I greatly appreciate the opportunity to present NAIOP's views on S. 350, the "Gillmor Discussion Draft" and the "Democratic Discussion Draft" to the Subcommittee. First, I want to thank Subcommittee Chairman Gillmor, Congressman Pallone and members of the subcommittee for their hard work and their recognition of the importance of this issue. It is an honor to be a part of this discussion.

My name is Daniel R. DeMarco. I am a member of the National Association of Industrial and Office Properties (NAIOP) and currently serve a NAIOP's National Vice-Chairman of Government Affairs. In 2002, I will become the National Chairman-elect of NAIOP.

I am a partner in Campanelli Companies in Braintree, Massachusetts. Campanelli is a family owned commercial real estate company in business since 1947 and employing approximately 50 people. Our company has developed over 12.5 million square feet of commercial property primarily in Massachusetts and manages a 5.4 million square foot commercial real estate portfolio. A number of sites we have developed in the greater Boston area have involved a variety of environmental issues. Today, Campanelli is an active development, construction, acquisition and property management real estate company. Prior to joining the Campanelli Companies in 1989, I was an Associate with the Boston, Massachusetts law firm of Burns and Levinson, where I specialized in corporate law, and from 1982 to 1984, I served as a legislative assistant to former U.S. Representative Brian Donnelly (D-MA).

NAIOP is the nation's leading organization of developers, investors, and owners of commercial real estate. NAIOP provides support and guidance to its over 10,000 members nationally to help create, protect, and enhance the value of commercial and industrial real estate, as well as promotes grassroots public policy related to real estate development. Among its numerous activities, NAIOP works with various public sector entities -- particularly local government and regional economic and industrial development agencies, authorities, and corporations -- in helping to bring unused or underutilized properties back as productive sources of jobs and tax revenues back to communities. As the owners, purchasers, and developers of brownfields, our members have a keen interest in legislative efforts aimed at renewal of these properties.

Further, as the owners and developers of commercial and industrial properties subject to regulation under a variety of federal and state environmental laws, NAIOP members have much at stake in efforts to reform the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, commonly known as "Superfund" or "CERCLA."

A brownfield is any real property that, because of actual or suspected environmental contamination, may lie idle, unoccupied, underutilized, or unused. The contamination of these properties may stem from activities that took place or conditions that arose before current ownership and operation of the property, and as a result of lawful non-negligent conduct. In most, if not all, instances, a brownfield will not be the subject of an active investigation, remedial or enforcement action by the U.S. Environmental Protection Agency (EPA), or a state environmental agency.

Liability for cleanup of these sites arises under the federal Superfund and similar state statutes, and extends to all past and current owners and operators of the property and to any party responsible for generating or transporting any hazardous substances requiring cleanup at the property. Liability under this scheme is "joint and several," i.e., each potentially responsible party (PRP) bears the entire responsibility for all remedial expenses to a person who cleans up a site, notwithstanding the amount or nature of contamination for which the PRP may be individually responsible. Allocation among PRPs usually takes place in lawsuits or in other adversary contexts in which the PRPs seek equitable contribution among themselves.

The Superfund liability scheme has clearly exacerbated the difficulty of bringing brownfields back to productive use. Moreover, that liability scheme itself is responsible for the creation of many brownfields. This system makes the owners of contaminated properties liable for millions of dollars in cleanup costs even if they had nothing to do with contaminating the site or they purchased the property decades after the contamination occurred. It exposes landowners not only to Superfund actions by EPA, but also to lawsuits decades in the future by as-yet unanticipated parties who incur cost to clean up the property. Concerned about this "trailing" liability, owners of possibly contaminated properties often hold this land back from the market. When properties that carry the stigma of contamination become available for sale, most developers avoid them out of concern that they will be exposed to endless uncertainty and undue financial liability.

Legislative Reforms are Needed

Brownfields hold enormous potential value for both the private and public sectors. This potential will remain unrealized, however, unless Congress reforms the Superfund liability system.

In April 1997, and again in May 1999, NAIOP had the privilege to testify before Congress on legislation aimed at Superfund reform and Brownfields revitalization. In that testimony, we pointed to five elements that NAIOP views as necessary to achieve meaningful Superfund reform that will result in practical brownfields revitalization: (1) Reform of the Superfund liability system; (2) Deference to state voluntary remediation programs; (3) Cleanup standards that are site specific, risk based, and which take into account future use; (4) Liability risks that can be quantified with solutions that are final; and (5) Recognition of market forces.

