1. home and garden
2. environmental safety

MALC
San Antonio, Texas
August 18-20, 2014
Environmental Due
Diligence:
(How to keep both you and your
client out of trouble)
S
Phase Engineering, Inc.
Who We Are
S Incorporated in 1993. Principals are James Dismukes, P.E.
and Melanie Edmundson, P.G.
S Operate from a central office and perform work nationally
and have an on line proposal request and report retrieval
system.
S Perform over 1,000 environmental site assessments and
related services annually with in house licensed / certified
staff.
S In house Environmental Professionals by EPA AAI definition
of over 200 years’ combined experience in our office plus
our educated support specialists.
Stakeholders
Stakeholder
Role
Environmental
Protection Agency
(EPA)
2005 - Developed the “All appropriate inquiries,” (AAI) rule under
CERCLA which is a process of evaluating a property’s environmental
conditions and assessing the likelihood of any contamination. Came
into affect Nov. 1, 2006. Updated Dec. 2013.
ASTM International
(ASTM)
1993 - Formerly known as American Society for Testing Materials.
Created the standard for Phase I environmental site assessments to
permit a user to satisfy one of the requirements to qualify for the
innocent landowner, contiguous property owner, or bona fide
prospective purchaser limitations on CERCLA Liability. Updated Nov.
2013.
Bank
Requires a Phase I ESA on commercial real estate property
transactions for business risk purposes, including refinance and
especially foreclosure of properties.
Client
Potentially liable for costs of cleanup if contamination exists and client
did not conduct due diligence to satisfy the EPA’s AAI.
Levels of Due Diligence
Type
Explanation
Environmental Data
Risk Review Report
(EDRRR) or Records
Search with Risk
Assessment Report
(RSRA) for SBA
Also known as a “desktop review.” Includes review of state and
federal records pertaining to property as well as street directories and
Fire Insurance Rate Maps, if available. No conclusions regarding
RECs are provided. Does NOT satisfy EPA AAI rule.
Transaction Screen
(TSA); ASTM 1528-14
Limited version of the Phase I ESA. Includes review of state and
federal records pertaining to property, street directories, Fire
Insurance Maps, and on-site inspection as well as interviews. No
conclusions regarding recognized environmental conditions (RECs)
are provided. Does NOT satisfy EPA AAI rule.
Phase I ESA
ASTM 1527-13
EPA “All Appropriate
Inquiries” AAI
Only report that satisfies the EPA AAI rule. Includes all of the above
as well as additional data and a conclusion about the presence of
Recognized Environmental Conditions (REC)s which incudes
Historical Environmental Conditions (HREC)s and Controlled
Recognized Environmental Conditions
Phase II ESA
Includes: soil/groundwater, mold, lead, asbestos, vapor intrusion,
radon, etc.
SBA Environmental
Investigations
S SBA requires an Environmental Investigation of all commercial
Property upon which a security interest such as a mortgage, deed
of trust, or leasehold deed of trust is offered as security for a loan
or debenture.
S Failure to comply with the provisions may result in a denial of
SBA’s guaranty
S Why are they required?
S See Flow Chart for Process
S Know your In House Environmental Policy!!!
Environmental
Questionnaire
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Lender responsibilities:
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Likelihood that Contamination may be present at Property
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At least one site visit to the Property and a good faith effort to conduct an interview
with the current owner or operator of the Property.
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An Environmental Questionnaire good for one year and the current owner or
operator of the Property must sign the Environmental Questionnaire. If the current
owner or operator of the Property will not sign the Environmental Questionnaire it
cannot be used and lender must then, at a minimum, obtain a Transaction Screen.
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An Environmental Professional may, but is not required to, assist with the
responses to the questionnaire.
Records Search with
Risk Assessment (RSRA)
S RSRA includes whether the Property is either “low risk” or
“elevated risk” or “high risk” for Contamination.
S This report need not be addressed to the SBA and need
not be accompanied by a Reliance Letter.
S A Records Search with Risk Assessment may be
considered if it was completed up to one year prior to
submission.
RSRA “Buyer Beware”
S The choice of historical records to be reviewed on
any particular site is at the discretion of the
Environmental Professional. The report must identify
by name the Environmental Professional that
performed the risk assessment.
S Using a firm that identifies that your property is listed
on the NAICS codes as a potentially environmentally
sensitive business prior to conducting the RSRA can
save the client time and even $$$.
