Environmental due diligence is a form of proactive environmental risk management typically conducted before purchasing, selling, or leasing a property or business. Due diligence investigations can help prevent costly environmental liabilities by identifying them early in the transaction, thereby protecting all parties’ interests. There is an increased opportunity for significant cost-savings when the hired consultant accounts for tangential aspects during their investigation.
Environmental due diligence encompasses tangential aspects that are not the primary focus of the investigation. Aspects such as these may indirectly impact the environmental risks or liabilities associated with the property or business or the transaction’s overall feasibility or value.
Tangential Aspects of Environmental Assessment: A Case Study
A major oil company requested environmental due diligence for a large property acquisition. The property acquisition was part of a larger company acquisition and involved hundreds of oil and gas well locations, facilities, tanks, and equipment. It was necessary to modify the Phase I assessment for the work. Of the hundreds of well locations, 50 were chosen for Phase I work and field verification. According to the consultants, any environmental liabilities exceeding $2 million must be identified during this evaluation. Phase I examined the locations of wells for potential environmental liabilities, such as petroleum releases, but did not examine the wells themselves. Even though the consultants were experts in evaluating the condition of oil and gas wells, the oil company addressed this aspect of the investigation in-house. The company did not consider the tangential legal implications, liability for plugging costs, potential impacts on property value, and potential penalties for non-compliance with regulations.
Many wells excluded from the consultants’ due diligence were over 50 years old and out of operation. The company’s in-house investigators did not perform a field review. The result was an underestimation of the number of wells that required plugging and their associated costs. The estimate for plugging a well was between $20,000 and $30,000 per well. The plugging costs for this transaction were much higher, ranging from $80,000 to $120,000 per well, resulting in a $42 million increase. The oil company made a mistake in thinking the plugging costs were insignificant. Environmental due diligence should always include tangential factors.
Additional examples of tangential aspects of environmental due diligence might include the following:
The information obtained during or upon completing an investigation can inform negotiations and contractual arrangements between the parties involved in the transaction. Environmental consultants could spot some issues big enough to kill a deal. Other issues may allow buyers to adjust the purchase price or negotiate an indemnity to shift financial responsibility for environmental risk. It may also be possible to purchase environmental insurance for sufficient financial protection.
The specific steps involved in environmental due diligence depend on the type and scope of the transaction, as well as any applicable regulations or guidelines. Consult an experienced environmental professional to ensure that your due diligence process meets all your needs and requirements. Find out more about SCS’s environmental due diligence services.
The announcement of new developments, especially new housing, is always welcome, given nationwide shortages. Wood Partners recently spoke of its Alta Cuvee project in Rancho Cucamonga, CA., an area experiencing high growth rates. With the construction currently underway, the community plans to open in late 2024.
Careful development companies follow all environmental guidelines set forth by local, state, and federal agencies to ensure sustainability. At the Alta Cuvee project, SCS Engineers performed a Phase I Environmental Site Assessment, ensuring due diligence on the part of Wood Partners.
Today’s commercial real estate transactions take environmental issues into consideration. Complex laws can impose significant environmental liabilities on purchasers, sellers, and lenders, whether or not they caused the problem and whether or not they still own the property.
When looking for a new home, look for reputable companies that perform due diligence. When looking for environmental due diligence services, look for engineers and consultants providing comprehensive services for the welfare of future tenants, owners, and your firm’s reputation.
All Appropriate Inquiries (AAI) is a process of evaluating the environmental condition of a property and assessing the likelihood of contamination. Parties must comply with the requirements of the AAI Rule or follow the standards set forth in the ASTM E1527-13 or E1527-21 Standard Practice for Phase I Environmental Site Assessments to satisfy the statutory requirements for conducting all appropriate inquiries.
