Reusing Contaminated Property for Commercial and Residential Developments:

Transcription

1 Reusing Contaminated Property for Commercial and Residential Developments: Practical Approaches from Voluntary Cleanup to Brownfield Programs SPEAKERS: Charles H. Tisdale Les A. Oakes Tuesday, January 16, :30 1:30 p.m. Eastern time If you have not downloaded the program materials, please do so now at learn/handout To connect to the audio part of the program, please call: A customer service representative will connect you to the seminar. For technical assistance at any time during the presentation, please call:

2 Speaker Biographies Chet Tisdale has practiced environmental law at King & Spalding since 1973 and has represented clients on air, water, and waste issues before state and federal agencies and in litigation. Mr. Tisdale is listed as a leading environmental lawyer in The Best Lawyers in America and Chambers USA. He practices in the Atlanta office of King & Spalding. Charles H. Tisdale ctisdale@kslaw.com Mr. Tisdale is a member of the Boards of the Chemical Waste Litigation Reporter, the Clean Air Campaign, the Emory University Alumni Association and the Georgia Conservancy. He is the former chair of the Atlanta Bar Litigation Section and the State Bar Environmental Law Section. Speaker Biographies Les Oakes joined King & Spalding's Environmental Practice Group in 1986 following a career of over eleven years as an environmental engineer with the Environmental Protection Division, Georgia Department of Natural Resources (EPD). At EPD, Mr. Oakes conducted compliance inspections, wrote permits and participated in agency enforcement proceedings. He worked in the air, hazardous waste and water branches. This work provided valuable experience and insight into complex regulatory issues and agency decision making. Chambers USA selected Mr. Oakes as a leading environmental lawyer in Georgia. Les A. Oakes loakes@kslaw.com

3 Reusing Contaminated Property for Commercial and Residential Developments: Practical Approaches from Voluntary Cleanup to Brownfield Programs SPEAKERS: Charles H. Tisdale Les A. Oakes Tuesday, January 16, :30 1:30 p.m. Eastern time 1 Increase in development of property in urban areas. Many properties in urban areas have soil or groundwater contamination resulting from prior users. Contamination can substantially delay development of the property. Contamination can increase the cost of development. 2

4 Goal of Seminar Provide practical advice on development of contaminated property; How to evaluate if property is contaminated; and How to develop contaminated property: without significant delay. without significant cost. in compliance with environmental laws. 3 Liability of Owner Owner is liable for contamination on property even if contamination occurred prior to purchase Liability imposed under federal and state law without regard to fault (federal and state superfund laws) 4

5 Regulatory Quagmires Owner tests and finds contamination in soil or groundwater Owner required by state law to report contamination above certain levels State or federal environmental agency evaluates contamination Environmental agency places property on list of properties to be cleaned up Environmental agency requires more testing (delay and cost) Environmental agency requires cleanup to stringent standards (significant increase in cost and delay) 5 How Can a Prospective Buyer Avoid These Regulatory Quagmires? 1. Understand the Regulatory Process 2. Work with qualified environmental engineer or geologist (environmental consultant) who will evaluate the property to determine if there is information which indicates contamination has occurred (Phase One Report) 3. Review draft Phase One Report with qualified environmental lawyer 4. Finalize Phase One Report and proceed with development if no information which indicates that hazardous materials disposed of on the property 6

6 What is a Phase One Report? All Appropriate Inquiries (AAI) to evaluate a property s environmental conditions and assess potential liability for environmental contamination. New U.S. EPA AAI regulations at 40 C.F.R. Part 312, effective November 1, 2006 Phase One process is logical even though regulations may appear complex 7 What is the Value of a Phase One Report? May create exemption from owner liability so buyer not liable for pre-existing contamination May provide sufficient information to proceed without soil or groundwater testing on property May satisfy lender requirements for appropriate environmental investigation Useful if buyer later sells property 8

