This testimony is submitted on behalf of the American Insurance Association ("AIA"). The AIA is the principal trade association for property and casualty insurance companies, representing more than 370 major insurance companies which provide all lines of property and casualty insurance and write more than one-third of all direct commercial property and casualty insurance in the United States.
We are delighted to have this opportunity to comment on S. 350, the Brownfields Revitalization and Environmental Restoration Act of 2001. We believe the bill constitutes a small, but positive step toward cleaning up hazardous waste sites. We are especially happy to observe that the bill does this through a mechanism other than litigation. Finally, we are pleased to note the bill is the product of a bipartisan consensus of the leadership of the Senate Environment Committee and we congratulate the sponsors of this bill for this achievement.
Mr. Chairman, we believe S. 350 will help facilitate the cleanup and redevelopment of hazardous waste sites throughout the country. Brownfields redevelopment - facilitated, encouraged, and stimulated by this bill - is undeniably good environmental policy and it is also good business. In fact, insurance related to the redevelopment of old industrial sites and even federal facilities is a small, but growing area of business for the insurance industry. Thus we are seeing a welcome conjunction between the interests of cities and towns in need of revitalization and the interests of businesses seeking new markets.
The brownfields problem this bill helps address is being faced by cities throughout the country. The contaminated properties we call "brownfields" are typically abandoned industrial or commercial properties that are no longer owned by the parties who were responsible for the contamination. Usually these properties have been obtained by local governments through foreclosure on mortgages, taxes, or other assessments that were in arrears. In other cases the sites are owned by trusts or estates that are financially unable to clean up the contamination. Local governments, trusts, and estates are rarely in a position to indemnify potential purchasers against environmental liability for known or unknown contamination. Some cities now own hundreds of such properties and simply cannot afford to hire consultants to characterize the environmental condition of these sites and certainly cannot afford to pay for cleaning up the contamination. If cities offer some limited form of indemnity for purchasers or developers of these properties, they risk a downgrading of their financial ratings due to the requirement to report contingent liabilities to auditors and rating organizations. For most cities this would be disastrous.
The predicament for many cities is that they don't have the resources to address the brownfields problem, but they can't develop the resources without addressing the brownfields problem. This would seem to provide an appropriate opportunity for Federal legislation, such as S. 350.
Title I authorizes grants to state and local governments, and to various redevelopment agencies for site assessment and remediation. While we will leave detailed comments on this provision to the mayors who are testifying today, we would point out that "grants" as opposed to "loans" are exactly what is needed. That's because as one might expect, the cities and towns most in need of brownfields redevelopment activity are often those that can least afford it, by definition. A loan simply digs the financial hole they are already in a little deeper. Therefore, grants are often the only practical way for these cities to begin to address the problem.
Title II makes modest amendments to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA" or commonly referred to as "Superfund") by exempting from liability innocent contiguous property owners; innocent prospective purchasers; and innocent landowners. All of these exemptions would apply only under very limited circumstances, detailed with great specificity in the bill. It is uncertain whether many parties would be affected by the contiguous property and innocent landowner provisions; no doubt the few who may be affected will certainly be enthusiastic supporters of these exemptions. It should be noted, however, that there are a number of risk management techniques, including insurance, currently available to prospective purchasers. Some of the types of insurance available to prospective purchasers and others involved in these transactions are mentioned below. Title III sets standards for Federal intervention during or after a state-supervised cleanup. We realize this issue has been a source of significant controversy. In any event, we also recognize that as a matter of public policy no cleanup is ever going to be entirely "final" in the sense that there will never be an opportunity for future government intervention. This is one of the areas where a combination of risk management techniques, including insurance, can facilitate the redevelopment of contaminated properties notwithstanding this lack of "finality." Insurance is currently available to pay the costs of additional cleanup of specified contaminants after the initial cleanups have been completed and approved by state or Federal regulators. In some cases, insurance policies may also be written to respond to additional cleanup that may be required due to future changes in the environmental laws.
Insurance is now emerging as a useful tool for managing environmental liability risk in the redevelopment of contaminated properties. In addition to insurance against the possible re-opening of completed cleanups (as discussed above), insurance is now being written to cover: cost overruns for specific remedial action plans; the discovery and remediation of new contaminants; and third party bodily injury, property damage, and cleanup claims arising from newly-discovered contaminants. In some cases, insurance may be available to all parties to a brownfields redevelopment transaction, including the sellers and buyers, the banks making the loans for the purchase, and for the engineers and contractors involved in the cleanup, as well as for the cleanup itself.
S. 350 will provide necessary relief to many cities struggling with the problem of abandoned, contaminated properties. Significantly, we note that no attempt has been made to reinstate the Superfund taxes as part of this bill and no attempt has been made to add other special liability exemptions for favored parties. We heartily endorse this approach. But we must emphasize that, while we think this bill is beneficial in its current form, we will very strongly oppose any attempt to reinstate the expired Superfund corporate taxes without the enactment of comprehensive liability and remedy selection reform. Likewise, we will oppose any special liability exemptions that may be added for sympathetic groups of responsible parties if the costs of those exemptions are shifted to the remaining parties.
Mr. Chairman, once again we congratulate you on this consensus bill and we sincerely hope this is the first in a long line of consensus legislation to come.