Getting the most out of All Appropriate Inquiries

1. Getting the most out ofAll Appropriate Inquiries Vermont – June 2011

2. All Appropriate Inquiries (AAI) • Pre-purchase Environmental Due Diligence • A reasonable environmental site assessment performed as part of a commercial real estate transaction • Necessary for parties seeking liability protection • Inherent with Brownfields Redevelopment • Environment (soil, water and air) • Buildings

3. 2002 SBLRBRA (Brownfields Amendments) • Established liability protections • Clarified Innocent Landowner defense • Added Contiguous Property Owner • Added Bona Fide Prospective Purchaser • Required EPA to develop regulations establishing standards and practices for conducting all appropriate inquires • Established EPA’s Brownfields Grant Program

4. Innocent Landowner • To qualify for CERCLA liability protections, the landowner must: • Performed AAI prior to acquisition of the property • Have no knowledge or reason to know of contamination at the time of acquisition • Comply with continuing obligations upon discovery

5. Contiguous Property Owner • To qualify for CERCLA liability protection, the landowner must: • Performed AAI prior to acquisition of the property • Have no knowledge or reason to know of contamination at the time of acquisition • Not be potentially liable or affiliated with any other person potentially liable for response costs • Not cause, contribute, or consent to a release or threatened release, and • Comply with continuing obligations

6. Bona Fide Prospective Purchaser • To qualify for protection from CERCLA liability, the BFPP must have acquired the property after January 11, 2002, and • Performed AAI prior to acquisition of the property • Acquired the property after the disposal of hazardous substances • Not be potentially liable or affiliated with any other person potentially liable for response costs, and • Comply with continuing obligations

7. Accepted Standards and Practices for AAI(heads up to potential cleanup/RLF grantees) • Eligibility based on pre-purchase inquiry • Prior to May 31, 1997 • Generally accepted good commercial and custodial standards and practices at that time • Between May 31, 1997 and November 1, 2006 • ASTM E 1527-97 or ASTM E 1527-00 Phase I Environmental Site Assessment • After November 1, 2006 • AAI Final Rule, or ASTM E 1527-05 Phase I Environmental Site Assessment

8. Reminder on AAI for local governments • Involuntary taking of property, through tax foreclosure or eminent domain, provides inherent liability protections • Remember – Continuing Obligations apply • Taking a property through donation or any dollar amount requires AAI to establish BFPP status (and all that goes with it)

9. Continuing Obligations to Maintain Liability Protections • Comply with land use restrictions • Not impede institutional controls • Take “reasonable steps” to stop and prevent releases of contamination • Provide legally required notices upon discovery • Provide cooperation, assistance and access to EPA, the state, or other conducting response actions and natural resource restoration • Comply with CERCLA request for information and administrative subpoenas

10. Stepping up to taking “reasonable steps”(to maintain liability protections) • Seek closure to environmental conditions recognized in the AAI/Phase I report and any Phase II investigations • Stop any current or previously unidentified releases • Prevent any future releases (by owner or operators) • Legal notices include notifying VT DEC on any identified releases to the environment • If disaster strikes, call in for state and/or EPA assistance

11. AAI Rule & ASTM E 1527-05 Apply to: • Persons seeking to establish liability protections • Innocent Landowner • Contiguous Property Owner • Bona Fide Prospective Purchasers • EPA Brownfields Grantees • Parties wishing to assess the environmental condition of commercial real estate

12. Managing AAI shelf life • Must be conducted within 1-year prior to the acquisition date, with certain components requiring updating within 180-days of acquisition • Date of acquisition or purchase date = date landowner obtains title to the property • With property transactions shelf life is pass/fail • Strategize AAI completion with each individual project • Status of environmental investigation • Buyer/owner/grantee goals and timing

13. Buyer’s Perspective to AAI Higher Risk Lower • No AAI • Buyer becomes PRP and assumes all risk • AAI Only • Qualifies as BFPP, but assumes all continuing obligations and potential risk due to uncertainty • AAI + Phase II • Reduces risk with greater understanding of continuing obligations • AAI + Phase II + Cleanup Planning • Minimizes risk and begins to approach cost certainty

14. Seller Perspective to AAI Higher Risk Lower • No AAI • Desirable, but unknown risk for potential liability from 3rd party lawsuit • AAI Only • Helps establish baseline risk for marketing property, and lowers potential risk from 3rd party lawsuit • AAI + Phase II • Further reduces risk to seller and buyer, but may result in reportable concentrations which may require further seller responsibilities • AAI + Phase II + Cleanup Planning • Minimizes risk, property value understood, improves decision making and bargaining position

