The R&D Tax Credit Aspects of Environmental Remediation
Environmental-Remediation
Taking care of the environment today is one
of the most paramount concerns for the generations of
tomorrow. Technology and innovation allow us to learn
more about our environment so that we can better protect it
for future generations by assisting us in environmental
cleanup processes.
Design and engineering
firms as well as other environmental professionals use a
number of technologies to clean up polluted sites, a process
known as environmental remediation.
Remediation
efforts can range from large, expensive projects such as the
BP oil spill in 2010, to smaller, less costly projects, such
as cleaning up a highway accident in which oil, asphalt, or
other contaminant is spilled. Based on this wide range of
projects, individual spills can present their own technical
issues based on factors such as size, site, required
remediation, specific chemicals, and contaminants.
Many of these issues
involve creative solutions and innovative approaches to
problem solving. Bioremediation, for example, which involves
breaking down contaminants through biological processes, is
one of the most active areas of research and development.
Properly cleaning up a contamination site often requires a
technical solution.
Federal and state
R&D tax credits are available for design and engineering
firms as well as other experts, companies, and organizations
innovating to in the environmental remediation sector.
The R&D Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On December 19, 2014, President Obama signed the bill
extending the R&D Tax Credit for the 2014 tax year.
Environmental
Remediation
Environmental remediation is the removal of
pollution or contaminants from environmental media such as
soil, groundwater, sediment or surface water. Pollution and
contamination needs to be
removed from the soil in order to protect human health as well
as the environment. Most cleanup sites fall under federal
regulations and are overseen by the Environmental Protection
Agency (EPA).
Geosyntec Consultants
Inc. v. United States
A
recent court case provided a favorable ruling for consulting
and engineering firms who provide environmental remediation
services. In Geosyntec Consultants Inc. v. United
States, 776 F.3d 1330
(Eleventh. Cir. 2015), Geosyntec Consultants Inc., the well
known consulting and engineering firm sought a federal income
tax refund of over $1.6 million in
R&D tax credits for a number of projects
it had completed between 2002 and 2005.
One such project involved the design and
expansion of a landfill and providing support services during
construction. The goal was to increase the capacity of the
landfill within its existing footprint. The landfill sat on a soft foundation, which
limited its capacity for vertical expansion, but a
previously-commissioned composite stability analysis of the
landfill demonstrated that expansion was possible.
Geosyntec’s work was separated into seven general tasks:
(1) site studies; (2) design work, including site design; (3)
general services, including permit applications and
construction drawings; (4) preparation of an operation and
maintenance manual; (5) construction-related services,
including on-site supervision and quality assurance
monitoring; (6) post-construction services, including as-built
drawings and a project completion report; and (7) additional
analyses, modeling, and testing.
In regards to this
activity the court said “Like the Fairchild contract, each
of the tasks required research development, and testing.”
Another project involved
the evaluation of a system for remediating contaminated
groundwater beneath a warehouse site previously used to
manufacture and store weapons and radioactive material.
The R&D activity, although eventually considered funded by
a third party, involved: (1) performing laboratory bench tests
to evaluate the feasibility and performance of enhanced in
situ bioremediation (EISB) for groundwater cleanup and (2)
preparation of a report describing its methodology, tabulating
the results, interpreting the data collected, and discussing
site conditions and potential pilot-test designs.
Additional examples of common R&D activity in the industry
are discussed below.
Site Assessment
Prior to beginning a remediation project,
the site in question must be assessed to ascertain what types
of contaminants are involved and to determine the most
appropriate technologies for clean up. Assessments must
be made to identify any potential hazards to the workers who
will be working on the project and to assess the impact that
pollution might have on the local community, as well as its
overall environmental impact.
Environmental engineers
typically will conduct testing to determine the extent of
pollution on the property. Common tests include groundwater
testing, subsurface soil assessment, sediment testing, and
assessment of pathways of contaminants in soil and
groundwater.
Treatment Design &
Site Mapping
A successful treatment design for any given
project requires a clear understanding of specific site
conditions and available treatment solutions.
Determining whether a cleanup project would be beneficial for
any given region is a research project in itself.
Part of the challenge is
determining which methods for cleanup are most
beneficial. One example is the cleanup of the Gowanus
Canal in Brooklyn. The $500 million plan by the EPA has
run into protests from otherwise environmentally conscious
residents in several Brooklyn neighborhoods. Residents believe
the canal should be purged of pollutants like Polychlorinated
Biphenyls (PCBs), lead, mercury and raw sewage, but are
fighting the methods the agency has chosen to accomplish
this. One neighborhood fears that the sludge taken out
from the canal would poison the air over their ball fields,
and others worry that the location of a sewage-processing site
needed for the cleanup would destroy a popular public swimming
pool.
