Environmental Services

Reduce Acquiring Environmental Liabilities

Reduce environmental liabilities and know the true status of your property with proper due diligence. An American Environmental Phase I Environmental Site Assessment (ESA) gives you piece of mind during real estate transactions. This assessment will provide you with information to assist in making an informed business decision. Overlooking this concern can cost you substantial future environmental expenditures, even if you did not create or contribute to the contamination.

Phase 1 Environmental Due DiligenceAmerican Environmental is offering special pricing on Phase I ESAs ordered during the Spring month of April on single tax lots located within NYC. Order your Phase I ESA today and get it for $1,700.00!  HURRY, get this deal before it expires! Additionally, expedited options are available allowing you to meet tight deadlines and successfully complete your real estate transaction.

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Revisions To CERCLA Due Diligence Requirements

CERCLA Due Diligence Requirements Revised to Reflect Updated Phase I Standard for Forested and Rural Land

Spencer Fane LLP
Paul Jacobson
July 11th, 2017

Purchasers of rural and forested land need to be aware of a recent change in EPA’s environmental due diligence rules. On June 20, 2017, EPA published a Direct Final Rule in the Federal Register, amending the All Appropriate Inquiries (AAI) Rule, 40 CFR Part 312, to reflect 2016 updates to ASTM E2247, a standard for Phase I investigations on rural and forested land.

The AAI Rule sets forth requisite practices for satisfying CERCLA § 101(35)(B) so as to obtain CERCLA liability relief, i.e. the innocent landowner defense, bona fide prospective purchaser liability protection, and contiguous property owner liability protection. The AAI requirements also apply when conducting site characterizations and assessments with the use of a Brownfields grant, under CERCLA § 104(k)(2)(B).

For years, the AAI Rule has referenced two voluntary industry standards for conducting Phase I site investigations, both published by the standards setting body ASTM International. One of these standards, ASTM E2247, only applies to forestland and rural property, and the other standard, E1527-13, is not limited in applicability to only certain types of property. The AAI Rule has allowed purchasers to establish compliance with the requirements of the AAI Rule by adhering to these industry standards (as makes sense, parties may not use the E2247 standard for property other than forestland and rural land). The June 20 Direct Final Rule merely replaces the reference to the 2008 version of E2247 with a reference to the updated 2016 version. No changes are made regarding the other ASTM standard referenced by the AAI Rule, E1527-13.

A summary of the differences between the 2008 and 2016 versions of E2247 is available here. One notable difference is that the 2016 version does away with the requirement that the site be at least 120 acres, so that the 2016 version applies to rural or forested properties of any size. E2247 in some ways requires less rigorous site investigation than E1527-13, so this widening of the applicability of E2247 is a welcome change to property purchasers. Individuals interested in obtaining a copy of the 2016 E2247 standard can do so from ASTM International at this link.

Purchasers of forested or rural land will not be required to use the 2016 version of E2247. Rather, this standard will merely be an allowed alternative to walking through the actual requirements of the AAI Rule itself. Nevertheless, once the Direct Final Rule goes into effect, property owners should ensure that their environmental consultants are not using the 2008 version of E2247, because it will no longer satisfy the AAI Rule.

EPA views the incorporation of the 2016 version of E2247 as noncontroversial, and thus published it as a Direct Final Rule, without a prior proposed rule. The Direct Final Rule will go into effect on September 18, 2017, unless EPA receives adverse comments by July 20, 2017. If EPA does receive adverse comments, the Direct Final Rule will not take effect. Rather, EPA would address the comments before issuing a subsequent final rule.

This post was drafted by Paul Jacobson, an attorney at Spencer Fane LLP.

Environmental Services

Capitalizing On Sites With Environmental Property Damage

Capitalizing On Sites With Environmental Property Damage: Is There Really A Pot Of Gold At The End Of That Rainbow?

Barnes & Thornburg LLP
Kara Cleary
March 15, 2016

When a company learns that it has a site suffering from environmental property damage, “profit” is the last thing on that company’s mind. Rather, the terms that company is more likely thinking about in this situation are those like losses, risk, environmental agency scrutiny, costly and lengthy remediation, bad press, etc. A recent article in the New York Times titled “Turning Polluted Properties into Profits” takes an alternative view of the value of sites with environmental property damage.

The article discusses a new business model and group of investors who are actively seeking out these properties in order to buy them, clean them up, and then sell them for a profit. However, as the article noted: “insurance is key.”

Finding insurance to help cover some or all of the clean-up costs is vital to the profitability of the damaged site. Because environmental property damage can exist for decades, historical insurance policies might be able to provide coverage for the resulting losses. In fact, if the site triggers commercial general liability policies issued before the pollution exclusion was common in the mid-1980s, the likelihood of available coverage is very high, assuming the insurance company is still around and paying claims.

But, like any business model – there are risks. From an insurance standpoint, there are three areas of concern:

1. finding historic coverage is not always easy or cheap
2. whether the rights under the historic insurance policies will transfer to the buyer
3. remediation may exceed the originally anticipated scope

For example, unless a company has stellar record keeping practices, often times it is hard to determine what policies a company had 40 or 50 years ago and even harder to locate copies of those policies. There are companies that specialize in this area that can help. However, it may not be an easy, speedy or cheap task.

Next, insurance companies have been known to assert that so-called “anti-assignment” clause to prevent a buyer from accessing the seller’s insurance policy without the insurance companies’ consent. Whether or not such provisions will be enforced is largely dependent on what state law will apply to the interpretation of the policy and the nature of the transaction (asset deal versus stock deal).

Lastly, remediation is often times a long process with required monitoring for many years even after the clean-up is completed. In addition, contamination of groundwater or nearby water sources may impact significantly the scope and costs of contamination and remediation. Thus, it may be very difficult to properly assess the scope of remediation initially.

Despite these obstacles, courts around the country have ruled in favor of insurance coverage for sites with long-term environmental property damage. Thinking about those damaged sites as potential profit centers is very interesting and gives companies another potential option for dealing with the issue – selling the properties to interested buyers!

This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult an attorney on any specific legal questions you may have concerning your situation.