Introduction
Thank you Chairman Chafee, Senator Lautenberg. My name is Kevin Fitzpatrick. I am president and CEO of AIG Global Real Estate Investment Corp., part of the American International Group, the insurance and financial services companies. Our company has national and international experience with the full range of real estate ownership and financing issues including the specific challenges associated with "brownfields" redevelopment. We operate in all fifty states, 150 counties and jurisdictions, and throughout the world.
I am speaking today on behalf of The Real Estate Roundtable. The Roundtable represents the nation's leading private- and publicly-held real estate owners, investors and managers. Its members have long advocated federal policy reforms that will facilitate, rather than undermine, the efforts of local communities across the country to advance "smart growth." "The Brownfields Revitalization And Environmental Restoration Act Of 2000" or S. 2700 includes just these kinds of policy reforms.
S. 2700 Provides a Roadmap for Brownfields Redevelopment
We have done a good job in this country of encouraging recycling in the area of consumer goods, such as plastics, bottles, and paper. In our view, it is time that we made the same national commitment to recycling our nation's blighted urban and rural brownfields properties. S. 2700 provides the real estate industry, and its partners in state and local governments, with a detailed roadmap for doing just that.
Among those blighted properties, the ones that often suffer the greatest market stigma are those with actual, or even simply perceived, environmental issues. We know them when we see them. They include the hulking warehouses, dormant smokestacks and abandoned shells of industrial plants that still line some of the nation's inland waterways and railroads. They stand as monuments to the "old economy." With the help of the economic and regulatory incentives included in S. 2700, many of these properties can be recycled to serve the commercial, residential, retail, and recreation needs of the information age and its so-called "new" economy. Status Quo Remains Highly Unfriendly to Brownfields Redevelopment
Today, companies that acquire certain environmentally distressed real estate also end up acquiring the market stigma and the uncertainties associated with Superfund cleanup liability. In the past our members have testified before this subcommittee, and others in Congress, that innocent parties that act responsibly in the redevelopment of these sites should not be punished by federal laws (Copies of that testimony are attached.) They should not be asked to take the risk that a $500,000 investment will become a $10 million dollar liability. The real estate industry is fully prepared to take the business risks associated with any prudent real estate development project. For the most part, however, the development community is not prepared to take the kind of litigation and liability risks presented by many brownfields projects.
In short, when the Congress passed the Superfund law in 1980 its purpose was to cleanup contaminated properties, whether industrial, commercial or residential. Nobody contemplated the possibility that the law would actually serve as a barrier to cleanups, cleanups the real estate companies might otherwise be willing to pursue at their own expense. S. 2700 will go far to correct this unintended consequence of federal policymaking.
S. 2700 Will Encourage the Highly Constructive Role of State Voluntary Cleanup Programs in Facilitating Brownfields Redevelopment
A growing number of states have taken highly constructive steps to encourage brownfields redevelopment. They have initiated voluntary cleanup programs (VCPs) that provide participants with authoritative "comfort" regarding the limits of their residual risk of cleanup liability under state law. Building on principles included in legislation offered by Senator Lautenberg almost ten years ago, S. 2700 will strengthen these programs in a number of ways, both legally and financially.
In our view, the greatest asset this legislation will offer state VCPs is the ability to extend the zone of "comfort" many now offer brownfields redevelopers so that it responds to liability concerns under the federal Superfund law. S. 2700 includes a provision that will, in most cases, reassure participants in state voluntary cleanup programs that their state-approved cleanup is not likely to be "second-guessed" by federal officials. This so-called "finality" assurance is crucial not only to potential buyers and sellers of brownfields properties but to their financial partners as well. We are very aware of the leadership shown by the authors of this bill in finding the highly elusive middle ground on this critical finality issue. Their creativity in doing so will prove highly valuable to communities across this country.
S. 2700 Will Codify Groundbreaking EPA Administrative Reforms
Finally, S. 2700 builds on the valuable work of the Environmental Protection Agency in developing administrative reforms in the area of "prospective purchaser" and "adjacent landowner" protection. These reforms reflect progressive and practical thinking on the part of EPA regarding how to mitigate some of the highly adverse, if unintended, consequences of the Superfund law on brownfields redevelopment. While extremely valuable in specific circumstances, the "guidance" documents issued by EPA to clarify prospective purchaser and adjacent landowner liability remain simply that policy "guidance." By their own terms these guidance documents do not carry the full force and effect of law and the Agency remains free to take action "at variance" with them at any time. The prospective purchaser and adjacent landowner provisions in S. 2700 will provide self-implementing and legally enforceable protections for would-be brownfields redevelopers.
Conclusion
I hope I have made it clear that with so many other investment options available at any given time, the prospect of open-ended liability under Superfund remains a real deal-killer. If, however, the Superfund law were changed along the specific lines of S. 2700 so that the potential liability of would-be purchasers and redevelopers of brownfields became better defined, the real estate community would be far more ready, willing and able to invest private capital into these sorts of projects.
We look forward to working with the members of this subcommittee and the growing number of bipartisan co-sponsors of S. 2700 to encourage its enactment into law during this Congress. Thank you.