Findings
& Recommendations for the Remediation of Historic Pesticide Contamination
- Final Report March 1999
Table
of Contents
V.
Costs and Economic Impacts
There has been considerable
apprehension regarding the costs associated with site investigation and
remediation, and the potential for far reaching economic impacts associated
with historic pesticide contamination. There will undoubtedly be some
negative economic impacts, however, the actions recommended below are
intended to minimize adverse economic impacts by providing practical solutions
while minimizing health risks associated with residual pesticide contamination.
This section addresses the typical costs that are associated with the
investigation of sites potentially impacted by historic pesticide use
and costs for the implementation of selected remedial strategies. Economic
impacts on lending institutions, property owners and others that may occur
as the result of this contamination problem are discussed. A discussion
of potential economic impacts if the Department or the Legislature takes
no actions is also included.
A.
Costs Associated with Site Investigation and Remediation
Costs are associated with the environmental
evaluation of a property to determine if soils are contaminated with pesticide
residues. In most cases, soil sampling must be conducted to determine
if a property contains pesticide residues.. The Department developed new
sampling guidance (Addendum
5) to minimize costs while ensuring that properties will
be consistently and adequately evaluated. It is likely that actual costs
will vary among environmental consulting firms and analytical laboratories.
The Department
recommends that a minimum of two samples be taken for a small property
(4 acres or less); this means that the lowest cost for site investigation
sampling is approximately $600-$1800. Sampling costs for a larger property,
for example, a 100 acre property, would be $7,000 at a minimum.
If no pesticide residues
are detected above the Department’s residential soil cleanup criteria,
the only additional costs would be the cost of the Department’s review
if a formal No Further Action determination is desired. The cost of Department
oversight would range from $500 to $4,000 depending on site specifics.
If contamination
were detected, additional sampling would be needed to determine the depth
and areal extent of contamination to determine the appropriate remedial
action for the site. The sampling and personnel costs for remedial investigations
typically begin at around $10,000 and can run into six figures, depending
on the site. The Department’s associated oversight costs would range from
$1,000 to $8,000, again depending on the site.
The costs of
remediating a site will vary depending on the concentration and distribution
of the contamination, the size and layout of the site, and the remedial
actions implemented. Table 6 presents cost estimates associated with each
remedial option presented above for 1 acre of contamination that is assumed
to be 1 foot deep (1 acre foot). These costs are based on the remediation
of undeveloped farmland.
Remediation costs
could rise dramatically for existing development due to difficulties associated
with the movement of soil around existing structures, trees, pools and
decks. In addition, the remediation of properties with existing development
would not have the benefits of economy of scale associated with undeveloped
land.
Table 6.
Estimated Remediation Costs
Remedial Option
|
Cost per acre-foot
|
Consolidation and covering contaminated soil on-site
(i.e., under roads and structures)
|
$1,000 - $2,000
|
Cap contaminated soil with clean soil
|
$7,000 - $12,000
|
Blending with clean soil from on-site
|
$1,000 - $2,000
|
Blending with clean soil from off-site
|
$8,000 - $15,000
|
Excavation and removal of contaminated soil
|
$32,000 -$ 80,000
|
Proven and innovative soil treatment technologies
|
$50,000- $100,000
|
The costs of remediation per acre
would probably decrease as the size of the property being remediated increases.Also,
it is important to note that the depth of contamination may be greater
than 1 foot, thus increasing the cost of the selected remedial action.
Elevated natural background concentrations of arsenic may impact the remedial
strategy selected and may affect the costs of implementing a remediation
at a site.
There are secondary
costs associated with remedies that result in contaminated soil being
left on-site. When contamination remains at a site (remedial options 1,
2 and possibly 6) the owner of the site must file a deed notice with the
applicable county recording office that describes site conditions and
any use restrictions that are placed on the property. If the property
is subdivided, the applicable portions of the deed notice must be attached
to the deeds of the parcels that are sold. Properties with environmental
deed notices could have lower market value than those without such restrictions.
Additional costs
will be associated with remedies when contamination is left at a site.
The Legislature recently included a requirement that subsequent owners
responsible for maintaining engineering and institutional controls (including
deed notices) report the continued protectiveness of those controls to
the Department every two years. See N.J.S.A. 58:10B-13. Costs associated
with biennial reporting are expected to be minor (i.e., less than $500)
and may simply require inspection of the property by the property owner
and the submission of a certification to the Department that the implemented
remedy continues to be protective of human health and the environment.
