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HomeMy WebLinkAboutUpdate on Cleanup and Reimbursement for the CMC Asbestos Facility.pdf Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Tim Cooper, Assistant City Attorney Greg Sullivan, City Attorney Chris Kukulski City Manager SUBJECT: CMC Asbestos Bozeman Report MEETING DATE: December 7, 2009 AGENDA ITEM TYPE: Special Presentation. RECOMMENDATION: No Action Required. Consider the staff update on the voluntary cleanup plan for the CMC Asbestos Bozeman Facility, the allocation of liability for the facility, and the status of reimbursement from the state orphan share fund. BACKGROUND: The site of the new Library once was a depot for the Chicago Milwaukee Railroad, and was contaminated with asbestos and other heavy metals in the soil. The area was fenced off for years because of the potential public health hazard. In 2001, in an effort to proactively address the contamination at the site, the City contracted a due diligence site investigation to identify other potential sources of environmental liability associated with the Facility and collected additional data necessary for cleanup of the property. In the fall of 2001, as a site for the new library, the City purchased 14 acres of the Facility from CMC Heartland Partners (CMC), successor in interest to the Railroad. Contractors for the City, under the Montana Voluntary Cleanup and Redevelopment Act (VCRA), submitted a Voluntary Cleanup Plan (VCP) which was approved by the Montana Department of Environmental Quality (DEQ). Remediation work on City owned property was completed in October 2003. Remediation was completed on-site; the material transported from the site was cleaned and contained in plastic bags and taken to the City landfill. The total cost for remediation of the City-owned portion of the facility was approximately $1.4 million. The City waived the disposal fees, which were approximately $955,000.00. The statutory framework under which the City obtained approval of its voluntary cleanup plan also provides opportunities for reimbursement for cleanup costs from the state “orphan share fund.” The orphan share fund is a state special revenue fund created from a variety of sources. The legislature has allocated funds from the resource indemnity and groundwater assessment taxes and from the oil and natural gas production taxes. The fund was established to pay for the share of cleanup costs that would be attributed to bankrupt or defunct polluters. The funds are available to parties willing to take the lead in cleanup. The orphan share determination is made through a voluntary process under the Controlled Allocation of Liability Act (CALA). Liability is allocated among persons involved at facilities requiring cleanup, including bankrupt or defunct 119 CMC Asbestos Bozeman Report Page 2 persons or entities. The share of cleanup costs for which bankrupt or defunct persons are responsible is to be paid from the orphan share fund. Both the DEQ and the City’s initial consulting engineer strongly encouraged the City to pursue orphan share reimbursement through the CALA process. The City thereafter submitted a petition initiating the allocation process on July 23, 2003. Between November, 2004 and November, 2006, the DEQ conducted further investigation to identify additional potentially liable persons (PLPs) for contamination that existed on properties adjacent to the city owned properties and issued CALA notice letters requiring the appointment of a lead PLP and cleanup of the remaining contamination at the facility. The DEQ also requested that the City conduct additional investigation of specific areas in the Facility. The City retained environmental consultant Tetra Tech to conduct supplemental investigation field work on properties adjacent to the Library. Concurrent with the supplemental investigation, the City, the DEQ, and other PLPs conducted discovery for the purpose of obtaining information relevant to the allocation of liability among the parties. After the close of discovery, and significant efforts at negotiations, a stipulated agreement between the noticed PLPs was signed in August, 2007. The agreement allocates 79% liability to the orphan shares. The City is therefore entitled to reimbursement of 79% of its eligible remediation costs; however, the City was also obligated to remain the lead party in the cleanup. Tetra Tech completed supplemental investigation field work focused on contamination on the adjacent properties in December, 2007. Based on information in the supplemental investigation report, the City submitted an Addendum to its original