The selection of the
most effective remedial design is critical to the success of
any project. Design and engineering firms offer cutting edge
analysis and feasibility studies of various remedial actions
and their effectiveness on any given site and the surrounding
environment. The latest software programs use site data
inputs to create accurate simulations of the effect of any
given treatment option available. These and
similar activities are often R&D tax credit
eligible.
In Situ Treatment
The main advantage of in situ or on-site
treatment is that it allows soil to be treated without being
excavated and transported, resulting in potentially
significant cost savings. There are many different types of in
situ treatment techniques. These categories generally
include biological, physical, thermal, and chemical treatment
methods.
Air Sparging
Air sparging, also
referred to as in situ air stripping, is a technology that
involves the injection of air into the subsurface saturated
zone and venting through the unsaturated zone to remove
subsurface contaminants. During air sparging, air bubbles
disperse horizontally and vertically through the saturated and
unsaturated zones, creating an underground process that
removes contaminants by enabling the transfer of hydrocarbons
from a dissolved or adsorbed state to a vapor phase.
Bioremediation
Bioremediation
technology uses microorganisms to biodegrade or neutralize
pollutants from a contaminated site. This technique is
especially useful in environments that have proven resistant
to conventional remediation technologies or where the
application of physical or chemical solutions is simply too
costly. Bioremediation works in either one of two ways:
- Providing natural,
pollution-eating microbes living at the contaminated site
with fertilizer, oxygen, and other conditions to encourage
their rapid growth or
- Adding specialized microbes to the
environment to degrade pollutants.
Ex Situ Treatment
Ex situ remediation is the process of
treating polluted soil after it has been removed from the
contaminated site. Here, the contaminated media is first
excavated or extracted and then moved to the process location
for treatment. This is the more conventional method for
cleanup and was very predominant from the 1970’s through
1990’s. Many of the same techniques that are used with
in situ treatment are also common to ex situ treatment.
The main advantage of ex situ treatments is that they
generally require shorter time periods, and there is more
certainty about the uniformity of treatment because of the
ability to screen, homogenize, and continuously mix the
contaminated media. Still, many ex situ treatment
options involve creative and technical solutions which are
often R&D credit eligible activities.
Biological Treatment
Biological treatment is
a process whereby contaminants in soil, sediments, sludge or
groundwater are transformed or degraded into carbon dioxide,
water, fatty acids and biomass, through the action of
microbial metabolism.
Thermal Treatment
Thermal ex situ
treatment processes use heat to separate, destroy, or
immobilize contaminants. Some innovative thermal
treatment technologies as described by the EPA are discussed
below.
Ex situ thermal
desorption involves the application of heat to excavated
wastes to volatilize organic contaminants and water.
Typically, a carrier gas or vacuum system transports the
volatilized water and organics to a treatment system, such as
a thermal oxidation or recovery unit. The thermal desorption
processes can be categorized as either high-temperature
thermal desorption (600 to 1,000ºF) or low-temperature thermal
desorption (200 to 600ºF).
Hot gas decontamination
involves raising the temperature of contaminated solid
material to 500ºF for a specified period of time. The gas
effluent from the material is treated in an afterburner system
to destroy all volatilized contaminants. This method permits
the reuse or disposal of scrap as nonhazardous material.
Plasma high-temperature
recovery uses a thermal treatment process applied to solids
and soils that purges contaminants as metal fumes and organic
vapors. The vapors can be burned as fuel, and the metals can
be recovered and recycled.
Pyrolysis is defined as
chemical decomposition by heat in the absence of oxygen.
Pyrolysis typically occurs under pressure and at operating
temperatures above 800ºF and the pyrolysis gases require
further treatment. The target contaminant groups for pyrolysis
are SVOCs and pesticides. The process is applicable for the
separation of organics from refinery wastes, coal tar wastes,
wood-treating wastes, creosote-contaminated soils,
hydrocarbon-contaminated soils, radioactive and hazardous
wastes, synthetic rubber processing wastes, and paint waste.
Thermal off-gas
treatment is one of several approaches that can be used to
cleanse the off-gases generated from primary treatment
technologies, such as air stripping and soil vapor extraction.
