Originally published by the Daily Journal of Commerce on February 28, 2023.
Owning or developing a parcel of contaminated real property, or a “brownfield,” has historically been a risky endeavor. But brownfields are abundant in the United States, and there are several incentives available to those who develop clean energy facilities on a dirty project site (e.g., building a solar array on a dormant industrial yard, or an electric vehicle charging station on an abandoned gas station). We use the term “clean energy” broadly in this article to include facilities that further electrification and/or reduce carbon emissions. In many cases, these incentives can help clean energy investments on brownfields pencil out.
Brownfield remediation programs have existed for decades and vary state to state. But recent legislative developments have added pools of funding and tax credit incentives that may tip the scales on making the benefits of brownfield development outweigh the risks. Here are some of the top deal sweeteners for clean energy developers building on a brownfield site in Oregon:
Oregon Brownfields Properties Revitalization Fund (BPRF)
In 2021, the Oregon Legislature passed HB 2518, which created the BPRF. This forgivable loan program works to reimburse private owners or operators for up to $250,000 incurred during brownfield remediation on eligible projects, including electric vehicle charging stations.
Oregon Brownfields Redevelopment Fund (BRF) and Brownfields Cleanup Fund (BCF)
The Oregon Business Development Department also administers funds to the BRF. This direct loan and grant financing program helps private property owners conduct environmental due diligence and cleanup on brownfields. Funding is available for projects with a “substantial public benefit,” such as the productive reuse of a vacant industrial or commercial facility. In addition, the BCF is a low-interest loan and grant financing option for cleanup projects on brownfield sites where remediation is necessary prior to redevelopment.
State tax incentives
The state of Oregon also offers several tax incentives for brownfield development, including property tax abatements, tax credits for environmental cleanup, or credits for creating new jobs. These incentives may be available in connection with a voluntary cleanup program or brownfield cleanup agreement with the Oregon Department of Environmental Quality.
Federal brownfields program
The U.S. Environmental Protection Agency (EPA) provides brownfield developer support via assessment, cleanup, multipurpose, revolving loan fund, and job training grants. In addition, participants can benefit from agency expertise through technical assistance and targeted brownfield assessments. The Infrastructure Investment and Jobs Act of 2021 directed an influx of funding to the Brownfields and Land Revitalization Program – Congress appropriated $300 million per year for five years ($1.5 billion total), which exceeds the former statutory cap of $200 million per year (which Congress had never funded in full). The $1.5 billion consists of $1.2 billion for brownfield competitive grants and $300 million for brownfield categorical grants. In addition to the increased annual funding, the EPA can now provide larger grants and may not require state matching contributions.
Federal tax incentives
The Inflation Reduction Act of 2022 (IRA) also provides a host of new or modified incentives applicable to renewable energy development on brownfields. Generally, the IRA contains (i) the new ability for certain entities to either transfer tax credits to third parties or claim the tax credits as refunds; (ii) the extension, modification, and addition of tax credits; and (iii) new “base and bonus rate” tiers and opportunities to increase those rates with so-called “adders.” Specifically, the IRA created a 10 percent adder for Business Energy Investment Tax Credit (ITC) and Renewable Electricity Production Tax Credit (PTC) projects located in an “energy community” (including brownfield sites).
While additional guidance is forthcoming, existing resources shed light on areas that might constitute “energy communities” under the IRA. First, the EPA has screened more than 130,000 potentially contaminated sites and solid waste landfills covering nearly 43 million acres across the U.S. for suitability for renewable energy generation facilities. The RE-Powering Mapper provides locations of these sites, as well as map layers with information about their potential for supporting renewable energy generation. In addition, the EPA maintains a Cleanups in My Community platform to track past and ongoing cleanups funded by its brownfields program.
Finally, brownfield incentives vary, but most states complement such incentives with some version of a voluntary cleanup program involving expedited project permitting. And in some states, voluntary cleanup releases the owner from future liability to the state for the cleanup of preexisting contamination. Further, an agreement with the state also may provide some protection from liability under federal law. Anyone considering whether to buy or develop brownfield property should contact the relevant federal, state, and local regulatory agencies for detailed information regarding site-specific incentives and protections.