Managing and MitigatingManaging and MitigatingEnvironmental Risks

Urban Land InstituteReal Estate Development Process: Part 1

Sheraton Dallas Hotel

January 20, 2012

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Overview

Environmental Liability ExposureEnvironmental Liability ExposureEnvironmental Site AssessmentsG t l Li bilit P t tiGovernmental Liability ProtectionContractual Liability ProtectionEnvironmental Insurance

Environmental Liability Exposure

Environmental Impacts CERCLA & State Equivalents CERCLA & State Equivalents Status liability – Owners/Operators Joint and several Joint and several Strict Retroactive Perpetual

Environmental Liability Exposure

Other Federal and State Statutes Clean Water Act Clean Water Act

√ Wetlands√ Storm water management√ g

Endangered Species Act

Environmental Liability Exposure

Increased Development Costs Waste management Waste management Waste water Asbestos Wetlands Lead paint

Land-use Restrictions Claims from Third Parties Unknown Environmental Conditions

Environmental Site Assessment

All Appropriate Inquiry (Phase I) Identifies Recognized Environmental de es ecog ed o e a

Conditions (RECs) Components Records review Site reconnaissance I t i Interviews Report Qualified environmental professional Qualified environmental professional

Environmental Site Assessment

AAI Does Not Cover:

Radon Mold

Petroleum Asbestos in

b ildi

Municipal solid waste

Wetlandsbuildings Lead-based paint Lead in drinking

Wetlands Endangered

species A h l i l d

gwater

Indoor air pollution/vapor

Archeological and cultural

Regulatory pollution/vapor intrusion

g ycompliance

Environmental Site Assessment

If Contamination Issues → Phase II Invasive Sampling of p g Soil Ground water Surface water Sediment

Release Reporting Obligations

Governmental Liability Protection

CERCLA Defenses Innocent Landowner Innocent Landowner Contiguous Property Owner Bona fide Prospective Purchaserp

Requires “All Appropriate Inquiry” ASTM E1527-05 – consistent with final

rule on AAI Codified at 40 CFR Part 312

Governmental Liability ProtectionTexas Voluntary Cleanup ProgramTexas Voluntary Cleanup Program

Remediate to meet Texas standardsRemediate to meet Texas standards Certificate of Completion – releases future

owners and lenders from liability to Texasowners and lenders from liability to Texas Must apply before taking title Must apply before performing remediation Must apply before performing remediation

Governmental Liability ProtectionTexas Innocent Owner/OperatorTexas Innocent Owner/Operator Program

Immune from liability if Property contaminated by release or Property contaminated by release or

migration from off-site source or sources, and

Did not cause or contribute to the source or sources of the contamination

Governmental Liability ProtectionTexas Innocent Owner/OperatorTexas Innocent Owner/Operator Program

IOP Certificate of Completion confirms eligibilityeligibility

IOP Certificates are not transferable

Governmental Liability ProtectionTexas Municipal Setting Designationp g g City ordinance restricts potable use of

groundwaterg Eliminates exposure pathway so may Lower cleanup standards Lower cleanup standards Reduce investigation/remediation

requirements Reduce remediation costs

TCEQ certifies the ordinance

Contractual Liability Allocation

Disclosure Obligations Remediation Agreements Remediation Agreements “As Is”

Li bilit R l P i i Liability Release Provisions Indemnity Provisions Successor Property Owner Problem

Environmental Insurance

Clean Up Cost Cap may not be available may not be available

Site Pollution Liability Insurance Green Building Restoration Green Building Restoration Storage Tank Liability Insurance

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