Feature

Portfields test the waters on government cooperation

On a clear day, visitors to Bellingham, in the northwest corner of Washington state, enjoy views of a sparkling Bellingham Bay.

Few would guess that just below the surface lies a toxic problem decades in the making. Like other port communities across the U.S., Bellingham residents and businesses once used their bay as a dumping ground.

The city built three separate landfills at the water's edge. Meanwhile, a pulp and paper mill leached mercury into the water as part of the chemical process of bleaching paper. Wood treatment plants leaked other toxic chemicals into the water. And that's not counting the environmental damage done by a food processor, bulk petroleum storage facilities and ship builders.

"It was a standard practice at the time," says Lucy McInerney, environmental manager with Washington state's Department of Ecology. "Now we have a legacy of environmental problems."

But fixing those problems has proven particularly difficult along the waterfront. A host of environmental agencies, both federal and state, lay claim to the offshore areas in need of rehabilitation. And that can make moving forward on vital cleanup projects seem like everything is done in slow motion.

Fortunately for Bellingham, the federal government launched an innovative program to help. In 2004, the Port of Bellingham became one of just three designated portfields. (The pilot project also includes the Port of New Bedford in Massachusetts and the Port of Tampa in Florida.)

The initiative is a partnership between EPA, the National Oceanic and Atmospheric Administration (NOAA) and five other federal agencies.

Where cleaning up contaminated land to redevelop a brownfield can be a complicated process, maritime areas add another layer of complexity. With so many federal regulatory agencies as stakeholders, in addition to their state counterparts, disagreements and bottlenecks are routine. Agencies look at everything from maintaining navigable channels to protecting habitat.

In the Northwest, salmon recovery efforts also slow permits down. Getting the green light to clean up a polluted body of water can take anywhere from five to seven years-far longer than a traditional, upland brownfield site.

But portfields do more than smooth a bumpy permitting process. They're also a commitment to helping ports retool themselves for growing waterfront commerce. Maritime trade is expected to double by the year 2020, according to EPA.

"What we're trying to do is get these properties cleaned up and ready for redevelopment so we can meet the demands of whatever the market brings to Bellingham," says Mike Stoner, environmental director for the Port of Bellingham.

The possibilities include: expanding the existing U.S. Coast Guard station to help with border patrol as well as creating a waterfront campus for Western Washington University. There are also plans for adding marina capacity that builds on Bellingham's strong boating community.

Stoner knows well the challenges presented by 11 separate contaminated properties. But he's also enthusiastic about the possibilities that come with Bellingham's growing reputation as a hip place to live, thanks to its proximity to Vancouver, B.C., and Seattle, along with a thriving university and prime real estate that looks out on both mountains and water.

Bellingham's reputation as a progressive, can-do kind of city helped it land the portfields designation in the first place.

In 1996, concern over the condition of Bellingham Bay sparked the Bellingham Bay Demonstration Project. A multi-organizational effort, it included a host of federal and state agencies as well as two Indian tribes.

"We were looking to expedite the cleanup of contaminated sediments and wanted to come up with a comprehensive strategy for Bellingham Bay," says McInerney, the Ecology engineer who also served as co-manager of the demonstration project.

The state-led effort brought different agencies together to plan a strategy that worked for everyone-integrating everything from sediment cleanup to controlling pollution sources to habitat restoration and land use.

Four years after the group was formed, taskforce members issued the Bellingham Bay Comprehensive Strategy in 2000 to help guide cleanup and habitat restoration. Since then, five projects have been completed under that strategy-with 11 more to go.

These days, the port is moving forward with one of its biggest projects yet: cleaning up 137 acres of polluted industrial land left behind when the Georgia-Pacific pulp and paper mill closed in 2001. The port acquired the property last year. Cleaning it up is expected to cost between $75 and $85 million, with the state Department of Ecology paying half.

"The portfields benefit we're getting is not so much financial but in terms of agency support," Stoner says.

And that can mean the difference between getting a project done, or going nowhere fast.

Back to Top

Problem Solver

Patience pays off for Portland display company

ACME Scenic & Display President Jan Pederson had his eye on a prime piece of property in northeast Portland. There was only one hitch. The land was contaminated with pesticides from an agricultural chemical company that once operated there.

That might have stopped some buyers in their tracks. But Pederson knew the parcel was a perfect fit for his creative team of set designers and trade-show display makers. His company-whose clientele includes big names like Nike and Adidas-was growing fast and needed room to expand.

But finding financial backing to purchase the five-and-a-half acre parcel was proving tough, if not impossible. Pederson began looking for a bank in 2004 and had come up empty-handed each time. The stigma of redeveloping a brownfield made it a tough sell.

Then, in August 2005, Pederson decided to attend the Oregon brownfields conference in Portland. It proved a pivotal moment. Pederson was put in touch with a lender-the Bank of Astoria.

A year earlier, he had reached out to Oregon's Economic and Community Development Department (OECDD). The department was the recipient of an EPA Brownfields Cleanup Revolving Loan Fund grant, enabling the department to capitalize up to $2 million in loans, as well as provide some grant opportunities to Oregon's communities.

"He really wanted the property and it met his needs. He was willing to work with us to meet all the programmatic requirements of the funding," says Karen Homolac, Brownfield Program and Policy Coordinator at OECDD.

OECDD officials loaned ACME $658,000 in cleanup money-the department's first-ever revolving fund loan. The state's Brownfields Redevelopment Fund added another $144,000 loan to the mix, also earmarked for cleanup. Meanwhile, the Bank of Astoria financed the purchase of the property, loaning $1.25 million (including $82,000 earmarked for cleanup). All together, cleanup costs are estimated at $894,000.

"They had a plan in place to clean it up, a way to monitor it and funding in place for cleanup," says Walt Postlewait, assistant vice president and loan officer at the Bank of Astoria.