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SCS’s Mike Miller explains the impact of the new ASTM E1527-21 Due Diligence Standard. Mike covers the history, CERCLA, defenses, and the changes impacting due diligence in the new Standard in this video. Watch it here. Use chapters in the timeline to jump from topic to topic at these start points:
Learn more about Environmental Due Diligence and All Appropriate Inquiries, and meet Mike Miller, SCS’s National Expert. Today’s commercial real estate transactions must take environmental issues into consideration. Complex laws can impose significant environmental liabilities on purchasers, sellers, and lenders, whether or not they caused the problem, and whether or not they still own the property. Environmental Engineers can help protect you and your investment.
SCS Engineers provides comprehensive environmental due diligence services nationwide and announces two new SCS National Experts to lead the expanding practice. Vice President Michael Miller and Project Manager Justin Rauzon take the helm to meet the expanding demand for these environmental services. Mr. Miller is in SCS’s Omaha, Nebraska location and Mr. Rauzon in the Long Beach, California headquarters office. Both professionals work nationwide and continue to support their regional clients in their new positions.
Miller focuses on comprehensive environmental management and consulting for private and federal clients. Project solutions typically involve solid waste, hazardous waste, environmental assessment, compliance audit, feasibility studies, environmental permitting, and training. His environmental due diligence experience includes work at fuel storage and vehicle maintenance facilities, petroleum retail sites, agricultural, chemical processing, and pharmaceutical manufacturing plants, active and closed landfill sites, abandoned chemical disposal sites, and numerous dry cleaner sites.
Mr. Rauzon has a diverse background in biological and environmental sciences and regularly performs environmental assessments and compliance audits at North American sites. Rauzon’s technical and management experience is with soil, soil vapor, and groundwater investigations on industrial, commercial, landfill, greenfield, and residential properties. He has extensive experience with environmental laws and regulations in the United States and Mexico.
Both work through all project phases, from developing cost estimates to implementing due diligence tasks ranging from site assessments to full remediation. SCS Engineers’ Environmental Due Diligence and All Appropriate Inquiries practice is comprehensive. The practice’s services cover Environmental Insurance Claims and Underwriting Support, Financing and Company Acquisition Support, Property Inspections and Abatement, Property Transactions, and Solid Waste Management Financing.
SCS’s Brownfields and Voluntary remediation engineers rely on the due diligence practice and developers, contractors, municipal officials and city managers, and advisors such as banks, insurance firms, and attorneys to private and public entities.
SCS Engineers Vice President Ashley Hutchens is now the Environmental Services Director for its Long Beach and Las Vegas operations. Besides managing her current projects and clients, Hutchens will manage the environmental professionals and technicians in each city. She is responsible for allocating resources for business development, project management, and coordinating activities with other SCS offices nationwide.
“Ashley’s proven capabilities solving environmental challenges for industries will serve our Long Beach and Las Vegas clients well,” said Julio Nuno, SCS Senior Vice President.
Hutchens has 18 years of experience in property evaluation and due diligence, site assessment, characterization, remediation; vapor intrusion assessment and mitigation; and hazardous waste management. She has led hundreds of projects, including all phases, from the development of cost estimates for site assessment, mitigation, and remediation, to groundwater monitoring and sampling, preparation and review of final reports, interfacing with regulatory agencies, and management of all aspects of projects, staff, and various subcontractors.
SCS Engineers’ environmental solutions directly result from our experience and dedication to solid waste management and other industries responsible for safeguarding the environment. For more information about SCS, please visit us at www.scsengineers.com, or contact .
Thanks to South Florida’s hot real estate market and impressive growth rates, a dwindling supply of properties are available for development in the area. The Atlantic Ocean limits South Florida’s development options to the east and Florida Everglades to the west. Due to these supply limitations, developers seek to redevelop contaminated landfills, golf courses, and agricultural land. Environmental due diligence is essential to the successful redevelopment of these types of properties. Depending on the property’s size and the extent of the contamination, redeveloping contaminated properties can cost upwards of a million dollars.