7 Process for Phase One Report Inspect property for visual signs of contamination Review EPA, state and local records for any reports of contamination on the property and on adjacent properties 9 Process for Phase One Report (cont (cont d) Review current and prior uses to determine if any information indicates use of hazardous materials which could have been spilled or disposed of on the property Title search for names of prior owners and environmental liens Historic aerial photos Old telephone books Sanborn fire department maps Interview current and former owners and tenants Prior environmental investigations retained by current or past owners 10

8 Process of Phase One Report (cont (cont d) Present factual information to use in determining whether there is any information which indicates that hazardous materials were used on the property and were spilled, leaked or disposed of on the property Present any information which indicates that contamination from an adjacent property could have contaminated groundwater or soil on the property which may be purchased 11 Why Should the Phase One Report Be a Draft? Client and qualified environmental lawyer should review facts reported in draft report To reach valid conclusions, legal issues must be considered and discussed Evaluate facts with environmental consultant and counsel to decide if further investigation is needed, including testing of soil, groundwater or underground tanks 12

9 Common Mistakes Environmental consultant does Phase One, concludes testing is required and conducts soil and groundwater testing Testing shows contaminated groundwater which must be reported to state environmental agency State requires additional testing, which is time-consuming and can be costly State may require cleanup which is not necessary or should be done by the person who caused the contamination Evaluation of sources of contamination in the area show that groundwater under the property was already contaminated by another source Was groundwater testing actually necessary? 13 Solution Careful review of draft Phase One factual investigation by owner and counsel may lead to determination that there is no evidence hazardous materials disposed on the property and other sources in area have contaminated groundwater under the property In this case, groundwater testing should not be conducted. The focus of Phase I is to determine if there is information which suggests disposal of hazardous material on the owner s property, not on other properties 14

10 Atlanta Area Groundwater contamination exists throughout the Atlanta area as a result of prior uses of property: gasoline stations, dry cleaners and other operations which resulted in spills of chemicals Before groundwater testing is conducted, evaluate the records available to determine if adjacent properties have already caused groundwater contamination Testing of groundwater is not required unless testing of soil on the property shows contamination at depth which could cause groundwater to be contaminated from waste disposed on the owner s property, not from other sources 15 Common Problem Soil contamination found near surface, environmental consultant recommends the testing of groundwater Soil at depth should be tested, if soil contamination is limited to area above groundwater, testing is not required 16

11 No Duty to Report Contamination Removed If Owner begins removal of contaminated soil within 30 days after notice and completes removal of all contaminated soil, there is no legal requirement to report the contamination to the state. Owner can then begin development of property, having complied with all applicable laws 17 What if Phase One Report Properly Concludes Tests of Property Are Required? Test soil first If no soil contamination found, no testing of groundwater is required Owner only responsible for contamination occurring on its property If soil contaminated down to groundwater, then groundwater testing is required 18

12 Duty to Report Contamination to State or EPA Georgia and most states require owner to report contamination of soil and groundwater State cleanup laws require state to evaluate test results to determine: Is more testing necessary? Is cleanup required under state cleanup standards? Does contamination present a risk of harm to human health or the environment? Following review, state may require more tests, cleanup or issue a letter stating that levels are low enough that no further testing and no cleanup is required 19 Duty to Report (cont (cont d) In some cases, state no further action letter is beneficial and resolves all environmental issues Georgia process for evaluation and decision on further testing or cleanup or no further action is done under Georgia Hazardous Site Response Act ( HSRA ), O.C.G.A et seq., and HSRA regulations EPA involvement generally only when contamination presents significant health or environmental hazard 20

13 Brownfield Laws Brownfield laws in numerous states provide buyer with expedited process to obtain release of liability for pre-existing contamination and expedited agency review EPA Brownfield Program provides buyer federal protection from liability for pre-existing contamination and favorable tax treatment for expenses of testing and cleanup Most Brownfield laws require some cleanup Brownfield laws must be carefully evaluated with the facts of each case Brownfield laws may result in regulatory delay or cleanup that is not required under a realistic risk assessment 21 Georgia Brownfield Law Buyer must test soil and groundwater Buyer must submit detailed reports to state Buyer must cleanup soil above Georgia cleanup standards Buyer obtains release of liability for any groundwater contamination Buyer can seek reduction in future property taxes to reimburse buyer for soil investigation and cleanup costs 22

