Environmental conditions could reduce the property’s value or create a cleanup liability.

Thousands of commercial properties face potential foreclosure as the result of a struggling economy and the pressure of $1.4 trillion of nationwide commercial real estate loans coming due in the next five years. Lenders can take action up front to manage the environmental and financial risk inherent in the foreclosure process.

A lender considering foreclosure on a commercial property should conduct an assessment of the property for environmental conditions that could reduce the property’s value or create a cleanup liability once the lender assumes ownership.

Under the federal Comprehensive Environmental Response, Compensation, and Recovery Act — commonly known as Superfund — property owners and operators are potentially liable for a release of any hazardous substance at their property.

Lenders generally are exempt from Superfund liability on the basis of two provisions. First, the lender does not participate in the management of the facility, but holds “indicia of ownership” primarily to protect its security interest in the facility. Second, the lender acts quickly to divest itself of the facility after foreclosure.

A lender gains additional protection against environmental liability under the “innocent landowner” provision of Superfund by making”all appropriate inquiry” (AAI) into the history and past uses of a property before foreclosing on it.

Hidden conditions lurking?

A Phase I Environmental Site Assessment (ESA) compliant with ASTM International standards and U.S. Environmental Protection Agency AAI rules will provide sufficient information on the environmental condition of a property. An ASTM-compliant Phase I ESA is a risk-management tool that can assist the lender (or user of the report) in satisfying one of the requirements to qualify for protection from potential liability under Superfund.

A Phase I ESA provides legal protection if it is performed before the buyer takes control or ownership of a property. It allows the lender to claim innocent landowner status, providing protection for the lender from environmental cleanup liability under Superfund.

A Phase I ESA must be completed by an environmental professional who meets the educational and experience requirements outlined by ASTM. The environmental professional evaluates the soil, surface water and groundwater at a property — in addition to the physical improvements that have been made to the property and its surroundings — for the purpose of identifying recognized environmental conditions.

A recognized environmental condition is defined by ASTM as the presence or likely presence of any hazardous substance or petroleum product on a property under conditions that indicate an existing release or a material threat of a release of any hazardous substance or petroleum product into structures on the property or into the ground, groundwater or surface water of the property.

A Phase I ESA will identify recognized environmental conditions via site reconnaissance and visual observations; interviews; record, regulatory, map and photograph reviews; and historical usage research. If a lender is seeking liability protection under Superfund, the Phase I ESA report must be prepared no more than six months prior to taking possession of the property.

A defensible Phase I ESA meeting the AAI criteria for liability protection is a critical element of thorough environmental due diligence. Hiring a qualified environmental professional can result in ongoing communication about a property and timely notification of a significant discovery. The cost of a Phase I ESA is typically $2,500 to $3,500, depending on the size and complexity of the property.

Being proactive

Scheduling a Phase I ESA early in the foreclosure process can be decisive in obtaining property access for inspection of a site. The site reconnaissance supplies information about a property that is not available anywhere else, improving the accuracy and completeness of the conclusions and recommendations. Additionally, sufficient time must be allowed for the necessary regulatory and public agency reviews.

Environmental issues besides the hazardous substances and petroleum products addressed by ASTM and AAI rules may be present at a property. Examples include asbestos-containing materials, lead-based paint, moisture intrusion, radon, vapor intrusion and wetlands. While these “business risk” issues are considered outside the scope of the ASTM standard, lenders often find it advantageous to include them in a Phase I ESA.

A Phase I ESA can be used as a risk management tool to provide protection from Superfund liability. It also is often used to identify potential environmental risks at a property such as improper storage and handling of hazardous materials, underground storage tanks, historical dry-cleaning operations, and historical automobile service and/or repair facilities. Such historical operations often involved hazardous substances and petroleum products that frequently resulted in contaminated subsurface soil and/or groundwater due to the lack of environmental regulations governing the use of these materials prior to the 1980s.