Voluntary Cleanup Plan. DEQ approved the Addendum on January 29, 2009. Cleanup work under the approved Addendum began in March, 2009. The physical work specified in the City’s Addendum was completed in June, 2009. A Construction Completion Report (CCR) has been submitted to DEQ for the purpose of obtaining final closure of the asbestos facility. The DEQ reviewed the CCR and provided notice to the City that it required the incorporation of numerous comments (edits, change, additions, etc.) along with verification that all required reclamation of the facility had been completed. Currently, the City is awaiting final approval from DEQ of the CCR. DISCUSSION: Voluntary Cleanup Plan (“VCRA”). On September 21, 1990, the former East Main Depot was listed by the Montana Department of Environmental Quality for remediation under the Comprehensive Environmental Cleanup and Responsibility Act (CECRA). The site was identified as the CMC Asbestos Bozeman Facility (“Facility”), an asbestos ore storage and processing, recycling/salvage yard. In 2001, the City received authorization to issue $4 million of general obligation bonds for the purpose of acquiring land and designing, constructing and equipping a new public library. After conducting a due diligence site investigation to determine the extent of the required remediation, the City subsequently purchased 14 acres of the Facility from CMC Heartland Partners, in order to construct a public library. The City paid $2.15 million on the purchase of the property. “Facility” is defined by CECRA as “any site or area where a hazardous or deleterious substance has been deposited, stored, disposed of, placed, or otherwise come to be located.” It must be 120 CMC Asbestos Bozeman Report Page 3 noted that a “Facility” is not defined by or limited by property boundaries, and in fact the CMC Asbestos Facility does encompass areas west of the current library property. The City submitted a Voluntary Cleanup Plan (“VCP”) to the DEQ, pursuant to the Voluntary Cleanup and Redevelopment Act (VCRA) in order to remediate contamination within the area of the facility purchased from CMC. VCRA was developed to permit and encourage voluntary cleanup of facilities by providing interested persons with a method of determining what the cleanup responsibilities will be for reuse or redevelopment of existing facilities. The 1995 Montana Legislature created VCRA to formalize the voluntary cleanup process in the state. It specifies application requirements, voluntary cleanup plan requirements, agency review criteria and time frames, and conditions for and contents of no further action letters. The act offers several incentives to parties voluntarily performing facility cleanup. Any entity can apply and liability protection is provided to entities that would otherwise not be responsible for site cleanup. Cleanup can occur on an entire facility or a portion of a facility. Under this act, the DEQ cannot take enforcement action against the party conducting an approved voluntary cleanup for work addressed in that plan. Once a plan has been successfully implemented (and DEQ costs have been paid), the applicant can petition the DEQ for closure. The DEQ must determine whether closure conditions are met and, if so, issue a closure letter for the facility or the portion of the facility addressed by the voluntary cleanup. The approved remediation involved excavation of contaminated soils and disposal at the City landfill. Prior to disposal, the soils were thoroughly characterized to ensure that the waste was acceptable for land disposal. Some soils were treated prior to land disposal to render them non- hazardous. The approved cleanup plan included: on-site waste characterization; removal of surface debris; excavation of contaminated soils; on-site treatment of soils; transportation of waste materials to the landfill; landfill disposal; confirmation sampling; and site reclamation. Waste characterization was conducted in the fall of 2002. Envirocon Inc. was retained by the City to implement the cleanup, and remediation was completed in the summer and fall of 2003. Total costs for remediation of the library site under the VCP were as follows: Resource Technologies, Inc Professional Engineering - Due Diligence - Voluntary Cleanup Plan $453,187.24 Publishing, Advertising Bids/Advertising Remediation $1,240.59 Envirocon Site Remediation $811,509.73 Dept. Environ. Quality Remediation Fees $91,499.36 Dept. Revenue Remediation 1% GRT $8,197.07 City Landfill Asbestos Disposal (in-kind) - 25, 984 tons soil $955,418.00 $2,321,051.99 121 CMC Asbestos Bozeman Report Page 4 Controlled