As the federal government seeks to promote alternative energy use, increased attention is being given to shuttered industrial sites near urban areas that can be redeveloped to provide wind, solar and other sources of green energy. These Brownfield and Superfund sites, many of which have been underutilized for years because of contamination or other issues, offer advantages for alternative power developments such as proximity to existing infrastructure and, in some cases, less opposition from the surrounding community.
Seeking to meet the goals of restoring contaminated lands and increasing alternative energy production, the Environmental Protection Agency (
EPA) is actively promoting construction of solar, wind and other alternative energy projects on Brownfield sites. Such projects include a wind power station on the Lake Erie shoreline near Buffalo, N.Y., where a steel plant formerly stood, and a 1.5-megawatt solar array on a former landfill in Philadelphia.
In addition to efforts and incentives at the federal level, various states have been promoting Browfield projects as a way to meet renewable energy targets mandated for utilities. To meet those aggressive goals, utilities are seeking promising sites for alternative energy projects.
Using Brownfield sites for green energy projects makes sense for several reasons. Among them, the sites often are near urban areas and can be easily tied into the existing electrical grid, while a more remote site might necessitate an inordinate investment in power lines. In addition, repurposing an old industrial site for projects such as wind turbines or solar arrays often does not draw the same aesthetic opposition as an offshore wind farm.
Although government incentives are available at the federal, state and local level, developers and operators must be mindful of the significant exposures they face in dealing with land that historically has been contaminated by industrial pollutants. These exposures range from environmental risks in the construction phase to operational risks once the project is up and running.
Risk Exposures
Developers also must consider the liabilities they may assume in taking control of these properties, and how those liabilities ultimately may be allocated among the responsible parties. These issues can be addressed with risk management techniques and insurance coverage tailored for Brownfield projects.
Initially, developers should learn about the site’s history and the contaminants involved, including conducting an assessment of potential environmental exposures. Not only will this assessment help the developer decide whether to pursue a project, it also may help establish “innocent landowner” protection under the Comprehensive Environmental Response Compensation Liability Act (Superfund).
On renewable energy projects, the EPA says it will work to address liability issues and has noted that relatively few properties involve cleanup under governing federal statutes. Most Brownfield properties fall under the jurisdiction of various state cleanup programs, which may provide some liability protection for redevelopment in certain situations as well.
The exposures a developer or operator may face vary according to the type of project. For instance, a solar power array being built on a former landfill faces different exposures than a methane gas recovery project. During construction, developers must be mindful of the exposures that arise from disturbing a site. Work that creates or spreads pollution or worsens an existing condition may create liabilities. Water runoff from a site is another source of potential liability. The developer should enact policies and procedures for contractors and subcontractors to monitor and prevent these kinds of liabilities.
Insurance Coverage
Besides taking risk mitigation measures, developers should consider an appropriate insurance program. Many projects today, whether under public or private auspices, require significant levels of environmental liability coverage even as a condition for bidding. Coverage for renewable energy projects on Brownfield sites must encompass all stages of the project and take into consideration the liabilities that building on such a site entails. The insurance industry has developed significant expertise in handling environmental and renewable energy risks, and coverage is more widely available.
Brownfield developers also may consider a renewable energy program that includes environmental coverage. This policy covers the operational exposures during construction, as well as provides coverage for pollution exposures once the project is up and running. Specifically, a renewable energy program could be structured to cover construction risks and liability, operational risks and liability, and environmental impairment for a variety of Brownfield-to-energy projects, including waste-to-energy, landfill gas, biomass power, wind energy and solar power. For instance, coverage for a landfill methane gas recovery project might cover the latent liability, as well as problems with methane recovery or indoor air quality issues.
Redevelopment of Brownfield sites for renewable energy offers unique opportunities as well as significant challenges. With a rebounding economy, governments are encouraging development of Brownfield sites for solar, wind and other power projects. On a state and local level, significant tax and financial incentives are still available.
At the same time, environmental regulation is tighter than ever, and developers face a variety of exposures when working on a contaminated site. By thoroughly assessing the property, instituting strict risk management policies and acquiring the appropriate insurance coverage, these exposures can be mitigated. The end result can be a successful and profitable project that benefits investors and the community by providing green energy and jobs.