Vermont – June 2011

Getting the most out of

All Appropriate Inquiries

Pre-purchase Environmental Due DiligenceA reasonable environmental site assessment

performed as part of a commercial real estate transaction

Necessary for parties seeking liability protection

Inherent with Brownfields RedevelopmentEnvironment (soil, water and air)Buildings

All Appropriate Inquiries (AAI)

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Established liability protectionsClarified Innocent Landowner defenseAdded Contiguous Property OwnerAdded Bona Fide Prospective Purchaser

Required EPA to develop regulations establishing standards and practices for conducting all appropriate inquires

Established EPA’s Brownfields Grant Program

2002 SBLRBRA (Brownfields Amendments)

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To qualify for CERCLA liability protections, the landowner must:

Performed AAI prior to acquisition of the property

Have no knowledge or reason to know of contamination at the time of acquisition

Comply with continuing obligations upon discovery

Innocent Landowner

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To qualify for CERCLA liability protection, the landowner must:Performed AAI prior to acquisition of the

propertyHave no knowledge or reason to know of

contamination at the time of acquisitionNot be potentially liable or affiliated with any

other person potentially liable for response costs

Not cause, contribute, or consent to a release or threatened release, and

Comply with continuing obligations

Contiguous Property Owner

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To qualify for protection from CERCLA liability, the BFPP must have acquired the property after January 11, 2002, andPerformed AAI prior to acquisition of the

propertyAcquired the property after the disposal of

hazardous substancesNot be potentially liable or affiliated with any

other person potentially liable for response costs, and

Comply with continuing obligations

Bona Fide Prospective Purchaser

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Eligibility based on pre-purchase inquiry

Prior to May 31, 1997Generally accepted good commercial and

custodial standards and practices at that timeBetween May 31, 1997 and November 1, 2006

ASTM E 1527-97 or ASTM E 1527-00 Phase I Environmental Site Assessment

After November 1, 2006AAI Final Rule, or ASTM E 1527-05 Phase I

Environmental Site Assessment

Accepted Standards and Practices for AAI(heads up to potential cleanup/RLF grantees)

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Involuntary taking of property, through tax foreclosure or eminent domain, provides inherent liability protectionsRemember – Continuing Obligations apply

Taking a property through donation or any dollar amount requires AAI to establish BFPP status (and all that goes with it)

Reminder on AAI for local governments

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Comply with land use restrictionsNot impede institutional controlsTake “reasonable steps” to stop and prevent

releases of contaminationProvide legally required notices upon

discoveryProvide cooperation, assistance and access to

EPA, the state, or other conducting response actions and natural resource restoration

Comply with CERCLA request for information and administrative subpoenas

Continuing Obligations to Maintain Liability Protections

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Seek closure to environmental conditions recognized in the AAI/Phase I report and any Phase II investigations

Stop any current or previously unidentified releases

Prevent any future releases (by owner or operators)

Legal notices include notifying VT DEC on any identified releases to the environment

If disaster strikes, call in for state and/or EPA assistance

Stepping up to taking “reasonable steps”(to maintain liability protections)

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Persons seeking to establish liability protectionsInnocent LandownerContiguous Property OwnerBona Fide Prospective Purchasers

EPA Brownfields Grantees

Parties wishing to assess the environmental condition of commercial real estate

AAI Rule & ASTM E 1527-05 Apply to:

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Must be conducted within 1-year prior to the acquisition date, with certain components requiring updating within 180-days of acquisitionDate of acquisition or purchase date = date

landowner obtains title to the property

With property transactions shelf life is pass/fail

Strategize AAI completion with each individual project Status of environmental investigationBuyer/owner/grantee goals and timing

Managing AAI shelf life

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Buyer’s Perspective to AAIHigher

Risk

Lower

No AAIBuyer becomes PRP and assumes all risk

AAI OnlyQualifies as BFPP, but assumes all

continuing obligations and potential risk due to uncertainty

AAI + Phase II Reduces risk with greater understanding

of continuing obligations AAI + Phase II + Cleanup Planning

Minimizes risk and begins to approach cost certainty

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Seller Perspective to AAIHigher