If this sounds like a simple story about a company, a contaminated piece of land and a quick-fix ending, it isn't. An extra-large helping of perseverance was required to make it work.

ACME signed a purchase and sale agreement in April 2006-two years after embarking on an odyssey that included securing funding, creating legal agreements to protect the company from liability and jumping through plenty of hoops.

"It goes on and on as far as the paperwork and the people who review it," says Ayrica Bennett, a human resources manager at ACME. "I think people sometimes lose patience. You have to want the property you're looking for to stick it out."

To make this particular sale work required some specific legal agreements. ACME and the seller negotiated what's called a Prospective Purchaser Agreement with the state's Department of Environmental Quality. This version gave more protection to the buyer by making the previous owner responsible for all off-site contamination.

Chas. H. Lilly, had operated an agricultural chemical company on the site until 1996. Toxic chemicals, such as DDT and arsenic, had begun leaching into the ground in 1959 when the Miller Products Company bought the land from an automobile manufacturer. The land changed hands a few times but agricultural chemicals were formulated there for nearly 40 years.

Fortunately, most of the contamination was concentrated in discreet areas. Even so, a groundwater plume containing pesticides, petroleum VOCs and arsenic extends an estimated 900 feet onto adjacent property. The prospective purchaser agreement makes the previous owner responsible for those cleanup costs instead of ACME.

The prospective purchaser agreement also requires the purchaser to contribute to the cleanup. ACME agreed to build a new storm drain system to protect groundwater from additional contamination, and to conduct soil hot spot removal and capping to protect current and future users, including construction and utility workers. Contaminated soil is being carted off for incineration. Environmental agencies will monitor the site for the next seven years to make sure the remedy is effective.

But ACME isn't waiting to finish cleanup work to make use of its property. The company has already moved into its new digs. The early move was possible because the warehouses and other existing buildings aren't contaminated.

"People shouldn't be scared of the (brownfields) process," says Bennett, the company's HR manager. "It's helping retain jobs in this area. We've already added four employees since being at this location. And we keep growing."

Back to Top

Groundwork

Developers: Do your homework before you go after loans

Building on brownfields has its rewards. Developers often pay pennies on the dollar for contaminated land. Many brownfields sit in prime locations, along the waterfront, in the center of cities, and near transportation hubs. There's even the nice feeling that comes from rehabbing a piece of land that has long sat vacant-creating jobs and cleaning up an eyesore at the same time.

All of this is weighed against unknown risks. How serious is the contamination? How deep does it go? How far has it spread? Put bluntly: how much money can you afford to spend to fix a property whose problems may be more severe than anyone realizes?

That makes financing a brownfield a tricky proposition. Banks are in the business of making loans. But they don't want to make loans on projects that may come back to bite them.

"Generally, they're pretty gun shy," says Steve Saylor, a program manager for Washington state's Department of Community Trade and Economic Development (CTED), who oversees low-interest loans for brownfields. "Any time you put the shovel in the dirt you never know what you'll find."

In some instances, regulatory agencies can help determine the scope of contamination. But everyone is taking a chance when they invest in a brownfield. And that means when you approach a bank you need to have done your homework, and then some.

"What we look for is somebody's who's got their act together. It's a serious, more complicated process," says Michael Wearne, vice president of environmental services at Columbia Bank in Tacoma, Wash. "A borrower has to be prepared, do more due diligence and engage a quality attorney, a quality consultant. And they need to understand it's going to take longer."

Wearne, who speaks frequently at brownfields conferences around the country, has worked with developers on contaminated properties for years. These days, many of the choice pieces of real estate sit in contaminated areas, although some aren't defined strictly as brownfields. For instance, Wearne's bank has made loans to developers who wanted to build in the Pierce County community of Fife, where groundwater is contaminated with arsenic.

"You could get real scared, real quickly or say 'that's part of the problem that's there,'" Wearne says. "We've made a half dozen loans down in that area."

Mostly, Wearne says, lending boils down to this: "Credit, collateral and character."

And how does Wearne assess someone's character? Typically, he looks for a developer who hires a quality consultant and attorney to help with a brownfield project.

"Those things often cost you more and they mean you are aggressively attacking the problem. That tells me you've got character," he says. "If you're trying to cut corners, I don't want to do business with you."

Walt Postlewait with the Bank of Astoria in Astoria, Ore., a subsidiary of Wearne's bank, said he expects developers to have good cash flow and very solid, dependable businesses.

"It's based on the strength of the borrower," says Postlewait, an assistant vice president and loan officer. "If you're a strong borrower, then a brownfield site may be of interest. It can be a very good investment for the buyer. But a questionable buyer, with inconsistent cash flow or limited equity, 'don't even waste your time.' Really, it's an arena for A-credit, A-businesses."

Both Wearne and Postlewait say the touchy-feely rewards that come from cleaning up a long-standing environmental problem do little to persuade banks.

"We know that it's reclaiming something that is useless and contaminated and at the end of the day we're leaving the state in better shape for our kids and grandkids," Postlewait says. "But that's a minor byproduct. We're in the business to loan money and mitigate risk."

He adds, "It's not the bank's money, it's the depositors' money. We've been entrusted to care for the money and we really need to make sure we're being professional and diligent with that loan."

Back to Top

About this newsletter.

To help raise awareness of the economic and environmental benefits of redevelopment, Building on Brownfields brings you news and information on brownfields in EPA Region 10: Alaska, Idaho, Oregon and Washington. The newsletter is funded by the EPA through Washington state's Department of Ecology, and is a cooperative effort between the four states and the EPA.

For past issues of the newsletter, go to www.buildingonbrownfields.com.

This e-newsletter is sponsored by Washington's Department of Ecology
and funded by EPA.