15. Objectives of AAI • Seek to identify conditions indicative of releases and threatened releases (Recognized Environmental Conditions (RECs)) • Identify current and past uses and occupancies • Identify current and past uses of hazardous substances and petroleum • Identify waste management and disposal activities • Identify current and past corrective actions • Identify engineering and institutional controls, and • Identify RECs at nearby and adjoining properties that may impact subject property

16. Performance Factors • Gather required information that is publicly available, obtained within reasonable time and cost, and can practicably be reviewed • Review and evaluate the thoroughness and reliability of the information gathered • Don’t let quality suffer at the expense of cost savings

17. Key Reporting Elements (Coming to your grant) • Opinion of the Environmental Professional (EP) • The report must provide and opinion as to whether the inquiry has identified conditions indicative of a release or threatened release • The EP must include in the final report an opinion regarding additional appropriate investigation, if the EP has such an opinion • “To be of real value, a Phase I report should contain a narrative that links the information obtained with an analysis as to whether or not the subject property contains a REC or area of concern.”

18. Key Reporting Elements (cont.) • Data Gaps • Data gaps that impact the ability of the EP to identify a REC must be reported in the opinion section of the report • However, the significance of a data gap may not be immediately evident • Better to identify all perceived data gaps, particularly when required information was not obtained, and document the significance of each • Identifying data gaps can be an EP’s best liability protection • EP Qualifications, Declarations and Signature • Must be included and declarations must be verbatim (in “general” conformance won’t cut it)

20. Records Review • Perform prior to Interviews and Site Inspection • How far back to review history • Back to first use or first structure (AAI) • Back to first use or 1940, whichever is earliest (ASTM) • Significant sites to the community means more potential local records • Searching for and reviewing State records on releases and investigation reports is a must • The results of the commercial environmental data reports for nearby or adjoining properties is both findings and “opinion” (i.e., tell me about their potential to be an REC)

22. Interviews • Identifying the types of hazardous substances and petroleum used on site, their storage, treatment and handing in business processes, and its disposal • Lack of required interviews is a data gap • For abandoned properties, interviews with neighboring properties may not be desirable from the buyer’s perspective, and will result in a data gap if voluntarily left out

24. Visual Inspection • Identifying the types of hazardous substances and petroleum used on site, their storage, treatment and handing in business processes, and its disposal • Experience can play an important role in the quality of the site inspection, and the Environmental Professional is encouraged to take part in the site inspection • The devil is in the details for a thorough inspection • Inability to get on the property is a significant data gap

25. Search for Environmental Liens(Update with 180 Days of Purchase) • User’s responsibility • User may engage title company to perform service, or request EP to perform this task • User may provide information to EP for inclusion in report, but does not have to • Lien information obtained or provided to the EP must be considered in rendering conclusions or opinions regarding the environmental conditions of the property

26. Specialized Knowledge or Experience • User must provide to EP • Specialized knowledge held back by the user may jeopardize future liability protections • Persons must take into account their specialized knowledge of the subject property, the area around subject property, and other experience in identifying RECs • Specialized knowledge should be provided before site inspection

27. Relationship of Purchase Price • User responsibility (generally when there is a transaction involving the purchase of the subject property) • Must consider whether the purchase price reasonably reflects the market values if not contaminated • If below market value must consider whether the difference is due to contamination

28. Commonly known Information • User and EP responsibility • Must take into account information within the local community in identifying RECs • Additional sources include: • current owners or occupants of neighboring properties, • local or state officials and others with knowledge of subject property, and • other sources (newspapers, websites, community organizations, local libraries, historical societies) • Commonly known information should be provided before site inspection.

29. Degree of Obviousness • User and EP responsibility • User and EP must take into account the AAI information collected in considering the ability to detect contamination by appropriated investigation • The EP must include in the final report an opinion regarding additional appropriate investigation, if the EP has such an opinion

30. Community Involvement in AAI • Yes • Potentially with publicly owned properties with high community interest • High profile sites (later on in investigation process) • When environmental conditions on subject property could be impacting nearby property owners • Requires planning and state involvement • No • Generally not for private party transactions • Identifying RECs could raise false concerns and jeopardize property redevelopment

31. Questions? AAI Contact Information • Alan Peterson • 617-918-1022 • Peterson.Alan@epa.gov • DorriePaar • 617-918-1432 • Paar.Dorrie@epa.gov