Allocation of Liability Act (“CALA”). On July 23, 2003, the City submitted a petition to the DEQ initiating a voluntary allocation of liability under CALA. CALA is a voluntary process that allows potentially liable persons (PLPs) to petition for an allocation of liability as an alternative to the strict, joint and several liability provisions included in CECRA. CALA provides an alternative to litigation that involves negotiations designed to allocate liability among persons involved at facilities requiring cleanup, including bankrupt or defunct persons. Cleanup of facilities must occur concurrently with the CALA process and CALA provides the funding for the orphan share of the cleanup. Since CECRA cleanups typically involve historical contamination, liable persons often include entities that are bankrupt or defunct and not affiliated with any viable person. The share of cleanup costs for which these bankrupt or defunct persons are responsible is the “orphan share.” CALA was designed to be a streamlined, voluntary allocation process. This flowchart outlines the basic CALA process. 122 CMC Asbestos Bozeman Report Page 5 Any person who has received approval of a voluntary cleanup plan can petition to initiate the CALA process. CALA includes fourteen factors to be considered in allocating liability. Based on these factors causation weighs heavily in allocation but is not the only factor considered. Other notable provisions in the CALA process include the limitations that only remedial action costs incurred after the date of petition are eligible for reimbursement, all remedial actions must be completed at a facility prior to reimbursement from the orphan share fund, and only a designated “lead party” is eligible for reimbursement. In November, 2006, the DEQ identified additional potentially liable persons (PLPs) and issued CALA notice letters requiring the appointment of a lead PLP and cleanup of the remaining contamination at the facility. On December 21, 2006 the City agreed to act as the lead potentially liable person under CALA to complete remedial actions at the Facility. The additional PLPs identified were Empire Building Materials, Inc., Harrington’s, Inc., Story Distributing Company, Simgraf Corp., and Pacific Steel & Recycling. The parties also identified the defunct/bankrupt entities previously involved at the facility as follows: Interstate Products Company, Interstate Manufacturing Company, Milwaukee Railroad, CMC Heartland Partners, and Carl Weissman & Sons. Liability allocated to these entities would be assigned to the orphan share. After extensive discovery, all persons participating in the allocation process endeavored to conduct good faith settlement negotiations. Ultimately a stipulated agreement between the noticed PLPs was signed in August, 2007. The agreement allocates 79% liability to the orphan shares. The City is therefore entitled to reimbursement of 79% of its eligible remediation costs; however, the City was also obligated to remain the lead party in the cleanup. In 2006, the City hired a new consultant, Tetra Tech, to conduct supplemental investigation field work on the remainder of the facility. Investigation field work on the adjacent properties was completed in December, 2007. Based on information in the supplemental investigation report, the City submitted an Addendum to its original Voluntary Cleanup Plan. DEQ approved the Addendum on January 29, 2009. Cleanup work under the approved Addendum began in March, 2009. The portion of the Facility covered by the 2008 VCP Addendum is considerably more complex than that of the original cleanup plan. The area includes buildings that pre- and post-date CMC operations, parking lots, streets, curbs, sidewalks and loading docks. The Facility contains multiple private property owners; some of which understand the project because they are part of the Stipulated Agreement, while others are not part of the agreement and are less familiar with the project. City right-of-way is also intermixed with the private parcels, and therefore several different approaches to removal of asbestos containing material needed to be developed. Also, there was no clear description of how and where asbestos was distributed throughout the Facility. The 2008 VCP Addendum described these differing conditions and how they may be addressed with differing approaches (i.e., removal, encapsulation, pavement patching, institutional controls etc). The remediation generally addressed the following areas: east of the south Harrington building and beneath the loading dock east of the north Harrington building; west of and adjacent to the north