The Task Force was
unable to estimate state or county-wide impacts that may be caused by
sampling and remediation costs or any associated decline in market values
because the exact number and location of affected properties is unknown
at this time. Only those properties where contamination is documented
will cost more to develop due to the addition of remediation costs. If
the remediation of a site can be "worked in" to the site development
plan, soil blending or consolidation could be accomplished with only minor
additional costs since large quantities of soil are routinely moved during
construction. However, there will be some costs associated with the tracking
of contaminated soils and associated confirmatory sampling.
B.
Potential Economic Impacts
The economic impacts
of historic pesticide contamination will be as varied as the interests
affected. Some of those affected are likely to be farmers, developers,
home owners and buyers, and local governments that own or plan to purchase
property for recreation, open space or other uses, and school districts.
The impacts will also affect new and existing development differently.
New
Development - The environmental condition of property being mortgaged
is one of the important criteria that lending institutions consider when
evaluating a mortgage application. When a developer seeks financing in
areas of potential pesticide residue contamination, lenders can be expected
to require a real estate appraisal and an environmental investigation
to assess the condition of the property prior to approving the financing.
If the investigation shows residual pesticide contamination, lenders can
be expected to require the borrower to obtain a No Further Action Letter
from the Department. Individual lenders may also require collateral protection
insurance with certain environmental protection riders. For remediations
involving a deed notice, the economic impacts of deed notices on property
values are unknown. Recent experience suggests that as long as all parties
involved act reasonably and remediation takes place, land development
projects will likely receive the needed financing.
Existing Development - The potential economic
impact of residual pesticide contamination may be greater for existing
development than for new development. Beyond the potential impact that
the contamination may have on the value of property presently used as
collateral for a mortgage, it is difficult to forecast the possible extent
of any other economic impacts because the number of properties that may
be effected is unknown. The reaction of the Legislature and the wider
marketplace may have impacts; however, they are unknown at this time.
If there is little or no reaction,
then lenders and borrowers will likely continue to behave in the traditional
manner when conducting real estate transactions. Lenders indicated to
the Task Force that the extent of the potential impacts will become more
apparent when properties are offered for resale.
Bank lending policies may also be
effected by outside forces including most notably, the secondary market
such as the Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac), who regularly purchase
mortgage paper from banks. These institutions could choose to not buy
mortgages on affected properties that would, in turn, impact where banks
choose to invest. This may have the effect of reducing the amount of money
available for all kinds of loans and thereby possibly increasing interest
rates. In addition, federal bank regulatory agencies could require New
Jersey banks to reassess the value of their loan portfolios and reappraise
properties with deed notices. This property revaluation could adversely
affect homeowners and other property owners.
Municipalities with a large number
of affected properties may be forced to increase property tax rates to
offset lower revenue streams if real property devaluation occurs. Local
taxes may also be impacted in those communities whose public parks and
schools are built on former farms and orchards that may require environmental
investigation and remediation.
The Task Force hopes that the Department’s
acceptance of soil blending as a remedial alternative for residual pesticide
contamination will serve to mitigate potential economic impacts. Furthermore,
low interest loans should be made available from the State to assist property
owners in addressing this contamination.
C.
No Action Alternative
When evaluating new
policies it is helpful evaluate the potential results of a "no action"
response. If neither the Department nor the Legislature takes any action
to address the potential risks associated with the development of former
agricultural properties as reflected in this report, the Task Force believes
that lenders would still require developers and home buyers to evaluate
the environmental conditions prior to loan approvals. The task Force also
expects that lenders would continue to require the Department’s review
and issuance of a No Further Action letter approving the remediation.
In addition,
municipalities could choose to pass their own ordinances to address historic
pesticide contamination within their jurisdiction. Separate local ordinances
would most likely lead to inconsistent policies being implemented across
the state. There would be a negative economic impact on developers and
home buyers who would be subject to varying policies. Finally, if neither
the Department nor the Legislature responds to this issue, the Department
would not approve soil blending as an acceptable remedial option for historic
pesticide contamination. Without soil blending as a remedial option, the
cost of remediating sites with historical pesticide contamination would
likely be higher.
Over time, a no action alternative could cause more people
to be exposed to historical pesticide contamination resulting in increased
long term health risks. At this time there is no way to estimate the costs
associated with those potential increased risks.
In general, it is the Department’s experience with other emerging environmental
issues that, although initially controversial, once the affected parties
have a greater understanding of the issue, the controversy often dies
down and the new requirements are accepted as routine. New Jersey has
seen economic benefits emerge from the implementation of sound environmental
policy.
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