Jersey Department of Environmental Protection
Historic Pesticide Contamination Task Force
& Recommendations for the Remediation of Historic Pesticide Contamination
- Final Report March 1999
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.
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 Departmentís residential soil cleanup criteria, the only additional costs would be the cost of the Departmentís 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 Departmentís 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.
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.
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 Departmentís 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.
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 Departmentís 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 Departmentís 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.
Last updated: 31 October 2000
Please send your comments to: askDEP@dep.state.nj.us