Our analysis of these bills leads NAIOP to conclude that the "Gillmor Discussion Draft," S. 350, and the "Democratic Discussion Draft" make individual attempts to address our members concerns on these important issues. We hope that these issues outlined above can be addressed in a broad bi-partisan manner.

Brownfield Cleanup and Redevelopment is Part of an Economic Process

Redevelopment of any brownfield property results from a complex economic process dominated by real estate issues. A developer will not be attracted to the most environmentally pristine of properties -- whether urban, suburban, exurban, rural, or agricultural-- if the property does not have economic potential. A developer will consider the inhibition to investment posed by a property's environmental contamination as it would similar inhibitions, such as the availability of infrastructure, work force, tax issues, and other factors.

We have heard the phrase "all politics is local." It is likewise true that all real estate is local. To quote a 2001 guidebook on brownfields development forwarded by former Clinton Administration EPA Assistant Administrator Tim Fields, "State-level creativity and innovation in meeting a wide range of brownfield site assessment, cleanup, and financing needs has been the hallmark of [brownfields reuse]."

Therefore, a federal 'cookie cutter' approach for brownfield development is insufficient to achieve the lofty goals of improving the environment, rebuilding our urban cores, reducing sprawl, increasing employment, and returning unproductive properties to state and local tax bases. Both S. 350 and the "Gillmor Discussion Draft" recognize that voluntary cleanup programs of the various states provide the best mechanisms to achieve these goals. By identifying the benefit of these programs, these bills address the five elements referred to above.

(1) Title I - Brownfields Revitalization Funding

The U.S. Conference of Mayors estimates that there are more than 500,000 brownfield sites in the United States. It is reasonable to speculate that as many as half or more of these sites could be old gas stations. We applaud the "Gillmor Discussion Draft's" effort to expand the definition of brownfield sites to include the less contaminated petroleum sites regulated by the Resource Conservation and Recovery Act. Further, we are encouraged by S. 350 and the "Democratic Discussion Draft 's" efforts to permit the use of grant and loan proceeds to implement environmental assessments and undertake cleanup of petroleum contaminated sites.

(2) Title II - Liability Clarifications

All three bills provide some form of protection from liability to innocent landowners, contiguous property owners, and bona fide purchasers of contaminated properties, all of which would mitigate some of Superfund's most draconian provisions. In order to qualify for this protection under Mr. Gillmor's draft, an innocent owner and a bona fide purchaser would have had to make inquiries for diligence investigations under the standards of the American Society of Testing of Materials (ASTM), the industry standard of both the commercial real estate and banking industries. For properties acquired before the promulgation of the ASTM standards, the party would have had to demonstrate compliance with contemporary industrial standards. The procedure in S. 350 and the "Democratic Discussion Draft" would require a complex EPA rulemaking and add uncertainty to a process that the free market and the most rigorous watchdog -- the banking industry -- have found effective. We support the provision in S. 350 and the "Democratic Discussion Draft," but believe that the "Gillmor Discussion Draft" provides a more simple approach.

The "windfall lien" provision of both S. 350 and the "Democratic Discussion Draft" allow EPA to impose a lien on the increase in value of the property to the extent of EPA's unrecovered cleanup costs. It does not, however, impose an obligation on EPA to attempt to recover these costs from PRPs. In contrast, the "Gillmor Discussion Draft" recognizes the need to require EPA to follow its own "Polluter Pays" policy before it imposes a lien on an innocent party. It requires that before EPA seeks to recover its costs from a bona fide purchaser it must first make reasonable attempts to recover those costs from one or more responsible parties.

Regrettably, however, none of the bills recognize the inherent unfairness of imposing an open-ended lien that has no time limitations, either for filing or duration. Under none of the bills would a bona-fide purchaser have notice of an EPA lien. Further, the EPA has the option to impose its lien at any time. Any lien imposed by the EPA should be recorded at the time the Agency performs its work at the affected property. This would be consistent with CERCLA Section 107(l), which already establishes a federal lien to secure the Agency's remedial costs on property "affected by a removal or remedial action." A notice provision would inform a prospective purchaser that EPA might seek to recover proceeds from the property after its acquisition. Such a notice provision is essential to fairness. The unintended effect, however, of any lien provision applying to a bona fide purchaser would be to discourage the development of properties on which EPA has filed its lien. Thus, NAIOP strongly believes that any lien EPA has filed should be released upon purchase of the property by a bona fide purchaser. Again, we do not know if this was the true intention of the bill's authors.

(3) Title III- State Response Programs

Of critical importance to the cleanup and redevelopment of brownfields properties is the effective deferral of Federal enforcement in situations where properties have been cleaned up in compliance with State programs.