Typically, developers will have to deal with contaminants like ammonia at a landfill redevelopment project, arsenic at a golf course redevelopment project, or pesticides at agricultural redevelopment projects. In some cases, remediation and assessment using the standard or “default” cleanup target level (CTL) can stop a project from proceeding. However, before abandoning the project, developers should consider the potential for establishing alternative cleanup target levels (ACTLs) for the site’s contaminants.
Several technical strategies are available to developers considering redeveloping contaminated properties to reduce overall costs and expedite the construction schedule. Costs associated with managing material above a default CTL can include disposal of contaminated material, importing clean fill, and delays to permitting and construction schedules if an environmental regulator determines your assessment is incomplete.
Understanding Default Cleanup Target Levels
Environmental regulators use a range of tools to develop default CTLs. Default CTLs can be based on complex equations that consider toxicity and exposure assumptions such as ingestion rates, body weight, age, and exposure levels. Soil properties are also considered. In some cases, human health may not even be the determining factor in calculating a default CTL. Rather, a particular contaminant’s environmental impact on the local ecosystem may be what determines its default CTL.
While default CTLs are useful tools to formulate remediation strategies on a broad range of sites, default CTL values will be overly conservative for other sites. More explicitly, some sites’ present and future use and exposure characteristics are so different from the assumptions used to calculate the default CTLs – that the default CTL does not accurately correspond to the risk associated with the proposed sites’ use. In such cases, explore the development of an alternative cleanup target level (ACTL).
Establishing Alternative Cleanup Target Levels
With the right approach, a site ACTL could provide significant cost savings while maintaining regulatory compliance. But buyers beware; choose your environmental consultant carefully. The consultant should understand the site-specific factors that affect the calculation of the ACTLs. Often, a knowledgeable consultant has a good idea of the outcome even before investing the client’s time and money pursuing the alternative.
Cost and Schedule Benefits
To illustrate cost and development time-savings, consider a simple example of arsenic-contaminated soil at a residential development. Suppose there are no other reuse options available for the contaminated material, and the material must be disposed of at a landfill. Given 100,000 cubic yards (cy) of contaminated material at a disposal cost of $60 per cy, we estimate 6 million dollars in disposal costs, not including importing clean fill. However, if the site is an age-restricted residential community, certain exposure assumptions could be modified to calculate a much higher ACTL for arsenic. The soil would no longer be regulated as contaminated, and costs associated with disposal, imported material, and soil tracking are eliminated. Soil that was considered contaminated based on the default CTL is now clean based on the ACTL.
Let us look at a more complex example. Consider the case of a site contaminated with dieldrin, a common pesticide found at golf courses and agricultural properties. A leachability ACTL recalculates the default leachability of a particular soil contaminant. A leachability ACTL uses site-specific soil chemical and physical properties, such as soil organic matter content, bulk density, and annual average soil moisture content, and determines a more realistic risk profile associated with soil that could potentially leach contaminants into the groundwater. With an ACTL above the default CTL, remediation may not be necessary, or the site may not require a deed restriction, or ongoing costs associated with monitoring of the groundwater or operation of a remediation system could be eliminated, making the completed project more attractive to potential buyers.
Summary
Developing ACTLs is a careful, thoughtful strategy that an experienced environmental consultant can propose based on the site’s unique conditions. The developer’s financial objectives and schedule and the property end-use must be carefully considered to develop a thorough redevelopment approach. The use of an ASCTL could mean the difference between a project that is financially infeasible and one that is attractive and profitable.
Learn more about remediation and brownfields redevelopment.
About the Author: Troy Schick, PE, specializes in stormwater and groundwater management and voluntary remediation of properties, including brownfields and former landfills. Troy uses his experience at SCS Engineers and education as an Environmental Engineer and Environmental Manager with field inspection, sample collection, documentation, and project management to benefit Florida communities. Troy is available for consultation at tschick@scsengineers.
