Graduated Steps of Environmental Due Diligence

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1 Successive Approximation: A problem-solving or computational method in which a succession of approximations, each building on the one preceding, is used to achieve a desired degree of accuracy. Graduated Steps of Environmental Due Diligence DESKTOP REPORTS Question: Is your goal to learn about the property? Or is it to paper the files with the minimum amount of due diligence? 1

2 Records Search with Risk Assessment Scope of Work is not well defined, allowing firms to provide very limited information. A Reliance Letter not used with RSRA s and therefore the EP has no skin in the game. Transaction Screen Analysis Car Wash Only Facilities I No Signature on RSRA I In Place of RSRA 2

3 ASTM E Updates and Issues ASTM in a nutshell Industry s Standard Practice for Environmental Site Assessments Created by ASTM as a baseline process for conducting All Appropriate Inquiry (AAI) Reviewed every 8 years could either re-ballot as is, or make changes. Updates for ASTM have been approved by the EPA. They are currently open to public comment until September 16. 3

4 KEY CHANGES Updated REC and HREC Definitions REC simplified Language more concisely describes a REC, but meaning is unchanged. HREC revised More definitively describes the scope of a HREC: regulatory closure, contamination may still be present but only if below residential cleanup standards A New Category: Controlled Recognized Environmental Condition (CREC) refers to sites where the contamination incident has received a risk-based closure, but could still pose ongoing or future obligations for the owner, such as special precautions during development or maintenance of an engineered control such as a vapor barrier. These definition adjustments will allow EPs to provide greater clarity in disclosing the degree of risk. Not expected to increase cost of report delivery times. 4

5 VAPOR MIGRATION Greater emphasis on assessing Vapor Risk No differentiation between solid, liquid or gas Clarified definition of migration and release E referenced as vapor screening standard Contaminated vapor migration now clarified to be associated with a release 5

6 REGULATORY FILE REVIEWS Review of regulatory files and/or records now explicitly recommended for adjacent properties. If EP deems not warranted (or reasonably ascertainable) justification must be provided in the report Will improve depth of ESA, but depending on state or agency may also add to report production times and cost depending on the regulatory agency involved How will the revisions add to cost or report delivery times? 6

7 Phase II s Phase II cont d The Phase II investigation will typically indentify environmental concerns through soil and groundwater sampling and analysis. The results of the Phase II assessment may result in the identification of necessary response actions. This information can be used to identify remediation costs and/or property devaluation. 7

8 Phase II indentifies that there is contamination Phase III or Site Characterization Need to quantify the contamination by determining the vertical and lateral extent of the contamination. This costly and more involved process might require multiple iterations of testing, however you need this information if you plan on doing remediation on the subject property. 8

9 Remediation Soil Remediation Bio Remediation Steps of Environmental Due Diligence 9

10 NAICS Codes 311 Food manufacturing (if underground fuel tanks present) 10

11 Presenters Moderator: Jan Garlitz NADCO General Counsel Panel: Steve Olear SBA - Environmental Appeals Committee Steve Reynolds SBA - Environmental Engineer, SLPC Nikole Reynolds ERI, LLC Gary Reynolds Partner Engineering & Science Submitting Environmental Investigations to SLPC Ensure the environmental submissions on CDs are properly labeled and in PDF format Ensure all appendices and attachments to the environmental assessment are submitted Ensure all scanned documents are legible 11

12 CDC Checklist for Submitting Environmental Investigation Ensure the CDC Checklist is included for all environmental document submittals 12

13 Ensure the correct NAICS codes for the past and current use of the property is included on the CDC Checklist The CDC must provide comments and sign the CDC Checklist Ensure the CDC comments on the CDC Checklist match the environmental professional s recommendations and conclusions Provide the SBA Loan Number or the control number on the CDC Checklist If a 504 Loan is approved after pre-application, include the control number and/or SBA Loan Number so the documents can be associated with the pre-application file 13

14 Any Transaction Screen (TSA or TSR), Phase I Assessment or Phase II Assessment must be accompanied by the SBA Reliance Letter and Certificate of Professional Liability Insurance Ensure the SBA Reliance Letter is not altered or modified 14

15 Ensure the Certificate of Professional Liability Insurance with Errors and Omissions statement is submitted with the SBA Reliance Letter. Ensure the SBA Reliance Letter has the same date as the TSA/TSR, Phase I or Phase II 15

16 Resubmissions Send in only the new documents for resubmissions not all documents For all resubmissions, follow the instructions provided at the bottom of the environmental response from SLPC Environmental Questionnaires State the past and current use of the property and the adjoining properties in an Environmental Questionnaire (EQ) The EQ must be signed by the owner or operator of the site and the CDC. If the owner is unable or unwilling to sign the EQ and the property is not in an environmentally sensitive industry (ref Appendix 4 of SBA SOP 50-10(5)), then a Transaction Screen Analysis is the minimum requirement for submission 16

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19 Contamination, Environmental Professional Recommendations and Gas Station Loans Ensure all information- as stated in SOP 50-10(5)(C), Subsection G (Approval and Disbursement of Loans When There is Contamination or Remediation) - is submitted if requesting approval of funds with known contamination on the property 19

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21 If there are contaminants on the Property, get the environmental documents to SLPC as soon as possible SLPC will need concurrence by SBA District Counsel If RSRA indicates elevated or high risk, conduct a Phase I Assessment not a Phase II Assessment Recommendations by the environmental professional need to be completed before submission. Send in documentation such as contractor s receipts, etc. In addition to a Phase I Assessment, gas station loans must include testing of all USTs, lines and related equipment by an independent contractor. Regular monitoring and inspection results do not meet this requirement 21

22 Environmental Appeals Committee Attach any SBA Environmental Appeals Committee decisions with the environmental submissions and resubmissions All requests for an exception to SBA s SOP environmental policy must be sent to the SBA Environmental Appeals Committee at environmentalappeals@sba.gov 22

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24 Current Information on Environmental Issues For the most current information on environmental issues, check out the page at : 24

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