If a Phase I ESA reveals recognized environmental conditions in connection with a property, conducting a Phase II Environment Site Investigation may be recommended to examine the conditions in greater depth. This may include a regulatory file review, additional interviews, a subsurface investigation, or other site-specific action.

The potential liabilities created by adverse environmental conditions are an important consideration that lenders should examine as part of the foreclosure process. A Phase I ESA performed by a qualified environmental professional is an effective way to manage the environmental risk of the foreclosure process and potential financial burdens.

ASTM International

Press release date: August 24, 2010

W. CONSHOHOCKEN, Pa., – ASTM International and Environmental Data Resources (EDR) announce an online course offering for ASTM E1527, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.

ASTM E1527 was first published in 1993 and has been revised numerous times since, most recently in 2005. It is one of the most widely published and distributed ASTM standards, and is used in commercial real estate transactions more than 220,000 times each year. Today, the process of performing Phase I Site Assessments is largely driven by the lending industry in advance of closing commercial loans. The purpose of E1527 is to specify environmental due diligence for the objective of achieving landowner liability protections (LLPs) under Super Fund. ASTM has offered an in-person training course on E1527 since 1993 and continues to offer it several times a year at various locations in the United States.

This is the first time that an online technical and professional training course has been offered by ASTM International. The online course features 12 modules of content offered over three weeks and is equivalent to the existing 16-hour in-person course. Participants are able to complete the material at times convenient to them during the three-week time period. Existing course instructors are online daily to facilitate communication, answer questions and participate in forum discussions. Additionally, the instructors will host an online conference call each week to discuss relevant topics and answer any questions that participants may have.

For the remainder of 2010, E1527 online training courses are scheduled for the following dates: Sept. 20, Oct.12 and Nov. 1. Click here to register.

The cost for the course is $895 USD and includes copies of ASTM E1527, course notes, case studies, and information about ASTM and Committee E50 on Environmental Assessment, Risk Management and Corrective Action. Register 30 days in advance and save $100. For more information or to register, go to http://commonground.edrnet.com and choose “commonground University” under the Learn menu.

The in-person E1527 course can be tailored to your company’s needs and brought to your facility by ASTM. Contact Scott Murphy, ASTM International (phone: 610-832-9685; smurphy@astm.org) for details. For questions about the online course, contact Lauren Rosencranz, Envrionmental Data Resources (lrosencranz@edrnet.com).

ASTM International is one of the largest international standards development and delivery systems in the world. ASTM International meets the World Trade Organization (WTO) principles for the development of international standards: coherence, consensus, development dimension, effectiveness, impartiality, openness, relevance and transparency. ASTM standards are accepted and used in research and development, product testing, quality systems and commercial transactions.

Environmental Data Resources, Inc. (EDR) is the leading provider of environmental risk information services and related workflow applications in the United States. As the innovator of the most comprehensive database of environmental and historical land use information, the company provides reports, subscription services and other solutions to help its customers reduce environmental risk. Established in 1991, EDR is headquartered in Milford, Connecticut with regional offices located throughout the United States. EDR is wholly owned by DMG Information Inc., the business information division of Daily Mail and General Trust, plc (DMGT).

www.astm.org

I’m republishing a great article posted in the Oregon Daily Journal of Commerce. I’ll soon be adding information relevant to Illinois customers. If you are in any other state, let me know, and I’ll find out how your state handles this.

“Risk comes from not knowing what you’re doing.”

- Warren Buffett

Many people seeking to purchase property for commercial purposes refuse to consider contaminated properties, because they are concerned about the risk of being held liable for the contamination, or about the time and expense that may be involved in addressing the legal and technical aspects of acquiring such properties. As a result, contaminated properties often are overlooked bargains.

In reality, armed with the proper knowledge, purchasers of contaminated properties will find that it is relatively painless to protect against liability under both federal and state law.

Federal law

In 2002, the Comprehensive Environmental Response Compensation and Liability Act was amended by Congress to encourage prospective purchasers to buy and redevelop Superfund and brownfield properties (i.e., properties known or suspected to be contaminated).

