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604-PT – Revision 1 – 04.30.08.USA

Welcome to the International Right of Way Association’s Course 604 Environmental Due Diligence and Liability. 604-PT – Revision 1 – 04.30.08.USA. Introductions Who we are… What we do… Where we do it… An environmental issue we are interested in learning more about.

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604-PT – Revision 1 – 04.30.08.USA

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  1. Welcome to theInternational Right of Way Association’sCourse 604Environmental Due Diligence and Liability 604-PT – Revision 1 – 04.30.08.USA

  2. Introductions Who we are… What we do… Where we do it… An environmental issue we are interested in learning more about...

  3. Objectives (1)At the conclusion of the course, you will be able to... • provide an overview of the innocent landowner defense • provide an overview of the ASTM International’s Phase I Environmental Site Assessment standards • understand the Environmental Protection Agency’s “All Appropriate Inquiry” Rule

  4. Objectives (2)At the conclusion of the course, you will be able to... • understand other environmentaldue diligence components • establish expectations and orderdue diligence services • analyze due diligence reports and weigh their conclusions on proposed projects

  5. Objectives (3)At the conclusion of the course, you will be able to…The course will not qualify or enableyou to complete a Phase I ESA. • explain when an environmental site assessment (ESA) is needed

  6. Housekeeping

  7. Schedule (1) 8:00 - 8:30 Introductions, Etc. 8:30 -9:15 What Is a Phase I ESA? 9:15 -10:15 Why Conduct a Phase I ESA 10:30 -11:15 Regulations and Resources 11:15 -12:00 Components of a Phase I ESA (Records Review)

  8. Schedule (2) 1:00 -2:45 Components of a Phase I ESA (Visual inspection, interviews, report) 3:00 - 3:30 Non-Scope Considerations 3:30 - 3:45 Ordering a Phase I ESA 3:45 - 4:00 Summary and Review 4:00 - 5:00 Exam

  9. What is a Phase I ESA?(Session Objectives)To understand better: • the various phases of environmental site assessments • the basic steps in a Phase I ESA and some of its limitations • when events trigger a Phase II ESA or a Phase III ESA • the expectations, outcomes and limitations of a Phase II ESA or a Phase III ESA

  10. Environmental Site Assessments ESAs are structured into separate phases: Phase I ESA: Site Assessment Phase II ESA: Contamination Assessment Phase III ESA: Remedial investigation and site remediation

  11. Phase I ESA A Phase I ESA defines good commercial and customary practice in conducting an environmental site assessment of a real estate parcel with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and petroleum products.

  12. Exercise No. 1 (1) 1. Does a Phase I ESA involve sampling/testing and/or cleanup/remediation? Why? Why not? No. These activities (i.e., sampling/testing and/or cleanup/remediation) describe tasks completed in Phase II and Phase III ESAs.

  13. Exercise No. 1 (2) 2. Will the property be considered “contaminate free” after the completion of a Phase I ESA? Why? Why not? Not necessarily. That is completely dependent on the property, its history and site conditions. It may be necessary to proceed past a Phase III ESA or other actions if it is even possible to have a “contaminate free” property.

  14. Exercise No. 1 (3) 3. Does a Phase I ESA conclusively identify all environmental issues associated with a property? Why? Why not? No. There are many types of environmental issues that a Phase I ESA will not detect and there are definite limitations to them.

  15. Exercise No. 1 (4) 4. Will a Phase I ESA ascertain if there is contamination present from current or past underground storage tanks (USTs) on the site? Why? Why not? No. All a Phase I ESA will determine, with limitations, is whether or not there are indications of current or past USTs on a site and/or whether or not there was a contamination action opened on the site. These mayor may not represent actual property conditions.

  16. Exercise No. 1 (5) 5. Will a Phase I ESA provide remediation cost estimates? Why? Why not? No. This information cannot be developed with any reliability until, at least, the completion of a Phase II ESA.

  17. Exercise No. 1 (6) 6. Does a Phase I ESA discuss whether or not permits (e.g., Corps of Engineers 404 wetlands permits or air emissions permits) are needed? Why? Why not? No. These and other items are specifically excluded from a Phase I ESA scope.

  18. Phase I ESARecords ReviewVisual InspectionInterviewsReportThe goal is to identify potential “red flags” associatedwith the property. In some instances, the “red flags” are referred to as Recognized Environmental Conditionsand are, in layperson’s terms, simplypotential environmental issues.

  19. Phase I ESA - Records Review(to determine historical property uses) Database searches Aerial photographs Ownership records Sanborn (fire insurance) maps Cross-reference directories Maps

  20. Phase I ESA - Visual Inspection(to look for signs of problems) Distressed vegetation Stained soil Hazardous materials/waste storage areas and containers Polychlorinated biphenlys (PCBs) Underground storage tanks (USTs) Disturbed soil, fill, pits, ponds, lagoons Property perimeter

  21. Phase I ESA - Interviews(to learn more about situations not uncovered in the records review or on the visual inspection) Current/past owners, occupants, lessees Neighbors Others with site knowledge

  22. Phase I ESA - Report Summarizes findings and “red flags” ASTM International has a recommended table of contents, which many preparers andusers find helpful.