Since the early 1990s, 47 states have enacted legislation or otherwise established programs that provide releases from liability under state environmental laws for parties who successfully complete voluntary and mandatory remediation actions. The "Gillmor Discussion Draft" requires EPA to defer to such state programs, and it would provide statutory protection against both cost recovery and contribution actions by the federal government or private parties for persons who meet the requirement s of those programs.

On the other hand, state governments would still be allowed to pursue Superfund claims under CERCLA section 107. This deferral to the state programs in the " Gillmor Discussion Draft" also provides an element of finality to site closure that is now missing from the Superfund site cleanup equation.

The example of states like Massachusetts, New Jersey, Pennsylvania, Michigan, Indiana, and others with voluntary cleanup programs, bolster the view of state program success. Many of these states have developed cleanup standards keyed to site use and risk and require enforceable deed restrictions and notices that convey with the property if it is not cleaned up to residential standards. If the use changes, the protection from liability lapses.

In Pennsylvania, for example, NAIOP actively participated in the legislative process that resulted in Act 2, the Land Recycling and Environmental Remediation Standards Act. Under that statute, parties may choose to clean up contaminated properties to one or more of three different levels, after which they receive a release from liability under state environmental laws. The remediation standards of Act 2 apply both to voluntary cleanups and mandatory remedial actions under the state's version of Superfund. The Pennsylvania statute has resulted in the cleanup of more than 650 sites since 1995, and has been adopted as model legislation by the American Legislative Exchange Council, an organization representing by legislators from all 50 states.

It is important to recognize that states have been at the forefront of brownfields redevelopment and cleanup, while EPA has been slower to catch up. NAIOP urges Congress to not attempt to federalize the state programs, or make states meet a standard issued by EPA to qualify for deferral of EPA Superfund enforcement. It would be more logical and productive to require EPA to study and emulate the most successful state programs in order to redesign its own Superfund enforcement strategies. For example, the "Gillmor Discussion Draft" somewhat achieves this by emulating a provision in Pennsylvania's Act 2 Section 902 (35 P.S. Sec. 6026.902) which eases requirements for permits or permit revisions for cleanup actions taken in compliance with the statute. Section 303 in Title III of the "Gillmor Discussion Draft" requires EPA to promulgate regulations within 18 months that would streamline, minimize, or eliminate procedural permitting requirements. This suggestion recognizes the extraordinary need to bring our brownfield sites back to life and to overcome impediments that would counter the attractiveness of the program.

The extent to which the EPA may reopen for liability the remediation of a property cleaned up under a state program has been controversial. It is essential to understand that there are two groups affected by this: (1) Owners of thousands of contaminated properties that have not been released for sale, and (2) Parties who would clean up and redevelop these and thousands of other contaminated properties. These groups have not done so because of concern that they will face a future of lurking federal liability.

As the "Gillmor Discussion Draft" recognizes, this applies not only to EPA enforcement actions, but also to third party suits for contribution under Section 113 of Superfund. Indeed, while we are not aware of EPA having yet sought to take an enforcement action at a site that has undergone a state approved cleanup, there are legions of third party suits for cleanup. The threat of liability for contamination found many years after cleanup by detection techniques that have not yet been developed lurks under Superfund. Both site owners and developers need the assurance of finality on both EPA and third party enforcement actions.

The "Gillmor Discussion Draft" also recognizes that while EPA should be able to take action to protect human health and the environment where state programs have failed to do so, the Agency should first give the states the opportunity to cure any defect for which EPA can give them notice. Moreover, the draft actually enhances the likelihood of cleaning up more brownfields by requiring EPA to reopen state decisions only where true emergencies exist. Using the boilerplate "imminent and substantial endangerment standard" for reopening provides very little protection from second-guessing. Under the statutes, which have imminent and substantial endangerment provisions, courts have given a very broad interpretation to the term and have allowed actions to go forward where the problems were much less than crises or emergencies.

In B.F. Goodrich v. Murtha, (1988) 697 F. Supp. 89, for example, the court held that the "imminent and substantial endangerment" provision of CERCLA Section 106, which authorizes EPA abatement actions, is not limited to emergency situations, and that EPA may act even where the actual harm may not be realized for years. EPA's own guidelines as to what constitutes an imminent and substantial endangerment are skimpy, and EPA has interpreted its authority broadly.

In United States v. Tarkowski, 248 F.3d 596, a case decided by the U. S. Court of Appeals for the Seventh Circuit earlier this year, Judge Posner criticized EPA's claim that an imminent and substantial endangerment existed to justify its authority to take a response action under CERCLA Section 104. Judge Posner said (at 599):

"The EPA takes the extreme position that, provided it has probable cause to believe that there is even a thimbleful of a hazardous substance spilled in a person's yard, or we suppose even a drop, it has an absolute right to an access order.."