Risk

Lower

No AAI Desirable, but unknown risk for potential

liability from 3rd party lawsuitAAI Only

Helps establish baseline risk for marketing property, and lowers potential risk from 3rd party lawsuit

AAI + Phase II Further reduces risk to seller and buyer, but

may result in reportable concentrations which may require further seller responsibilities

AAI + Phase II + Cleanup Planning Minimizes risk, property value understood,

improves decision making and bargaining position

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Seek to identify conditions indicative of releases and threatened releases (Recognized Environmental Conditions (RECs))Identify current and past uses and occupanciesIdentify current and past uses of hazardous

substances and petroleum Identify waste management and disposal

activitiesIdentify current and past corrective actionsIdentify engineering and institutional controls,

andIdentify RECs at nearby and adjoining

properties that may impact subject property

Objectives of AAI

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Gather required information that is publicly available, obtained within reasonable time and cost, and can practicably be reviewed

Review and evaluate the thoroughness and reliability of the information gathered

Don’t let quality suffer at the expense of cost savings

Performance Factors

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Opinion of the Environmental Professional (EP)The report must provide and opinion as to

whether the inquiry has identified conditions indicative of a release or threatened release

The EP must include in the final report an opinion regarding additional appropriate investigation, if the EP has such an opinion

“To be of real value, a Phase I report should contain a narrative that links the information obtained with an analysis as to whether or not the subject property contains a REC or area of concern.”

Key Reporting Elements (Coming to your grant)

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Data GapsData gaps that impact the ability of the EP to identify a

REC must be reported in the opinion section of the report

However, the significance of a data gap may not be immediately evident

Better to identify all perceived data gaps, particularly when required information was not obtained, and document the significance of each

Identifying data gaps can be an EP’s best liability protection

EP Qualifications, Declarations and SignatureMust be included and declarations must be verbatim

(in “general” conformance won’t cut it)

Key Reporting Elements (cont.)

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RECORDS REVIEWUse information in preparation for interviews and site inspection

Historical Use Records AAI = 1st use or structure ASTM = 1st use or 1940

Aerial photographs Fire insurance maps Property tax files Land title records USGS topographical maps Building department records

Zoning/land use records Other: misc. maps, newspaper achieves, internet sites, community organizations, local libraries, historical societies)

Physical Setting (ASTM): USGS 7.5 min topographic map (required)

Other groundwater and soil maps when migration potential exists (discretionary)

Federal, State, Tribal and Local Records Subject Property(update within 180-days of purchase)

Reported releases and site investigation reports Landfill/disposal locations Storage tanks Waste handling and generating Identified site lists

Spill reports CERCLIS ERNS RCRA generator Engineering and Institutional Controls Public health department

Federal, State, Tribal and Local Records Nearby or adjoining Properties:(update within 180-days of purchase)

NPL (1 mi) Delisted NPL (0.5 mi) CERCLIS (0.5 mile) CERCLIS NFRAP (0.5 mi) RCRA Corrective Action sites (1 mi) RCRA generators (adjoining properties)

Identified site lists (0.5 mi) LUST sites (0.5 mi) Registered storage tanks (adjoining properties) Permitted landfills/waste management facilities (0.5 mi) Engineering controls (0.5 mi)

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Perform prior to Interviews and Site InspectionHow far back to review history

Back to first use or first structure (AAI)Back to first use or 1940, whichever is earliest

(ASTM)Significant sites to the community means more

potential local recordsSearching for and reviewing State records on

releases and investigation reports is a mustThe results of the commercial environmental data

reports for nearby or adjoining properties is both findings and “opinion” (i.e., tell me about their potential to be an REC)

Records Review

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INTERVIEWS (update within 180-days of purchase)(for hazardous substances and petroleum use, storage, treatment, handling and disposal)

Interviews: Current owner Current occupant

Major occupants (when multiple occupants are present)

Additional Interviews (one or more to meet objective and performance factors):

Current or past facility manager Past owners and occupants Current or past employees