SCS Engineers announces Brittney Odom’s promotion to the Southeast region’s Environmental Services Director. Odom will continue expanding and integrating SCS’s environmental engineering and consulting operations to provide more streamlined and efficient services in her new role. She will lead environmental operations in Alabama, Florida, Mississippi, Georgia, and the Caribbean. As with all SCS leaders, she continues serving her clients in Boca Raton in her expanded role.
Odom supports real estate developers, municipalities, banks, and insurance firms to identify properties’ environmental conditions. Next, depending on soil, water, and geotechnical testing determines the appropriate environmental due diligence and the engineering activities necessary to redevelop them and be in 100% compliance with local and federal rules.
There is an active push to develop more affordable residential housing in the U.S. Real estate developers and residents want to be close to business and transportation hubs, but potential development sites could require remediation. Once agricultural sites, golf courses, or at one-time housing industrial operations, these properties need environmental testing, due diligence, possibly remediation, or vapor intrusion barriers to ensure the safe redevelopment. No matter the condition, properties with a past can return to pristine condition and make desirable residential and mixed housing locations, supporting economic development.
“It’s important to know and understand all of the options ahead of time to keep costs down and environmental quality up for sustainable communities,” stated Odem. “You need to reassure all parties that there is no leaking storage tank or anything that could compromise health.”
Her focus recently is on the redevelopment of large-size properties contaminated with arsenic and other legally applied pesticides. These property types include golf courses and agricultural land that have become inactive but are in high demand for residential use. These projects may need soil management, including remediation, soil blending, and placement restrictions.
Odom has years of experience conducting environmental site assessments, overseeing remediation activities, and submitting regulatory reports, including Phase I & II assessments in Florida, Tennessee, Louisiana, Texas, and the Caribbean. These focus on gas station properties and bulk storage terminals for large oil companies, often located on prime waterfront sites.
Additional highlights in Odom’s professional career include expertise in the applicable Florida Regulatory Chapters and Standard Operating Procedures. She also has experience in state and international cleanup efforts and their associated regulatory procedures. She participated in successful environmental closure efforts, with imposed engineering controls and property restrictions.
Odom has ten years of experience managing subsurface investigation and conducting oversight during remedial activities, including source removal and remediation system installation. She holds certifications in 40-Hour HAZWOPER/OSHA training, Loss Prevention System, CPR, RCRA Hazardous Waste, DOT Hazardous Waste, and American Petroleum Institute certification.
“Brittney’s breadth of experience solving the complexities of large scale redevelopment while meeting all environmental regulatory compliance enables her to innovative better solutions,” said Carlo Lebron, SCS vice president and director of SCS’s Southeast operations. “She’s an expert, with access to our deep bench of engineers, scientists, technology, and even economists within SCS.”
The Los Angeles County Board of Supervisors designated Alpine Village in Torrance, a Historic Landmark. The parking lot is a former landfill, and in the early ’70s, SCS Engineers designed building protection/sub-floor ventilation systems for several on-site structures. Once completed, SCS entered into contracts to monitor, maintain, prepare, and submit regulatory reports that the firm still performs well to this day.
“As we celebrate our 50th Anniversary, Alpine Village is an example of one of SCS’s oldest and longest continuously running projects,” said President and CEO Jim Walsh. We’re proud that we provide valuable environmental services to businesses and communities.”
Dave Ross, Senior VP (retired), said, “This certainly underscores SCS’s longevity and sustained superior client service. I can recall the elation when we won the first LFG [landfill gas] monitoring job there…I completed one of the earliest rounds of [air] sampling on the roof of the main building.”
Learn more about SCS Engineers and the award-winning environmental services this employee-owned firm provides.
Perfluoroalkyl and polyfluroalkyl substances (PFAS) and other emerging contaminants are becoming increasingly important for real estate transactions. Several states have adopted or proposed health guidelines or Maximum Contaminant Levels (MCLs) for PFAS in their state. States with adopted limits include CA, CT, CO, MN, NC, NH, NJ, and VT; and states with proposed limits include IL, MA, MI, and NY. You can track bills by state here.
