Environmental Insurance Helps Cities Create Sustainable Development Out
of "Brownfields"
December 2005
Two New Jersey cities are using environmental
insurance to turn large polluted areas into environmental models that reduce
greenhouse gases, improve wildlife habitat, and provide other environmental
improvements.
by Michael
O. Hill*
Hill & Kehne,
LLC
Many American cities have waterfronts, landfills, and other very large areas
(e.g., 50 to 1,000 acres) that are unused or underused because of pollution.
Known as "brownfields," these areas may bar citizens from their own waterfronts
and other natural resources. Often the principal obstacle to redevelopment is
the risk that environmental unknowns pose to redevelopment capital. Environmental
insurance can reduce those risks, and the large scale of these projects allows
cities to go beyond cleanup and actually improve the environment by, for example, reducing greenhouse gases; improving wildlife habitat;
and/or creating model small-scale treatment
and power systems.
Two New Jersey communities—one in the Meadowlands and one in Camden—are proving
this can be done and providing a roadmap. They are doing so with the help of
one deeply capitalized and environmentally focused developer, Cherokee Investment
Partners, LLC.
The Meadowlands: Greenhouse Gas Reductions
In the N.J. Meadowlands—located along the N.J. Turnpike and adjacent to the
New York Giants stadium—sit six landfills, some still active and some orphaned
30 years ago. As is true of many landfills, they are filled with a mixture of
municipal and construction wastes that, in addition to taking up valuable space,
slowly release methane gas into the atmosphere (methane is a greenhouse gas
23 times more harmful than carbon dioxide). The environmental unknowns in the
landfill are numerous and substantial, e.g., What, exactly, was disposed there?
To what extent might contaminated groundwater under the landfills be carrying
contamination to neighboring properties? What, exactly, will the government
require to do the cleanup under today's laws? How about tomorrow's laws?
Environmental insurance—in this case, from AIG, the world's largest insurer—has
been purchased to mitigate every one of those risks, and others. Cherokee bought
the insurance and worked with the New Jersey Meadowlands Commission (NJMC) and
with AIG to draft a customized "surplus lines" policy that fits exactly what
the NJMC and Cherokee needed (not less, not more). Because those risks could
be mitigated at a reasonable cost, Cherokee was able to invest substantial capital
into this project.
Cherokee has probably undertaken more development of contaminated properties
(over 300), and probably for longer (since the mid-1980s), than anyone else.
This is exciting in itself. More exciting, however, is where Cherokee is heading
now, looking not just to redevelop property in a way that does not harm the
environment, but in ways that actually improves it. Led by Founding Partners Tom Darden and John Mazzarino, and supported by
myriad experts, including world-renowned environmental ("Green") architect William
McDonough, Cherokee is using its capital in novel and environmentally beneficial
ways.
The scale of the Meadowlands project is such that Cherokee will be able to
vacuum extract the methane gases that are in the landfills and pipe them to
an onsite power generating plant. The capture and use of these gases is the
environmental equivalent of permanently removing approximately 700,000 cars
from the road.
Camden: Improved Eagle Habitat and Utility Models
Once voted America's most beautiful city, Camden, N.J., borders the eastern
shore of Delaware River directly across from Philadelphia. For almost 40 years,
however, much of its waterfront has been completely inaccessible to the city's
residents. Housing a 90-acre long-closed landfill and several shuttered industrial
sites, the waterfront is completely inaccessible to its residents, many of whom
are unaware that their neighborhood abuts the river. For 25 years the city has
wanted to open the waterfront; for 25 years, the environmental uncertainties
and lack of capital have made that impossible.
Under the leadership of Melvin (Randy) Primas, the city's Chief Operating
Officer, and with critical development capital and self-funded planning from
Cherokee, Camden is pursuing a plan to clean up and redevelop close to 2 miles
of waterfront (approximately 600 acres) with 5,000 units of mixed-use housing,
a community center, marina, golf course, and other open areas.
A golf course, by itself, is in most cases not economically viable. In Camden,
the golf course would serve three purposes:
-
to provide recreational opportunity;
-
to increase the purchase price of enough of the new homes to make the
overall development viable; and, perhaps most unexpectedly,
-
to enhance the chances that a pair
of bald eagles nesting along the city's waterfront can raise a viable chick.
The eagle pair began nesting in the Camden area in 2003. Their principal
food source, however, is PCB- and DDT-contaminated fish from the highly polluted
stretch of the Delaware River that sits between Camden and Philadelphia. As
a result, state biologists must remove any egg laid by this pair, knowing it
could not survive on its own. An egg that the State removed from the nest in
2004 and hatched in a lab days later produced an eaglet that died within days
of suspected PCB toxicosis, and that had PCB or DDT congenital abnormalities.
With the environmental uncertainties reduced by insurance, and because of
the enormous scale of the project, Camden and Cherokee have literally been able
to build into their plans an alternative food source for the eagles. Golf course
ponds will be created not just to improve the beauty and challenge of the course,
but to hold fish that the eagles can eat.
Also because of the scale of the project, Camden and Cherokee intend to provide
a novel application of self-sustainability. Under a concept known as "Camden-Off-the-Grid,"
the development will create its own water quality infrastructure. Cherokee is
also exploring small-scale power sources. These facilities will be self-contained,
lower-impact, environmental models.
In sum, because of their enormous size, these projects do more than simply
reuse contaminated land and thus avoid the increasing problem of "urban sprawl."
With the creative energy of city leadership combined with a knowledgeable, well-capitalized
developer, these large projects can create models of environmentally sustainable
redevelopment. More cities should try them.
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