Interviews for Abandoned Properties (one or more):

Owners or occupants of neighboring or nearby properties when evidence indicates unauthorized or uncontrolled access to subject property

Interviews with State and/or Local Government Officials (ASTM):

Fire department Health agency Agencies with hazardous waste disposal jurisdiction

Building and groundwater permitting agencies w/ AUL knowledge

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Identifying the types of hazardous substances and petroleum used on site, their storage, treatment and handing in business processes, and its disposal

Lack of required interviews is a data gapFor abandoned properties, interviews with

neighboring properties may not be desirable from the buyer’s perspective, and will result in a data gap if voluntarily left out

Interviews

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VISUAL INSPECTIONS (update within 180-days of purchase)(for hazardous substances and petroleum use, storage, treatment, handling and disposal)

Inspection of Subject Property - General:

Identify current uses Identify past uses Identify geologic, hydrogeologic, hydrologic, topographic conditions

Identify structures Identify thoroughfares on and adjoining the property Potable water supply Sewage disposal system

Inspection of Subject Property – Exterior and Interior:

Hazardous substances and petroleum products Storage tanks Odors Pools of liquid Drums Unidentified containers PCB sources (electrical, hydraulic equipment etc.) Heating/cooling systems and fuel source Stains and corrosion

Drains and sumps Pits, ponds and lagoons Stained soil and pavement Stressed vegetation Solid waste disposal areas Waste water/liquid discharge areas (drains, ditches, underground injection, streams, etc. ) Wells (dry well, irrigation, injection, abandoned etc.) On-site septic systems

Inspection of Adjoining Properties and Surrounding Area (from subject property, public right-of-ways, aerial photos):

Identify current uses Identify past uses

When On-Site Visual Inspection Can Not Be Performed:

Inspect from public right-of-ways, other vantage points, aerial photographs

Document efforts taken to gain access Address impact in terms of a Data Gap 23

Identifying the types of hazardous substances and petroleum used on site, their storage, treatment and handing in business processes, and its disposal

Experience can play an important role in the quality of the site inspection, and the Environmental Professional is encouraged to take part in the site inspection

The devil is in the details for a thorough inspection

Inability to get on the property is a significant data gap

Visual Inspection

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User’s responsibility User may engage title company to perform

service, or request EP to perform this taskUser may provide information to EP for

inclusion in report, but does not have to Lien information obtained or provided to the

EP must be considered in rendering conclusions or opinions regarding the environmental conditions of the property

Search for Environmental Liens(Update with 180 Days of Purchase)

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User must provide to EP Specialized knowledge held back by the user

may jeopardize future liability protections Persons must take into account their

specialized knowledge of the subject property, the area around subject property, and other experience in identifying RECs

Specialized knowledge should be provided before site inspection

Specialized Knowledge or Experience

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User responsibility (generally when there is a transaction involving the purchase of the subject property)

Must consider whether the purchase price reasonably reflects the market values if not contaminated

If below market value must consider whether the difference is due to contamination

Relationship of Purchase Price

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User and EP responsibilityMust take into account information within the

local community in identifying RECsAdditional sources include:

current owners or occupants of neighboring properties,

local or state officials and others with knowledge of subject property, and

other sources (newspapers, websites, community organizations, local libraries, historical societies)

Commonly known information should be provided before site inspection.

Commonly known Information

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User and EP responsibility User and EP must take into account the AAI

information collected in considering the ability to detect contamination by appropriated investigation

The EP must include in the final report an opinion regarding additional appropriate investigation, if the EP has such an opinion

Degree of Obviousness

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YesPotentially with publicly owned properties with

high community interestHigh profile sites (later on in investigation

process)When environmental conditions on subject

property could be impacting nearby property ownersRequires planning and state involvement

NoGenerally not for private party transactionsIdentifying RECs could raise false concerns

and jeopardize property redevelopment

Community Involvement in AAI

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AAI Contact Information

Alan Peterson617-918-1022Peterson.Alan@epa.

gov

Dorrie Paar617-918-1432Paar.Dorrie@epa.go

v

Questions?

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