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January 23, 2025

Replacement for CT’s unpopular environmental contamination law nearing adoption

Department of Energy and Environmental Protection Commissioner Katie Dykes.
By Michael Puffer

For a long time, industry experts and civic officials with a stake in redeveloping Connecticut’s industrial sites have complained that the state’s cumbersome law governing potentially contaminated sites was killing deals and scaring off investors.

Last week, the Connecticut Department of Energy and Environmental Protection released its final version of new “release-based” regulations that will replace the roughly 40-year-old Transfer Act. DEEP Commissioner Katie Dykes is asking state lawmakers to allow these new regulations to go into effect March 1, 2026.

“I can’t tell you how many folks I’ve heard from – property owners, mayors, developers, environmental lawyers – who say the Transfer Act has really been a deterrent to deals getting done in Connecticut,” Dykes told the Hartford Business Journal Wednesday. “I expect this will be a big ‘Open for Business’ sign that will unfurl across many communities in our state.”

DEEP, on Jan. 14, sent the final draft of its cleanup regulations to Attorney General William Tong’s office for review. From there, they go before the General Assembly’s Legislative Regulations Review Committee for final approval. DEEP officials hope lawmakers begin their review at a March 25 meeting, and finish this spring.

When state lawmakers passed a 2020 law kickstarting the process of replacing the Transfer Act, they said the new regulations would go into effect immediately upon adoption. Dykes is asking lawmakers to tweak that implementation timeline until March 1, 2026, to give affected property owners and the industry some time to prepare for the new law.

The biggest complaint against the Transfer Act is the wide net it casts, dragging in all properties in which more than 100 kilograms (about 220 pounds) of hazardous waste was processed or generated in any one month from Nov. 19, 1980 onward.

Under the law, those properties – even ones where there was never any known discharge or spill – had to undergo environmental testing and review before a sale could be completed. 

At a minimum, a property owner would have to spend about $50,000 for an environmental review, which had a roughly 50% chance of being audited by the state, meaning further cost and delay, said attorney Jane Kimball Warren, an expert in environmental law in the Hartford office of McCarter & English.

“It was very expensive to prove the negative, and the idea behind this (regulatory change) is you don’t have to go looking under every stone; you don’t have to go looking for trouble,” Kimball Warren said.

Michael Puffer | Hartford Business Journal
A brownfield at 777 South Main St. in Waterbury.

Under the new system, property owners will have to clean up releases either as they happen, or as they are uncovered.

Kimball Warren said this will require a lot of consultation with attorneys. Lenders will still want to see environmental testing of certain properties before purchase, but owners might not want to be aware of the results.

Kimball Warren said she is also getting calls from New York-based attorneys, wondering if they should hold off on transactions until the new regulations go into effect. She expects a slowdown in deals early next winter as buyers wait until the new rules go into effect.

Meantime, properties that sell before the new regulations go into effect will still be subject to a Transfer Act review, meaning there will be a dual system of environmental regulation in place for years while those reviews play out, Kimball Warren said.

“Transactions right before the effective date are not going to happen because everybody is going to wait,” Kimball Warren said.

A March 2019 report by the Connecticut Economic Resource Center estimated the Transfer Act cost the state 8,000 jobs and more than $170 million in state and local tax revenues between 2014 and 2018. 

A recent update of that CERC analysis found that, if sites were not stuck in the Transfer Act, another 4,350 manufacturing jobs would have been created, along with $113.8 million in additional state tax revenue over the past five years.  

Graham Stevens, chief of DEEP’s Bureau of Water Protection and Land Reuse, said the new regulations offer streamlined reviews and large cost savings for redevelopment projects. 

One change would allow developers to manage polluted soil fill on-site, capping it with existing pavement or foundations, rather than scooping out and replacing the top four feet of soil. 

That means, Graham said, a multifamily developer in a city core will have an opportunity to cap certain types and levels of pollution with existing pavement and foundations, rather than digging out urban fill and replacing it with clean dirt, he said.

“People who live in a tower in Stamford don’t have sheds or garages; they aren’t going to dig in the soil,” Stevens said. “We are really trying to create standards where the cleanup is aligned with the risk.”

The rule change will save months and millions of dollars on redeveloping contaminated sites, DEEP estimates. Because the state provides significant cleanup grants, it will also allow more to be accomplished with existing funding. 

Dykes said the new regulations will help clear the way for redevelopment in cities and downtown cores, reactivating dormant sites, eliminating blight and generating new tax revenues.

Industry experts had a seat at the table

The new release-based system is entering the home stretch of a process stretching over four years. Among other things, this involved more than 50 meetings between DEEP staff and a working group of environmental attorneys, real estate brokers, environmental cleanup experts and other stakeholders.

Those meetings helped shape changes to the regulations.

For instance, the latest regulation carves out single-family homes from review under the new system, as long as they don’t have a level of pollution migrating onto other properties. This was a major concern for the working group collaborating with DEEP, officials said.

Stevens said the process has been far and away more collaborative than previous efforts to update or replace the Transfer Act.

Frank H. Hird, vice president of real estate services firm O,R&L Commercial, said DEEP has made “vast improvements” to the regulations thanks to incorporation of feedback from stakeholders, many of whom were raising concerns to the very last minute.

That doesn’t mean there won’t be any complaints or even calls for further tweaks to the regulations before they are adopted. But DEEP’s inclusion of industry professionals has engendered some goodwill.

Hird said he is reserving final judgement until attorneys and environmental professionals in the working group finish digesting the complex proposal. But he has heard encouraging early feedback on the regulations pushed out by DEEP last week. He credited the state’s outreach as well as the many hours volunteered by industry professionals.

“If it were just DEEP talking, or just the LEPs (licensed environmental professionals), or the attorneys, or the brokers, it wouldn’t be the same,” Hird said. “I just think the collaborative approach is the best way to try and get something like this done.” 
 

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