Environmental Due Diligence Principals for CRE Professionals

Transcription

1 Environmental Due Diligence Principals for CRE Professionals May 16, 2017 Presented by: Sean Leary, Executive Vice President Vieau Associates, Inc. Edina, MN

2 Who Can Sell a Superfund Site? Who wants to buy a Superfund Site?

3 TCAPP Arden Hills, MN 3+ mile long groundwater contamination plume

4 Reilly Tar Site St. Louis Park large groundwater and soil vapor plume

5 General Mills / SE Hennepin Ave Superfund Site Minneapolis large groundwater and soil vapor plume

6 Pilgrim Cleaners Site Brooklyn Center dry cleaner release solvent impacts to soil, groundwater, and soil vapor

7 CMC Heartland Arsenic Site Southeast Minneapolis Widespread windblown arsenic in soil Plus groundwater contamination

8 Bell Lumber & Pole Company New Brighton wood treating chemicals groundwater plume

9 Western Mineral Products Site Minneapolis Wind-blown asbestos fibers in soil

10 Industrial Solvent Groundwater Plume Lake Elmo Bayport

11 Bloomington Lyndale Avenue Corridor Site Industrial Solvent Groundwater and Soil Vapor Plume

12 What is Superfund Liability? 1980 CERCLA Liability for response costs incurred to remediate a Release of Hazardous Substances Imposed on Owners and Operators Strict No Fault Joint & Several Deep Pocket at Greater Risk

13 Liability Protections for Owners & Operators Third Party Defense since 1980 No contractual relationship Innocent Landowner Defense since 1986 No reason to Know Contiguous Property Owner Defense since 2002 Solely as a result of migration Bona Fide Prospective Purchaser Defense since 2002 Knowingly taking title to contaminated property

14 Defenses available to buyers are predicated on their having performed All Appropriate Inquires i.e. a Phase I Environmental Site Assessment

15 Standards for All Appropriate Inquires Constantly changing Environmental assessments beginning in 1986 No industry standard ASTM Standard E1527 Phase I Environmental Site Assessment since 1993 ASTM Standard revised 5 times EPA regulation 40 CFR Part 312 since 2005 *Refers to ASTM E

16 Bona Fide Prospective Purchasers BFPP defense created in 2002 for Brownfields Redevelopment Poses burden of Continuing Obligations Beyond Due Diligence: post-purchase Due Care Minnesota s 1992 Land Recycling Act way ahead of EPA (No Association Determination)

17 Superfund s Petroleum Exclusion Petroleum contamination excluded from CERCLA Liability BUT is subject to enforcement under RCRA Distinguished by law but not by commercial real estate

18 Other Non-Scope Issues (to Pile On ) Asbestos Containing Materials (ACM) Lead in paint, drinking water Radon in natural soil gas Add mold or whatever other environmental issues concern you

19 Phase I Environmental Site Assessment ASTM/EPA Standards set the minimum scope of inquiries: ASTM: Professional Judgment EPA: Performance Based Government Records Historical Records Interviews Site Reconnaissance Any Reason to believe there is contamination?

20 Phase II Investigation Warranted when Phase I identifies Recognized Environmental Conditions Sampling and Testing Not intended to be comprehensive Never guaranteed to be conclusive

21 Environmental Professional Defined by EPA AAI Regulation Some lenders specify specific credentials Qualifications are still primarily self proclamation Primary qualification: Ability to defend an opinion

22 Common Due Diligence Work Products RSRA limited in office desktop review (limited time/budget) Transaction Screen (inspection, limited records review) Phase I ESA constitutes All Appropriate Inquiry by EPA Phase IIs confirm or refute impacts (soil, groundwater, soil vapor, indoor air) Custom Reviews

23 Industries/Uses considered High Risk - SBA Environmentally Sensitive Industries OIL & GAS EXTRACTION MINING (EXCEPT OIL & GAS) HEAVY & CIVIL ENGINEERING CONSTRUCTION FOOD MANUFACTURING (underground fuel tanks) BEVERAGE & TOBACCO PRODUCT MANUFACTURING TEXTILE MILLS LEATHER & ALLIED PRODUCT MANUFACTURING WOOD PRODUCT MANUFACTURING PAPER MANUFACTURING PRINTING & RELATED SUPPORT ACTIVITIES PETROLEUM & COAL PRODUCTS MANUFACTURING CHEMICAL MANUFACTURING PLASTICS & RUBBER PRODUCTS MANUFACTURING NONMETALLIC MINERAL PRODUCTS MANUFACTURING PRIMARY METAL MANUFACTURING COMPUTER & ELECTRONIC PRODUCT MANUFACTURING ELECTRICAL EQUIPMENT, APPLIANCE & COMPONENT MANUFACTURING TRANSPORTATION EQUIPMENT MANUFACTURING FURNITURE & RELATED MANUFACTURING MISCELLANEOUS MANUFACTURING AUTOMOBILE & OTHER VEHICLE MERCHANT WHOLESALERS MOTOR VEHICLE PARTS (USED) MERCHANT WHOLESALERS METAL & MINERAL MERCHANT WHOLESALER RECYCLABLE MATERIAL MERCHANT WHOLESALER CHEMICAL & ALLIED PRODUCTS MERCHANT WHOLESALERS PETROLEUM & PETROLEUM PRODUCTS MERCHANT WHOLESALERS AIR TRANSPORTATION

24 SBA Environmentally Sensitive Industries (continued) RAIL TRANSPORTATION PIPELINE TRANSPORTATION TRUCK, UTILITY TRAILER, AND RV RENTAL & LEASING TESTING LABORATORIES EXTERMINATING & PEST CONTROL WASTE MANAGEMENT & REMEDIATION SERVICES GENERAL MEDICAL & SURGICAL HOSPITALS GOLF COURSES & COUNTRY CLUBS SKIING FACILITIES MARINAS RV PARKS & RECREATIONAL CAMPS AUTOMOTIVE REPAIR & MAINTENANCE DEATH CARE SERVICES LAUNDRY & DRY CLEANING SERVICES PHOTOFINISHING LABORATORIES MOTOR VEHICLE AND PARTS DEALERS GASOLINE STATIONS FUEL DEALERS FABRICATED METAL PRODUCT MANUFACTURING MACHINERY MANUFACTURING ELECTRONIC & PRECISION EQUIPMENT REPAIR & MAINTENANCE COMMERCIAL & INDUSTRIAL MACHINERY & EQUIPMENT REPAIR & MAINTENANCE HEAVY EQUIPMENT & OTHER COMMERCIAL MACHINERY RENTAL & LEASING

25 The Big Picture - How can you help your clients? Extraordinary Assumptions can be just that Extraordinary! Watch their back (i.e. risk exposure) Don t kick the can down the road - get ahead of the issue Manage expectations Remedial cost estimates educated guesswork Regulatory outcomes the crystal ball

26 What Vieau Does Focus on client objectives Act as a regulatory liaison Bring environmental issues to closure

27 We are a relationship business, NOT a commodity service sleary@vieauassociates.com