In addition to the established thermal treatments, organic
contaminants in gaseous form can be destroyed using innovative
or emerging technologies, such as alkali bed reactors.
Vitrification technology
uses an electric current to melt contaminated soil at elevated
temperatures (2,900 to 3,650ºF). Upon cooling, the
vitrification product is a chemically stable, leach-resistant,
glass and crystalline material similar to obsidian or basalt
rock. The high temperature component of the process destroys
or removes organic materials. Radionuclides and most heavy
metals are retained within the vitrified product.
Vitrification can be conducted in situ or ex situ.
Durango Oil Spill
In August 2015, EPA workers inadvertently
leaked about 3 million gallons of mustard wastewater, the
remnants of an abandoned gold mine near Silverton, CO, into
the Animus River. The contaminated water went downstream into
the San Juan River and eventually into Lake Powell on the
Utah/Arizona border. The mine water is toxic because it
contains dissolved pyrite, or iron sulfide, sometimes referred
to as fool's gold. The combination of iron sulfide, water, and
oxygen results in the formation of sulfuric acid which has the
potential to be quite dangerous.
The EPA's emergency
cleanup solution was a quick version of typical mine treatment
and involved a creative solution. The agency excavated
four holding ponds in order to detoxify the river water.
Water in these ponds was then treated with caustic soda
(sodium hydroxide) and lime (calcium oxide), which are very
basic in pH. When water is basic in pH most metals will
come out of the solution. The sludge left behind can
essentially be stripped of water and disposed of. These
types of creative solutions often involve technical
uncertainty and are typically good candidates for the R&D
tax credit.
University of Michigan
Smart Filter Technology
Researchers at the University of Michigan
are developing a state-of-the-art technology for cleaning up
oil with gravity instead of chemicals. They call it the
“smart filter technology”. Essentially, a novel
nano-material is used to strain oil from the water. It
has properties that repel oil but attract water.
To test the material,
the team dipped postage stamps and small scraps of polyester
in the solution, cured them with ultraviolet light and tested
them in various oil and water mixtures and emulsions,
including items such as mayonnaise. Amazingly, the material
was able to separate out all of the different oil and water
combinations with 99.9% efficiency.
MIT Magnets
Technology being developed at the
Massachusetts Institute of Technology (MIT) could provide
cleanup crews with the ability to reuse oil even after it has
contaminated waters. The new technique uses magnets to simply
lift oil out of the water. Water repellent
nano-particles are mixed with the contaminants so that they
can be picked up by the magnets. The nano-particles are
then removed and reused. Since the oil can be reused
with this method, companies that cause spills may be more
willing and able to absorb cleanup costs.
Penn State PetroGel
Professor Mike Chung and his researchers at
Penn State University were looking to develop a more effective
removal, recovery, and cleanup from future oil spills. In
response, they have developed a new technology for oil
recovery and cleanup, referred to as PetroGel. This new
PetroGel technology offers a unique combination of advantages
over the existing oil absorbents. Some of these advantages
include high oil-absorption capability, no water absorption,
fast kinetics, easy recovery from the water’s surface, no
waste in natural resources, and cost-effectiveness.
These properties can
transform an oil spill in an ocean into a soft, solid
oil-containing gel. The oil-containing gel has the structural
integrity to be collected and transported without difficulty.
In addition, PetroGel has the potential to collect all the oil
molecules in one spot and transform them into a product that
can be processed back into usable oil, which can also be cost
effective for companies cleaning up the spills.
PetroGel has only been
tested on a small scale, however, in partnership with the U.S.
Department of Interior’s Bureau of Safety and Environmental
Enforcement, Mike Chung and his team will be testing this out
on a large scale in the Arctic Sea in the winter of
2015. They will be testing whether or not 250 pounds of
PetroGel can absorb ten thousand pounds of Alaskan North Slope
crude oil, accounting for wave size, water temperature, and
ice. If successful, Chung will work with industry partners to
mass produce PetroGel. This has tremendous potential to
prevent shoreline pollution, save wildlife, and ensure a safe
seafood supply. This technological innovation is an excellent
example of the remarkable R&D developments being made in
the U.S.
Conclusion
Environmental professionals, construction
companies, and design and engineering firms use a number of
technologies to clean up polluted sites. Many of the
challenges associated with these projects involve creative
solutions, technical uncertainty, and a process of
experimentation. Federal and state research and
development tax credits are available to help support and
shoulder the costs of these efforts.