Empire Building Materials warehouse; south of the Harrington building, on property owned by Harrington’s, Inc. and Story Distributing; in the alley and driveways south of Heeb’s Grocery; vacated portion of Olive Street north of the north Harrington building; the east and 123 CMC Asbestos Bozeman Report Page 6 south walls of the utility conduit remediation excavation; parking lot of Empire Building Materials adjacent to Wallace ROW; west of the south Empire building; south Empire building and ramp; and southwest corner of Wallace and Main intersection, extending west beneath the sidewalk and south beneath the Heeb’s Grocery parking lot. In October, 2008, the Commission passed Resolution No. 4132, authorizing the award of an Alternative Project Delivery contract for remedial actions. We bypassed the statutory bid solicitation process and utilized the abbreviated RFQ/RFP process, enabling us to enter into a contract with Envirocon Inc. in an expedited manner. We secured necessary access permits from affected, adjacent properties in order to test, remove and remediate contaminated soils. Institutional Controls. The addendum to the cleanup plan also included a Remediation Plan for Observed Asbestos Ore in accessible areas and a Potential Asbestos Ore Area Investigation Plan and Combined Protective Plan for areas of Potential Asbestos Ore and inaccessible Observed Asbestos Ore. Inaccessible areas are those areas under buildings, under Wallace Avenue and other specified paved areas. The Combined Protective Plan includes preventive measures, operations and maintenance and institutional controls plans. Institutional Controls are proposed as an alternative to prevent exposure to the public, utility and construction workers, and the environment in the event that areas of Potential Asbestos Ore are disturbed. The institutional controls proposed include restrictive covenants, or “deed restrictions,” on all specified properties unless it is shown that asbestos ore contamination does not exist through implementation of the addendum. In January, 2009, the Commission adopted Resolution No. 4140, directing the implementation of asbestos related information within the records of the City and modification of the City Street Cut permit requirements. We developed a GIS layer identifying areas of observed and probable asbestos locations. We adopted the modified Street Cut Permit with new language addressing potential asbestos along Wallace with the required form for accredited asbestos contractor/supervisor information. During the summer of 2009, Assistant City Attorney Cooper met with affected property owners to negotiate the placement of restrictive covenants on those areas identified in the cleanup plan as areas of Potential Asbestos Ore and inaccessible Observed Asbestos Ore. Declarations of restrictive covenants were recorded on properties owned by Empire Building Materials, Inc., Harrington’s, Inc., Story Distributing Company, Heeb’s Grocery, Tire Rama, and Department of Transportation right-of-way on East Main. Separate agreements were made with individual property owners in consideration for placement of these covenants. In exchange for recording the deed restrictions, the City agreed that if the DEQ required additional cleanup the City would address contamination on the property through submittal of a new VCP, but agrees to pay only the percentage of remedial action costs eligible for reimbursement in the amount equal to its claim against the orphan share fund. [As indicate above, only a designated “lead party” is eligible for reimbursement from the orphan share fund.] CALA/ VCP Addendum Costs and Reimbursement. As indicated, the City paid approximately $2.4 million for remediation of the City property during the initial cleanup in 2003. Except under special, limited circumstances, claims may not be submitted and remedial action costs may not be reimbursed from the orphan share fund until all remedial actions are completed at a 124 CMC Asbestos Bozeman Report Page 7 facility. However, on January 2, 2009, the Director of the DEQ, Richard Opper, provided written notice to the City that DEQ staff had determined that approximately $2.1 million of the City’s initial costs were eligible for reimbursement under CALA. As per the Stipulated Agreement, the City is entitled to a proportional share of 79% of those eligible costs, or $1,663,718.00. Mr. Opper stated that the DEQ would release half of the reimbursable funds, or $831,859.00, upon written documentation from the City that certain institutional controls were in place. Documentation of progress on those controls – namely, the steps