Prior to this amendment, purchasers of brownfields could be held liable for contamination related to the property unless they could establish that they had no reason to know the property was contaminated. This scenario created an obstacle to the redevelopment of properties that were known to be contaminated.

In order to avoid liability, the party seeking to purchase a known-contaminated property could negotiate a Prospective Purchaser Agreement with the EPA. (A PPA is a legally binding agreement between the government and a prospective purchaser of contaminated property that limits the purchaser’s liability for environmental cleanup).

The 2002 CERCLA amendments, however, allow purchasers to buy a contaminated property and avoid potential liability for existing contamination without the need for a PPA, by qualifying as a “bona fide prospective purchaser.” Therefore, in order to protect against potential federal liability for environmental contamination at a property, a purchaser needs to ensure that it qualifies as a bona fide prospective purchaser (BFPP).

A prospective purchaser of contaminated property can qualify as a BFPP by satisfying the criteria in the provision found in CERCLA statutes.

Pre-purchase criteria include:

• Pre-purchasing “all appropriate inquiry”
• Not affiliating with a liable party

Post-purchase criteria include:

• Taking reasonable steps with respect to hazardous substances on the property
• Complying with any land-use restrictions and institutional controls
• Cooperating with governmental authorities and persons conducting any cleanup
• Complying with information requests and administrative subpoenas

Of these criteria, “all appropriate inquiry” and “reasonable steps” typically pose the most significant concerns.

All appropriate inquiry refers to the requirements for assessing the environmental conditions of a property prior to its acquisition. In 2005, the EPA adopted rules governing what constitutes “all appropriate inquiry.” Although a full discussion of all appropriate inquiry is beyond the scope of this column, a key aspect includes a professional’s environmental site assessment, which includes:

• Interviews with past and present owners, operators and occupants of the facility for the purpose of gathering information regarding the potential for contamination at the facility;
• Reviews of historical sources, such as chain-of-title documents, aerial photographs, building department records, and land-use records, to determine previous uses and occupancies of the real property since the property was first developed;
• Searches for recorded environmental cleanup liens against the facility that are filed under federal, state or local law;
• Reviews of federal, state, and local government records, waste disposal records, underground storage tank records, and hazardous waste handling, generation, treatment, disposal, and spill records concerning contamination at or near the facility;
• Visual inspections of the facility and adjoining properties.

Additionally, a BFPP must take “reasonable steps” with regard to the hazardous substances on the property, including stopping a present release, preventing a future release and preventing exposure to a prior release. If such steps are not taken, the purchaser could lose its status as a BFPP.

The EPA believes that, in most cases, the 2002 CERCLA amendments make PPAs from the federal government unnecessary, because prospective purchasers need only take the steps necessary to qualify as a BFPP. Only under limited circumstances will the EPA still consider entering into a PPA.

In general, the EPA will consider a PPA when: 1, there is likely to be a significant windfall lien and the purchaser needs to resolve the lien prior to purchase, or 2, a PPA is necessary to ensure that the transaction will be completed and the project will provide significant public benefits.

This is a great intro for the budding environmental engineer. At some point, you’ll have to get muddy to really understand wetlands though.

Wetland Delineation 1

Wetland Delineation 2

We wanted to shine a spotlight today on a new solution from CorpsJD, a newly launched online GIS GPS-Capable Wetland Delineation, Mapping & Reporting Software Service. Built on the Microsoft platform of Windows Server 2008, SQL Server 2008, and Bing maps, and integrated with ESRI’s GIS application, CorpsJD provides a high performance and reliable service that simplifies the environmental assessment and permitting process associated with wetland properties. In the words of CorpsJD, “Imagine if you could instantly load Bing aerial maps and see your property’s aquatic constraints, soil concerns, FEMA floodplains and other state and local environmental variables that determine a properties net worth. That’s CorpsJD. All of this is displayed in a standardized GIS mapping format that’s easy to learn, all at the click of a mouse. Imagine saving 50% of the field time and 80% of the office time on a job you’re doing anyway.” CorpsJD is hosting a series of webinars introducing the new features and functionality of the service. Find out more at http://www.corpsjd.com

Things like this are not normally part of a Phase 1 Environmental Site Assessment. It is always interesting to learn about the history of a property. As you may see from the link, All Appropriate Inquiry never gets boring.