Transaction Screen
S ASTM E1528-06. A Transaction Screen may be
considered if it was completed up to one year prior to
submission.
S Does NOT satisfy EPA AAI rule
S Requires a reliance letter.
Phase I Environmental
Site Assessment (ESA)
S The Phase I ESA is the preliminary environmental study
and is the process by which a person or entity seeks to
determine if a particular property is subject to
Recognized Environmental Conditions (REC).
S The consultant is allowed 20 calendar days to
complete the process
Environmental
Professional (EP)
Definition in AAI
S Current P.E .or P.G. and 3 Years Relevant Experience, or
S Other Government Issued License of Certification to
Perform ESA’s and 3 Years Relevant Experience, or
S Baccalaureate or higher in Engineering, Environmental
Science, Earth Science and 5 Years Relevant
Experience, or
S 10 Years Relevant Experience
ASTM Phase I
ASTM E1527-13 Major
Revisions/Changes
S More REC definitions. Now there is a REC (Recognized
Environmental Condition), HREC (Historical Environmental
Condition) and CREC (controlled recognized environmental
condition);
S Requirement for regulatory file reviews for subject property and
adjoining property. If a formal file review is not conducted, then
justification for lack of file review is required; and
S Inclusion of vapor encroachment within the REC definition.
ASTM Major
Revisions/Changes Cont.
S Process is more involved and costs may increase due to
number of regulatory files required.
S Time frame of a typical project can unexpectedly increase if
necessary agency files are ordered. Some agency files can
take 4-6 weeks to obtain.
S More Phase IIs may be warranted based on potential vapor
encroachment issue. A lot of closed LUST and VCP sites
did not evaluate the vapor pathway.
HREC vs. CREC
S HREC: An underground storage tank is removed from the ground,
soil and groundwater contamination is encountered, impacted soil is
removed, groundwater is monitoring over a period of time, and
concentrations decrease to meet federal reporting limits. HREC.
S CREC: An underground storage tank is removed from the ground,
soil and groundwater contamination is encountered, impacted soil
that are accessible are removed, residual soil and groundwater
impacts remain but meet risk-based criteria for industrial property
use. The regulatory agency issues a NFA letter that is effective as
long as the property remains industrial. If property use changes,
additional investigation and/or remediation will be required. CREC.
Vapor Encroachment /
Migration
S Vapor intrusion/encroachment is defined by the EPA as
vapor-phase migration of volatile organic compounds or
volatile inorganic compounds into occupied buildings from
underlying contaminated groundwater or soil.
S The number of buildings or homes where vapor intrusion
has occurred is undefined
S Screening and ASTM
SBA Phase I ESA
Defined
S AAI compliant Phase I ESA’s conducted by an
Environmental Professional in accordance with the most
recently adopted standard for a Phase I ESA established
by ASTM International, currently ASTM E1527-13.
S A Phase I ESA must contain an opinion by the Environmental
Professional as to whether the inquiry has identified conditions
indicative of Releases or threatened Releases at the Property
S Reliance letter required
AAI/ASTM E 1527-13
Phase I ESA Requirements
S Records Review i.e. regulatory data, aerial photos & historical
maps & data
S Site Reconnaissance i.e. the property and adjoining properties
with full descriptions of each ASTM required item to be
assessed
S Interviews with “User” and “Owner”, etc.
S Report with required ASTM language and all supporting data
attached
Additional
Investigation
ASTM – Case Dependent
“The environmental professional should provide an opinion
regarding additional investigation, if any, to detect the
presence of hazardous substances or petroleum
products” Does not include non scope considerations.
“This is not intended to constitute a requirement that the
environmental professional include any recommendation
for (a) Phase II..”
Documentation in
Report
S Per ASTM E 1527-13 12.2 “Relevant
supporting documentation shall be included
in the report or adequately referenced to
facilitate reconstruction of the assessment
by an environmental professional other than
the environmental professional who
conducted it. Sources that revealed no
findings also shall be documented.”
Phase I Shelf Life &
Prior Assessment Use
S Shelf Life-Be aware for use of prior reports for reports
not meeting the current standard, contractual
agreements from prior users, etc.