outlined above – was provided to Mr. Opper on January 15, 2009. The City received the partial reimbursement of $831,859.00 on January 27, 2009. In 2007, during the allocation process and the supplemental investigation phase of the remainder of the facility, Assistant City Attorney Cooper petitioned the DEQ and presented evidence pursuant to §75-10-743(7), MCA, that it would be a hardship for the City to complete the remaining remedial actions. The DEQ was persuaded and granted the hardship. Therefore, all remedial action costs from August 8, 2007 forward have been reimbursed by DEQ at 100%. To the extent these remedial action costs and hardship reimbursements contribute to the total overall cost of the project, the 21% for which the City is responsible as the lead party will eventually reduce the amount of reimbursement which the City has already been deemed eligible to receive. Recovery of that 20% (the City received an allocation of 1% liability) would have to come from other PLPs. As of this date, the total reimbursed costs for remediation of the remainder of the facility under the Addendum to the VCP, are as follows: Total Amount of Claims Submitted and Reimbursed 1. Advertising 395.10 2. DEQ Oversight costs 61,983.79 3. Dept. of Revenue 16,124.45 4. Envirocon 1,378,943.19 5. Great West 9,710.95 6. Tetra Tech 460,749.54 7. Trapper Peak 52,001.89 Total: $ 1,979,908.91 Pending Claims – Waiting Reimbursement 1. Dept. of Revenue 1,304.50 2. DEQ Oversight costs 16,867.62 3. GC Clerk & Recorder 194.75 4. Great West 3,578.50 5. Envirocon 156,001.72 6. Panhandle 7,800.00 7. Tetra Tech 6,987.22 8. Trapper Peak 129,145.50 Total: $321,879.81 125 CMC Asbestos Bozeman Report Page 8 As stated above, the physical work specified in the City’s Addendum was completed in June, 2009. Tetra Tech submitted a draft Construction Completion Report to DEQ at that time for the purpose of obtaining closure of the asbestos facility. After securing various restrictive covenants and other institutional control documents, the final report was deemed finally submitted on September 24, 2009. On November 10, 2009, the DEQ provided notice to the City that it had completed its review of the City’s Construction Completion report. The notice specifically stated that DEQ was not approving the Report because reclamation of certain excavated areas had not yet been completed. Attached to that notice were 79 numbered comments. The City is asked to incorporate those comments in the text of a revised Report and submit it DEQ no later than December 10, 2009. We are in the process of doing so. The notice provided further that DEQ will not consider the cleanup plan complete until the City satisfactorily addresses DEQ’s comments and the City submits verification that all reclamation has been completed. FISCAL EFFECTS: The DEQ is still reviewing various invoices and the documentation of certain costs. The City is also processing additional costs and expenses and waiting on others. At this point it is not possible to provide a complete accounting of all costs to date, costs still to be incurred, or final reimbursement amounts owed to the City. However, in terms of the amount of total costs that have been paid by the City and by the orphan share fund under the CALA hardship determination, the remaining reimbursement amount owed can be estimated by determining the appropriate allocation of that total amount to the orphan share. Total Eligible Project Costs (Estimated) 4,449,091.57 Orphan Share (79%) 3,514,782.34 Less orphan share payments partial reimbursement 831,859.00 hardship payments 2,301,788.72 3,133,647.72 Estimated Remaining Reimbursement 381,134.62 Assuming the above estimate is reasonably accurate, and the City receives it, the total amount of reimbursement received from the orphan share will be $1,212,993.62, and reduce the City’s overall expenditure of (eligible) costs to approximately $934,309.23. This is the equivalent of the “lead party’s” share of 21% of the total costs. Total Eligible Project Costs (Estimated) 4,449,091.57 Lead Party Share (21%) 934,309.23 The final note to be made is that the percentage of liability allocated to the City of Bozeman was one-percent (1%) (equivalent to $44,491.00) The remaining 20% was allocated to the other signatories to the Stipulated Agreement. We executed agreements with three of those signatories; however, upon final release by DEQ of all monies owed to the City, we plan to approach the remaining signatory to negotiate an appropriate contribution in accordance with the allocation agreed to in that stipulated agreement. Report compiled on December 2, 2009 126