Judge Posner was particularly critical that EPA would seek "to undertake remedial efforts before determining whether there is a hazard that justifies the efforts." 248 F.3d at 601. Authorizing EPA to take action at sites cleaned up under state programs only in true emergencies where the state has sufficient notice to cure any noted problem should avoid this unnecessary over-reaching by EPA.

The sensible restrictions on EPA second-guessing in the "Gillmor Discussion Draft" gives due credit to the states that have been on the firing line of brownfields redevelopment and encouragement to the developers who want to use those programs. At the same time these provision do not sacrifice protection of human health and the environment. We need to recognize that most developers, their employees, families, and other loved ones live in the communities where they work. It is cynical at best to project that states will try to cut environmental protection in order to attract development. In the unlikely event that such a circumstance would occur, the "Gillmor Discussion Draft" provides adequate ability for EPA to act swiftly and effectively to counteract such misconduct.

(4) Title IV of "Democratic Discussion Draft" -- Advisory Commission

We applaud the inclusion in the "Democratic Discussion Draft' of a provision that would authorize a study of the effect of brownfields development on Environmental Justice issues. We concur that all communities should share in the benefits of such activity and that the Commission appointed under Title IV should both monitor compliance with this goal and issue recommendations to implement the goal. The Commission should not, however, have the unprecedented authority to disenfranchise state cleanup programs, as the Draft would empower it to do. This provision is probably unconstitutional as a violation of due process of law and the restriction of the 10th Amendment to the Constitution.

Cleaning up real or perceived contamination will not assure the success of a brownfields remediation. Additionally, the ordinary factors that make real estate development work must be in place for a brownfield development to succeed. Hence, brownfields revitalization incentives must be market-driven. Location, accessibility, infrastructure, work force, demand, and other factors must be taken into account when allocating grants and other financial resources to brownfield revitalization efforts. Even public and non-commercial projects must make economic sense. The "Gillmor Discussion Draft" builds upon the substantial foundation provided in S. 350, which NAIOP supported. We believe that the "Democratic Discussion Draft" attempts to address some of the same problems, but just does not go far enough.

NAIOP members maintain that brownfields can and should be redeveloped consistent with protection of the environment and human health. Failure to enact brownfields reform legislation will result in the creation of more brownfields, as well as continue to foster the current inhibitions to brownfield redevelopment. Such outcomes are unilaterally inconsistent with protecting the environment and human health. The committee has an unparalleled, historic opportunity this year to take advantage of Congressional momentum, as well as fulfill the private sector's desire to enact this important legislation.

Congress should act before this window of opportunity closes. Enacting broad bi-partisan brownfields reform legislation would result in both greater environmental remediation and the creation of wider economic opportunity in redeveloped brownfield sites.

Mr. Chairman, Congressman Pallone, and members of the Subcommittee, I again thank you for the opportunity to present NAIOP's views on brownfields reform legislation, specifically S. 350, the "Gillmor Discussion Draft" and the "Democratic Discussion Draft." NAIOP understands that there will be a long discussion over certain policy components of this legislation; after all, legislation is the art of compromise. We feel that S. 350 and both drafts discussed here today will involve all interested parties in continuing the important dialog that began many years ago. We appreciate your collective efforts as you work to obtain a broad bipartisan consensus on how to move forward in passing brownfields reform. Ultimately your efforts will be successful. NAIOP looks forward to working with the committee to that end.

Thank you.

The June 22, 2001 "Invitation" for today's hearing states the requirement that the written testimony of any witness appearing in a non-governmental capacity must contain, "to the maximum extent practicable, a curriculum vitae and a disclosure of the amount and source (by agency and program) of any Federal grant (or sub-grant thereof) or contract (or subcontract thereof) received during the current fiscal year or either of the two previous years by the witness or by an entity represented by the witness."

A summary of Mr. DeMarco's professional experience is attached. With regard to contract activities between Campanelli Companies and the federal government, there are no such activities. For over five decades, Campanelli Companies has provided services for all phases of real estate development including building design, site engineering, permitting and construction. Campanelli Companies has extensive experience in the industrial, office, warehouse/distribution and retail markets and they work closely with clients during every phase of a development project, including site selection, feasibility analysis, local, state and federal permitting, architectural and engineering design, building construction, as well as facilities and property management.

The National Association of Industrial and Office Properties has not received a federal grant or contract in the current fiscal year or in either of the two previous fiscal years.