Train Tanker Below Car Dealership

A free hydric soils identification book is available online.  Click the link.  Enjoy.

A recent court decision demonstrates the need for even due diligence in every real estate transaction. Don’t count on someone else to tell you what is necessary. If you want peace of mind, do the background research on your propert.

Take a hike through a meadow in full bloom and chances are you’ll wish you could recreate a smaller version in your own yard. The colors and varieties of flowers and grasses are totally random, yet about as close to landscaped perfection that you’ll ever find. Whether you have a large expanse or a small area, a wildflower garden can be a unique addition to your landscaping plan.

The native plants are hardy and once established require little care, fertilizer or watering. In a true wildflower garden, the flowers are planted close together, at least one per square foot of dirt. This allows them to provide shelter for one another, conserve water, and helps to eliminate weeds. The brightly colored flowers attract a variety of birds and butterflies and can provide a taste of wilderness even in the most urban setting,

Once a wildflower garden is fully established, you can sit back and enjoy, but the real effort comes with the soil preparation and maintenance in the first two or three years. Here is a guide to the successful planning and planting of your own wildflower meadow.

Designing Your Garden:

Plant a combination of wildflowers and native grasses. The most common complaint from new gardeners is that the garden bloomed beautifully the first year and proceeded to get sparser in subsequent years, accompanied by a high concentration of weeds. This is often the result of choosing a seed mixture consisting of non-native annuals instead of true native, perennial wildflowers and grasses. With the latter species, you shouldn’t expect blooms until the third year.

When choosing plants, use a combination of Spring and late bloomers, as well as a mixture of tall and low growing species.

Flowers that attract birds or butterflies, include Blazing stars, coneflowers, asters, silphiums and sunflowers. If deer are a problem in your area, choose a combination of deer resistant seeds such as lavender hyssop, nodding wild onion, coreopsis, purple clover, purple coneflower and meadow rose.

Choose a sunny location with good air circulation. Your wildflowers will need a minimum of one half day of full sun to really thrive. Steep north-facing slopes tend to be sheltered from the sun and are not the best candidates for meadows, but do well with ferns or woodland wildflowers.

Soil & Site Preparation:

Determine your soil type, adding to it if needed. For instance, a sandy or clay type soil will benefit from added organic matter which breaks up heavy soils, improving ability to absorb water and provides air flow to the roots. The other effective method for improving poor soil is to plant a “green manure crop” such as buckwheat. Let it grow for a year and plow it under. The roots will draw up the nutrients from the lower soil and convert them into organic matter.

In addition to proper growing conditions and good soil, the most important factor in growing a successful wildflower garden is having a smooth, surface, free of weeds. The first step is to remove any existing vegetation is by smothering, cultivating, herbiciding or a combination of these.

On smaller areas, smothering is an effective method of eliminating weeds. Cover the planting area with dark plastic, tarps, old carpeting, plywood or a thick layer of leaves for a complete growing season. Adding a layer of newspaper before covering will enrich the soil even more. As the paper decomposes, worms will move in, adding even more nutrients.

A broad spectrum, non-persistent herbicide will also do the trick, especially on larger areas. The third alternative is to cultivate the area using a rototiller or tractor.

Planting:

Once you have prepared your site, purchase your seeds from a reliable grower. On areas less than one acre, the seeds can be dispersed by hand, by mixing with a lightweight material such as vermiculite, peat moss or sawdust. For a 1000 square foot planting, combine one bushel basket of this material, dampened slightly, with your seed. Take half the mixture and spread across the area. When spreading the second half, walk perpendicular to your first spreading. If the soil is dry, proceed to roll the area. If it is wet, then wait until it dries slightly to avoid compacting the soil.