverage to attract funding from both the EPA and six state agencies.”
Lane County received a $250,000 EPA grant for remediation work at the site, while Sequential received a $50,000 loan from the Oregon Economic and Community Development Department (OECDD). The overall cost of the project — between $1 and $2 million — was on par with that of an average fueling station, according to Hill. So why spend the extra time and effort cleaning up a brownfield?
“Years of interactions with customers told us there was this incredible emotional demand for a choice that had real value associated with it,” Hill says. Turning an old, polluted property into a productive retail outlet aligned with the company’s mission.
The innovative project stood out to Karen Homolac, brownfield program coordinator for OECDD, because of its sustainable design, its proximity to Interstate 5, and its link to the growing biofuels industry.
“Biofuels has become a huge area of interest,” Homolac says.
“The market is driven by transportation corridors.” Homolac manages a $2 million revolving EPA fund as well as a $9 million brownfield redevelopment fund fed by the Oregon state lottery. The state’s largest biofuels producer, Sequential Biofuels processed 1 million gallons in 2006.
The company sells five blends of biofuel at its Eugene station, including E-10 which is approved by engine manufacturers for all gasoline vehicles. Even so, sales have been lower than expected. “Our biggest stumbling block has been that there is not familiarity with E-10,” Hill says.
Perhaps public awareness is changing: He notes sales between February and March increased by nearly 20 percent.