  23. Phase I ESA A Phase I ESA does not: • include sample collection of media or building materials • audit subject property regulatory compliance • provide a base for remediation costs • satisfy environmental assessment (EA) or environmental impact statement (EIS) processes as defined in the National Environmental Policy Act (NEPA)

  24. Phase I ESA A Phase I ESA is never: • an automatic attainment of an innocentlandowner status • a guarantee that the subject property is “clean” • a risk elimination process

  25. Phase II ESA (1) • Additional investigation of “red flags” identified in a Phase I ESA • Usually involves sampling and testing (e.g., asbestos survey, ground water plume delineation, waste characteristics) • Cost can range from a few hundreddollars to tens of thousands of dollars

  26. Phase II ESA (2) • Time to complete can range froma few days to several weeks • Usually completed by an environmentalconsultant or environmental consulting firm (highly specialized and technical)

  27. Phase III ESA (1) • Implementation of remediation plan developed from the Phase II ESA(e.g., disposal of accumulated waste, soil and/orgroundwater remediation, asbestos abatement) • Costs are highly variable • Time to complete is highly variable

  28. Phase III ESA (2) • At times, results in feasibility studies,risk analysis or assessments • Activity and use limitations (AULs) orother restrictions on property use arecommon outcomes

  29. Decision Table

  30. Exercise No. 2 (1) 1. What findings from a Phase I ESA would trigger a Phase II ESA? Any recognized environmental conditions (RECs) discovered in a Phase I ESA which require additional research/investigation to determine if it is an actual rather than a potential issue.

  31. Exercise No. 2 (2) 2. What triggers the end of a Phase II ESA? When the validity of the potential issues has been verified or determined not to be relevant.

  32. Exercise No. 2 (3) 3. What are some examples of Phase II ESA findings that would trigger a Phase III ESA? Any issue associated with contamination that requires action (e.g., cleanup, property use restrictions).

  33. Exercise No. 2 (4) 4. What triggers the end of a Phase III ESA? Usually, the completion of remediation or other activities designed to make the property usable, sometimes with restrictions.

  34. Exercise No. 2 (5) 5. After the completion of a Phase II ESA and/or a Phase III ESA will a property necessarily be “contaminate free”? Why? Why not? No. Many times, contamination and/or liability will still exist even after the completion of these tasks.

  35. Exercise No. 2 (6) 6. Is it always necessary to proceed to a Phase II ESA if RECs are discoveredin a Phase I ESA? Why? Why not? No. The potential purchaser may determine that the property contains too many potential liabilities and choose not to proceed.

  36. Why Conduct a Phase I ESA? (Session Objectives) To understand the reasons to conduct a Phase I ESA, which include: • potential liability implications • potential cost implications • potential project timing delay implications • potential offset impacts • determining when further investigation is warranted • exploring options when an issue is discovered • other considerations

  37. Exercise No. 3 (1)Light Rail and Station Bulk oil storage: Spills, leaks Warehouse: What’s stored? 30s residences: ACM, fuel oil tanks, LP, pesticides Park: What’s in the former landfill? Service station: USTs, fuel and other products

  38. Exercise No. 3 (2)Above Ground Electric Transmission Line Agriculture: Fertilizers, herbicides, pesticides Railroad: herbicides, pesticides, PCBs, creosote, hazardous materials spills?, petroleum, fuel spills Oil and gas operations: Leaks in gathering lines, proximity of tank battery leaks

  39. Exercise No. 3 (3) Runway Extension Dry cleaners: Solvent spills, dumping, leaks Auto salvage: Batteries, brake fluid, tires, transmission fluids, motor oil Warehouse: What’s stored?

  40. Exercise No. 3 (4)Compressor Station Agriculture: Fertilizers, herbicides, pesticides Former Superfund site: Why a Superfund site?, cleanup status, activity/use restrictions? Former dairy: Solvents, fuel, building materials, mercury/PCB equipment

  41. Why a Phase I ESA? (1)

  42. Why a Phase I ESA? (2) • To access the innocent landowners defense under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) • To assess environmental liability and cost issues • To quantify the extent of contamination and determine costs before/after purchase for use in negotiations

  43. Why a Phase I ESA? (3) • To identify existing or potential environmental hazards • To identify whether or not a neighboring property has the potential to impact the subject property • To determine if further investigation is required

  44. Why a Phase I ESA? (4) • Discount purchase price • Escrow accounts • Indemnifications • Operation and maintenance (O&M) expenses • Activity and use limitations (AULs) • Assessing suitability for planned purposes

  45. Why a Phase I ESA? (5) Since the mid-1980s, Phase I ESAs have been incorporated into the environmental policies of most lending organizations as a requirement of any loan application involving a parcel of commercial real estate. According to the Mortgage Bankers Association, over 250,000 Phase I ESAs are performed annually.

  46. Phase I ESA Significance and Use Limitations • Primary purpose: To satisfy All Appropriate Inquiry (AAI) and to provide access to the innocent landowner defense • Not limited to CERCLA • Site specific - Time limitations • Uncertainty not eliminated, not exhaustive • Usage of prior assessments limited

  47. Situations that Could Trigger a Phase I ESA (1) • Property transaction: User may wish to establish innocent landowner defense under CERCLA • Initial assessment of a property when a spill occurred or a suspected disposal site • A firm’s proactive assessment of its property and other assets

  48. Situations that Could Trigger a Phase I ESA (2) • Facility closure plan development • User may wish to conduct an inquiry into non-scope considerations of another project or for other business risk decisions • When acquiring an easement (to establish baseline conditions, identify potential hazards and to identify AULs)

  49. Summary: Why a Phase I ESA? • Properly conducted environmental due diligence provides CERCLA liability relief • Increasingly, insurance companies require purchasers and lenders to obtain environmental insurance. Phase I ESAs(and occasionally Phase II ESAs) are performed to provide information to the underwriters with data to assess risks • Information collected during a Phase I ESA is vitalto property owners, corporate managers, investors, borrowers and/or lenders during a property transaction

  50. Exercise No. 4 (1) 1. What, if any, are the liability considerations of obtaining an easement versus purchasing a property in fee? Essentially, there is no difference from a liability standpoint. Liability exists and isno less in an easement, so the needs are the same.

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