Brand new real estate opportunities exist in the real estate market to transform a contaminated property, a brownfield, into a renewable-energy producing property, a brightfield. The Clean Energy Results Program (CERP) – a joint effort between the Massachusetts Department of Environmental Protection and the Massachusetts Department of Energy Resources that promotes the development of renewable energy projects in Massachusetts – thats seeks to streamline agency assistance to clean energy stakeholders and the public.
One of the CERP’s goals is to redevelop contaminated land into clean energy projects. By 2020, the CERP wants to achieve 50 megawatts of new solar photovoltaic power on underutilized contaminated land, converting 21E sites, underused brownfields, Superfund sites and closed landfills into solar fields producing solar-powered renewable energy. Kerry Bowie, director of brownfields and environmental justice at the Massachusetts Department of Environmental Protection, recently spoke at a conference, entitled, Energizing Tax Credits: Turning brownfields into brightfields, about the benefits of CERP. The conference which was hosted by Cherrytree Group, LLC, took place on June 14 in Boston. Bowie stressed that underused brownfields are a great option for renewable energy projects because of their limited reuse options (due to contamination); the potential use of existing infrastructure; and the ability to protect open space and provide for sustainable development. An ideal project for converting a brownfield into a brightfield is one with at least 2.5 acres of land, that is underutilized, abandoned, or available for sale or lease with close proximity to utility lines. Bowie estimated that in Massachusetts there are over 200 sites that fit such characteristics.
In addition to CERP, Massachusetts provides a resource to remediation in the form a tax credit. Eligible developers may receive a tax credit of up to 50 percent of costs directly incurred in remediating environmental contamination in situations where the contamination was not caused by the taxpayer. Richard Cote, principal of Comprehensive Environmental Inc., provided ‘tips’ at the Energizing Tax Credits conference for other licensed site professionals to assist their clients to receive the Brownfields Tax Credit (BTC). The tips included maintaining detailed and itemized invoices of the remediation as the tax credit is administered by the Massachusetts Department of Revenue, conforming the remediation with the Massachusetts Contingency Plan, and ensuring that the remediation can pass an audit by the Massachusetts Department of Environmental Protection. Further, as many accountants and LSPs are unaware of the BTC, working with professionals who specialize in the credit is key to receiving the tax credit.
The BTC, which was set to expire in August 2013, was recently extended for an additional five years. With the extension of the availability of the BTC, the Massachusetts Department of Revenue (DOR) which processes BTC applications, has been working on a new directive – a defined set of rules that would clarify and supplement current DOR procedure regarding the BTC. Stakeholders, including the Cherrytree Group, have provided comments regarding the directive, emphasizing the goal of the BTC, that is to incentivize remediation. The DOR is set to release a directive in the near future which will provide new and/or clarified procedural rules regarding the BTC application process.
Once a brownfield has been remediated, the property owner is then eligible to a Renewable Energy Tax Credit, known as the Investment Tax Credit (ITC). The ITC is a federal tax credit which amounts to 30 percent of the investment made in renewable energy projects. It is available prior to the construction of the renewable energy project on the property. Contaminated sites are an attractive option for renewable energy projects because contaminated sites can be acquired at a significant discount. Further, as the BTC is received post-remediation and the ITC is available prior to construction of a renewable energy project, coupling both of the credits can lead to a significant upfront capital infusion. With the support of government agencies, such as CERP, state and federal tax credits, such as the Brownfields Tax Credit and the Investment Tax Credit, real estate developers have the means necessary to obtain financial capital to move a project from an idea to a successful reality.
Yelena Tsvaygenbaum is the corporate counsel at Cherrytree Group LLC.