The Wisconsin Department of Natural Resources (WDNR) and the Environmental Protection Agency (EPA) are focusing their attention on these contaminants. The WDNR recently issued letters to more than 3,000 responsible parties listed with open cases on the DNR’s Bureau for Remediation and Redevelopment Tracking System (BRRTS) requesting they review PFAS use at open sites. Read a sample of the DNR letter.
With WDNR’s increasing focus on PFAS, a lack of sufficient due diligence, which includes evaluations for PFAS, could lead to significant additional liability for property purchasers, developers, and lenders. In addition, a lack of sufficient assessment could lead to a delay in case closure even after responsible parties have addressed all other contaminants and potential exposure pathways at a site. A sufficient assessment for PFAS will depend on site-specific factors and should carefully consider the associated risks and liabilities.
For real estate buyers, owners, developers, lenders, brokers, and contractors the potential presence of PFAS at a property presents significant liabilities that need to be incorporated into due diligence procedures and safe work plans. The investigation and remediation of sites with PFAS contamination can be expensive, and the WDNR is working to define enforceable cleanup goals for soil and groundwater.
Resources:
About PFAS
PFAS are often referred to as “forever chemicals” due to their inability to be broken down in the environment. Due to the very high toxicity of PFAS, the proposed groundwater standard is extremely low – in the parts per trillion, which is more than 100 times lower than the groundwater standards for other well-known toxic contaminants such as benzene from gasoline or tetrachloroethylene commonly used at dry cleaners and industrial facilities.
PFAS are found in a wide variety of products, including nonstick coatings (e.g., Teflon), water-repellent coatings used on clothing and food packaging, fume suppressants, and firefighting foams. Potential sources of PFAS include many types of manufacturing and processing facilities, locations where firefighting foams have been used, metal plating facilities, wastewater treatment plants, and many more.
PFAS systems can treat and clean sources and remediation solutions by environmental engineers can bring properties back to life; safe to build and live on.
Joseph Dinan heads the SCS Engineers new office at 101 Arch Street, Boston, MA 02110,
Tel: 857-444-6302
SCS Engineers opened a new office in Boston’s Downtown Crossing district. The new location is more convenient for clients and enhances support to the firm’s growing client base in New England.
Joseph Dinan, an accomplished project manager and senior scientist heads Boston’s SCS team. Dinan has an excellent record meeting regulatory compliance and accountability for his clients to efficiently permit projects, keep them on budget and maintain the redevelopment schedule while meeting all environmental guidance. His background includes applied sciences including chemistry, microbiology, and environmental and soil sciences. Dinan has successfully managed hundreds of environmental assessment and remediation projects, both domestically and internationally.
Dinan’s Boston team resolves complex environmental challenges through the application of comprehensive analytical skills and technologies. Approaching each project with decades of expertise, mitigating the financial risk through careful assessment, analysis, and planning protects clients and the environment during all phases of redevelopment.
The Boston location supports the growing demand for environmental scientists, engineers, and consultants. SCS professional staff specializes in meeting federal, state, and local clean air, water, and soil goals, and the restoration of property once thought impractical to revitalize. The firm also provides vapor intrusion systems for protecting existing properties and a range of comprehensive environmental services for public and private entities.
As with most established urban environments, many properties may have previously been industrial or mass transportation sites, which often means that extra care is taken during redevelopment. Commercial real estate transactions must take environmental issues into consideration. Complex laws can impose significant environmental liabilities on purchasers, sellers, and lenders, whether or not they caused the problem, and whether or not they still own the property.
Important rules published by the U.S. Environmental Protection Agency – USEPA and in Massachusetts and other states offer defenses against environmental liabilities provided that the defendant conducted “all appropriate inquiries” regarding the property at the time of the acquisition, and then took reasonable steps to mitigate the effects of hazardous substances found on the property.
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