14 Georgia Brownfield Law (cont (cont d) Georgia Brownfield law can cause significant delay because of time required to: 1. Conduct extensive soil and groundwater tests 2. Prepare and obtain state approval of soil cleanup plan 3. Cleanup soil to stringent state cleanup standards Georgia Brownfield law is only useful in certain cases 23 Hypothetical #1 Buyer has a consultant prepare a Phase One Report. The report does not indicate that hazardous substances or petroleum products or tanks have ever been located on the property. The consultant finds two monitoring wells on the property and decides to take a sample. The monitoring wells show pesticide contamination. What does the buyer have to do now? Should the consultant have sampled the wells? 24

15 Hypothetical #2 Property located next to Atlantic Station. A Sanborn map shows a foundry located on part of the property in the 1920s. Owner wants to sell the property soon. Owner does not want to become involved in the HSRA reporting system. If the property were listed as a HSRA site requiring further investigation, the regulatory process could take 1 to 5 years, delaying the sale. The buyer wants to do environmental testing and is concerned about contamination from the foundry. What can owner do to satisfy the law and sell the property quickly? 25 Hypothetical #3 The Phase One Report indicates the potential for some contamination and, accordingly, testing is conducted. Barium is found in soil above the HSRA reporting requirement. The soil sample is taken at 8 feet. Other information in the area suggests that groundwater is 34 feet below the surface. there is no barium on the surface (top 1 foot of the site). What should be done with this information? 26

16 Hypothetical #4 Buyer plans to buy property that includes a shopping center with a dry cleaner which operated for 30 years. A common dry cleaning fluid, PCE, is found in soil and groundwater at levels significantly above notification criteria under HSRA and the cleanup criteria for soil and groundwater under HSRA. The location of the property is in the Atlanta area. Buyer asks why should it be responsible for another party s problem. Buyer wants to avoid further work on the property and acquire the property to build apartments and needs to proceed as soon as possible. How can Buyer comply with the law without substantial regulatory delay? 27 Hypothetical #5 The client s property has been tested and found to contain soil and groundwater contamination for TCE used as parts cleaner by a machine shop which operated on the property over 20 years ago. The client has heard about the Georgia Brownfield Program and another lawyer has recommended the program. The client asked for our advice. What questions are appropriate to determine whether the Brownfield Program should be used? How should we explain the Brownfield Program to our client? 28

17 Hypothetical #6 The consultant finds that there are leaking underground gas tanks located upgradient of our client s property along with contamination detected from an investigation of the property immediately upgradient which contained a former dry cleaner. The consultant advises our client in a report that the groundwater contamination from gasoline and dry cleaner operations constitutes a Recognized Environmental Condition and that our client should do further testing on its property. What is our recommendation? 29 Hypothetical #7 The Phase One Report prepared by our client s consultant includes a visit to the site, an interview with the current owner, and a review of aerial photographs from the 1990s and 1980s. The consultant concludes that there is no Recognized Environmental Condition and that no further work be done on the property and that the Phase One Report is sufficient. Is it? 30

18 Hypothetical #8 The consultant s tests show the presence of lead, chromium, and barium in soil all below the notification concentration except for one sample of barium at 6 feet, which is just over the notification concentration. Should a HSRA notification be submitted to the EPD? Is there any alternative to avoid the notification? 31 Hypothetical #9 The consultant s report documents the presence of lead in soil above notification concentration and gasoline products (benzene, xylene, ethyl benzene, and toluene) in groundwater. The client wants to develop the property soon and not be required to do further testing or have the site listed on the state s Hazardous Site Inventory. What can be done? 32