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Environmental Enlightenment #084 |
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Here's the latest edition of Environmental Enlightenment - a SHORT, LIGHT and SIMPLE environmental newsletter. Its purpose is to inform and educate. If you do not want to receive further mailings from Ami Adini & Associates, unsubscribe now by scrolling to the bottom of this email and clicking on the unsubscribe link. Phase I Site Assessment NewsThis is a longer than usual letter; but it remains simple and entertaining, true to our goal of enlightenment. It assembles and expands on pieces from previous letters to allow a panoramic view of developments in the field of Phase I environmental site assessments. An acknowledgment is in order to Environmental Data Resources, Inc. (EDR), for an article handed out at an Environmental Due Diligence at Dawn seminar in California, which provided source material. EDR provides electronic reporting services to the environmental community. Pictures are inserted to provide breathers for the overloaded mind. Environmental due diligence is a product of CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act, A federal law passed in 1980 that created a special tax to fund a trust fund, commonly known as Superfund, to be used to investigate and clean up abandoned or uncontrolled hazardous waste sites.
EPA has primary responsibility for managing cleanup and enforcement activities authorized under CERCLA. Under the program, EPA can pay for cleanup when parties responsible for the contamination cannot be located or are unwilling or unable to perform the work, or take legal action to force parties responsible for contamination to clean up the site or reimburse the Federal government for the cost of the cleanup. CERCLA assigns joint, strict and several liability to owners, operators and other potentially responsible parties who have or had certain relations to a piece of contaminated real estate that is the target of cleanup mandated by the US EPA.
Joint and Several Liability: A concept, under CERCLA, based on the theory that it may not be possible to apportion responsibility for the harm caused by hazardous waste equitably among potentially responsible parties (PRP). Joint liability means that more than one PRP is liable to the plaintiff. Several liability means that the plaintiff may choose to sue only one of the defendants and recover the entire amount. One PRP therefore can be held liable for the entire cost of cleanup, regardless of the share of waste that PRP contributed.
Strict Liability: A concept under CERCLA that empowers the federal government to hold PRPs liable without proving that the PRPs were at fault and without regard to a PRP's motive. PRPs can be found liable even if the problems caused by the release of a hazardous substance were unforeseeable, the PRPs acted in good faith, and state-of-the-art hazardous waste management practices were used at the time the materials were disposed of.
A later amendment of CERCLA provided the "innocent land owner defense" to buyers of real estate who could prove they had no knowledge of the situation.
To enter this status, the "innocent landowner" would have to demonstrate that they had conducted "All Appropriate Inquiry (AAI)" into the history and past uses of the property in question and the AAI revealed no indications of the hidden problem. Only CERCLA did not define what constituted AAI. In time, the AAI process took on the much more familiar name of "Phase One Environmental Site Assessment" process (Phase I ESA). In the mid 1980s, the cost of Phase I ESA for industrial property could be in the range of $5,000 and up. In today's dollars this would amount to over $10,000.
The real estate industry did not tolerate such cost, especially when the process expanded to include commercial properties. In the early 1990s, the American Society for testing and Materials (ASTM) took on the challenge. It created two "Standard Practices":
E 1527 is "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process." It is the most commonly used practice. The cost of its application averages $1,800.00 in Southern California. E 1528 is "Standard Practice for Environmental Site Assessments: Transaction Screen Process." Some lenders use it as what they consider to be a minimal approach to comply with FDIC requirements, and they use it mostly in cases where the expected risk is minimal; e.g., an apartment building in a neighborhood known to have always been residential. The average cost of Transaction Screen in southern California is $800.00. Both E 1527 and E 1528 were last updated in 2000. E 1527 will be revised again in 2005 to reflect recent amendments to CERCLA. These CERCLA amendments have now doomed E 1528 for extinction.
The changes stem from a mandate to EPA pursuant to the January 2002 Small Business Liability Relief and Revitalization Act (the Federal Brownfields Law) to write the nation's first federal standards for conducting "all appropriate inquiries," the process by which a property's potential for environmental contamination is investigated prior to purchase. "Brownfield" is an abandoned, idled, or under-used industrial or commercial facility where expansion or redevelopment is complicated by real or perceived environmental contamination. The term originates from the color of abandoned structures that have become brown with the accumulation of dust, rust and dirt. EPA estimates there are more than 400,000 brownfields in the U.S.
Congress' Statutory Language for Mandatory Components of "All Appropriate Inquiry" includes the following components:
EPA is now finalizing its standards for "all appropriate inquiry". Some of the more important points are:
Phase I Environmental Site Assessment (ESA) process is used not only to immune against CERCLA liability. Most frequently it is used to search for other potential business risks in real estate transactions concerning subsurface soil and groundwater contamination. Examples of such risks may involve past existence of underground petroleum storage tanks, metal cutting and finishing operations, dry cleaning, salvage yards, and others. Such operations may have contaminated the subsurface soil and ground water to a degree that will not constitute a CERCLA liability, but may still require cleanup actions that could cost a fortune to the unaware buyer. A frequent outcome of the Phase I process is the Phase II Environmental Site Assessment (Phase II ESA) process. The objective of the Phase II ESA is to validate or refute the concerns raised in the Phase I ESA. It's validate or refute only! The Phase II does not intend to assess the full magnitude of the contamination if such indeed is found to be present. The process involves intrusive sampling of soil and/or groundwater by various means of drilling. The two most common are: Open-flight hollow-stem auger drilling;
and, Hydraulic Push Hollow Tube Sampling
The Phase II report is aimed at a "Yea or Nay" statement. Costs of Phase II typically range from $2,000 to $20,000. Where the unfortunate conclusion is a "Yea," the parties to the transaction may decide to drop the deal. Sometimes they elect to pursue a more definite answer on the extent of the contamination so as to enable them to assess the risk. In such a case they go for an Extended Phase II ESA, sometimes called "Phase III." The cost of Extended Phase II ESA could range from $10,000 to $50,000 in medium cases. In extensive investigations involving soil and groundwater on vast areas it can run into the hundreds of thousands of dollars. Call me if you've got any questions. There are no
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