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 Diligence American Environmental is offering special pricing on Phase I ESAs ordered during the Spring months of April and May, on single tax lots located within NYC. Order your Phase I ESA today and get it for $1,500.00! HURRY and get this deal before it expires! Additionally, expedited options are available allowing you to meet tight deadlines and successfully complete your real estate transaction.

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.

Environmental Services

Controlled Recognized Environmental Concerns (CRECs)

New ASTM Standard Coming………….

 CONTROLLED RECOGNIZED ENVIRONMENTAL CONCERNS (CRECs)

New term on the market

A client recently said to me; “It seems like every year environmental requirements become more stringent and costly, making more purchasers and lenders request environmental inspections before committing to the real estate transaction”. Environmental Site Assessments (ESAs) or Phase I Environmental Site Assessments are the industry standard for assessing a parcel of property environmental quality and part of the due diligence process required by financial institutions for commercial real estate transactions.  ESAs or Phase I ESA are usually conducted according to the American Society for Testing and Materials (ASTM) Standard E 1527-05; with the last changes to this standard occurring seven years go. This, however, is going to change very soon. ASTM, the organization that creates Standards that Environmental Professionals (EPs) follow when performing Environmental Site Assessments (ESAs), is scheduled to issue a revision of the current ASTM 1527-05 Standards that would mandate additional investigation and assessment.

The new Standard, when approved by the EPA, will require (a) assessment for vapor migration.  Vapor migration must be considered no differently than contaminated groundwater migration.  The proposed ASTM 1527-13 standard references E2600-10, a methodology to assessing vapor migration;

(b) More detailed explanations for regulatory agency record reviews in every new ESA.  This means that EPs would have to describe in greater detail why they decide particular sites listed in database searches would not affect a Site’s environmental quality. Although the proposed standard will minimize confusion and allow clients to better understand EPs’ judgments, this new measure will require additional time that will be required to complete them and;

(c) Simplification of the definition of “Recognized Environmental Concerns (RECs)”.  The current definition for Recognized Environmental Conditions, or REC (the main thing that EPs try to identify during ESAs), has been found to be confusing to some people. As a result, the definition is proposed to be simplified while retaining the same basic meaning, except for the creation of the new term “Controlled RECs” (CRECs) proposed by the new ASTM Standard to describe sites that have had their regulatory agency cases closed but still have some harmful compounds present. This will allow for more accurate ESAs and prevent misunderstandings.

RECs – Old Definition: “the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property, or into the ground, ground water, or surface water of the property.”

New Simplified REC Definition: “the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to any release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.”

Historical RECs The definition for HRECs is proposed to also be revised in order to separate itself from the CRECs definition. The definition of HRECs is currently defined as environmental conditions that have been RECs in the past, previously remediated and had their cases closed by regulatory agencies, but which may or may not be considered a REC currently. The new revision for HRECs will be;

New HREC Definition: “a past release of any hazardous substances or petroleum products that has occurred in connection with a property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted residential use criteria established by a regulatory authority, without subjecting the property to any required controls (e.g., property use restrictions, AULs, institutional controls, or engineering controls).

Controlled RECs At times, however, remediated RECs are closed by regulatory agencies with implementation of required controls (e.g., property use restrictions, Activity Use Limitations (AULs, institutional controls, or engineering controls).

AULs are put in place at Sites where there is still some contamination but, due to low levels of contaminants and/or institutional controls installed at the Site, the contamination is not harmful to human health. AULs serve to protect human health by prohibiting certain activities on AUL sites (i.e. excavations on sites with subsurface contamination). The problem with the current definition for HRECs for sites that had required controls was that it was sometimes interpreted by clients as environmental problems that happened in the past and had no current effect on a Site.  The creation of the new term CREC in the revised standards will clarify the confusion and such sites will be a REC under a Phase I ESA.

Just like with the current ASTM 1527-05 Standard; the proposed Standard will still satisfy the “All Appropriate Inquires” rule that qualifies landowners for the innocent landowner defense under CERCLA.  This Standard will ultimately call for more comprehensive ESAs; which will be able to characterize the environmental quality of a site to a greater degree.

 

Environmental Services

Other Environmental News

DEC Cleaning Up Gasoline Facilities Downstate

From the NYSDEC November 2008 issue

Motiva Enterprises LLC, a joint venture of Shell Oil Company and Saudi Refining Inc., will address petroleum storage violations at various Shell-branded gas stations and service centers in New York City, Long Island and the lower Hudson Valley, under a comprehensive enforcement agreement announced by the New York State Department of Environmental Conservation (DEC).

petroleum, spill, violation, oil inspection, DEC, environmental, consultant

Fiberglass underground storage tanks

Motiva Enterprises will be required to hire a consultant to inspect the 88 cited facilities and address any issues identified.

The agreement with Motiva stemmed from inspections conducted by DEC at numerous facilities in the downstate area. It also follows up on Motiva’s previous agreement to remove and, in some cases, replace old, single-walled tank systems with new state-of-the-art, double-walled tanks at two dozen sites. Motiva currently is in the process of completing that work.

DEC will receive $281,000, with the remaining $69,000 in penalties divided between Nassau, Suffolk, Westchester and Rockland counties to assist in the ongoing petroleum-storage compliance reviews. An environmental benefit project also has been required. During the next six months, DEC and Motiva will develop a plan for the $200,000 included for the project that will have a positive environmental effect on communities with non-compliant facilities. This may include additional education on petroleum storage practices to help prevent further spills or other violations that could damage natural resources and affect public health.

The agreement also requires Motiva to hire an independent consultant to inspect the 88 facilities cited and to fully address any issues identified by the auditor. Under DEC oversight, each audit will be reviewed and every facility will be brought into compliance with state and federal environmental laws and regulations. In addition to regulatory requirements, if any new spills are discovered, Motiva will be required to perform a cleanup