S Prior Assessment Usage-All Appropriate Inquiries rule
and ASTM Standard requires all known prior related
environmental reports for the property be provided to
the EP and reviewed by the EP for the current Phase I
ESA being conducted
SBA Phase II ESA’s
Defined
S Phase II ESA means an Environmental Investigation,
which at a minimum, is conducted by an Environmental
Professional in accordance with the most recently
adopted standard for a Phase II ESA process established
by ASTM International, currently ASTM E1903-97 (2002).
SBA will recognize a Phase II ESA conducted in
accordance with generally-accepted industry standards
of practice and consisting of a scope of work that would
be considered reasonable and sufficient to identify the
presence, nature and extent of a Release.
Gas Station Loans
S ENVIRONMENTAL INVESTIGATION REQUIREMENTS FOR
GAS STATION LOANS
S Gas Station Loan Phase I environmental assessments must be
conducted by an independent Environmental Professional and
Any Phase II performed in connection with a Gas Station Loan
must be conducted by an independent Environmental Professional
who holds a current Professional Engineer’s or Professional Geologist’s
license and has the equivalent of three (3) years of full time relevant
experience.); and (5) if the Property is Contaminated, include a
detailed description of and cost estimate for the recommended
Remediation.
Dry Cleaners
and the SBA
S Prudent lending practices dictate and SBA requires that on-site
dry cleaners in operation for more than five years undergo a Phase
II Environmental Site Assessment in addition to a Phase I which
would be required due to the NAICS code match. Any Phase II
performed in connection with an on-site dry cleaning facility must
be conducted by an independent Environmental Professional who
holds a current Professional Engineer’s or Professional Geologist’s license
and has the equivalent of three (3) years of full time relevant experience.
Results of The
Environmental Investigation
S Property is not Contaminated. If the Environmental
Professional concludes that the Property is not
Contaminated, the Lender (except on PLP, SBA Express,
Export Express, Patriot Express and PCLP loans) must
submit the results of the Environmental Investigation to
SBA with recommendations and seek SBA’s
concurrence.
Results of The
Environmental
Investigation Cont.
S
Property is Contaminated. If the Environmental Professional concludes that the
Property is Contaminated, Lender can either: (1) decline the loan; or If the Phase II
ESA reveals Contamination and the lender still wishes to make the loan, lender must
ensure that the Environmental Professional has documented:
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i. Whether the Contamination quantities exceed the reportable or actionable levels;
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ii. Whether Remediation is necessary;
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iii. An estimate of any Remediation costs (Environmental Professionals may use
ASTM E2137-01 Standard Guide for Estimating Monetary Costs and Liabilities for
Environmental Matters); and
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iv. The projected completion date of any Remediation.
Non-Scope
Considerations
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Asbestos Containing Building Materials
S
Radon
S
Lead-Based Paint SBA says “For example, Property constructed prior to 1980 that will be
used for daycare or child care centers or nursery schools or residential care facilities occupied
by children must undergo a lead risk assessment (for lead based paint) and testing for lead in
drinking water, and the results of these assessments must be submitted to the SBA.
Disbursement will not be authorized unless the risk of lead exposure to infants and small
children has been sufficiently minimized.“
S
Lead in Drinking Water
S
Wetlands
S
Regulatory Compliance
Non-Scope
Considerations Cont.
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Cultural and Historic Resources
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Industrial Hygiene
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Health and Safety
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Ecological Resources
S
Endangered Species
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Indoor Air Quality
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Biological Agents
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Mold
Licensed and Certified
S Federal and State Laws require EP’s to be licensed or
certified to consult on many non scope considerations i.e.
asbestos, lead based paint, mold, etc.
S Statements from non licensed certified individuals is
considered null information and can get your bank and
client into big trouble later
Professional Errors &
Omission Insurance
S Qualify the EP’s insurance coverage and verify with the
carrier to confirm they are valid and have the coverage you
require.
S Lenders typically require a minimum of $1,000,000.00
Errors and Omissions insurance.
S Not necessarily Pollution or General liability.
PEI Additional Services
Nationwide
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Report Reviews
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Create or review Environmental Lender Policies
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Client designed report for a special purpose i.e. foreclosure, HUD, SBA, etc.
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Property Condition Assessments (ASTM)
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Compliance Audits
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Stormwater Compliance
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On line proposal request at: www.PhaseEngineering.com
Dare to Compare!
PEI Is All This:
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Registered Professional Engineering P.E. Firm
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Licensed Professional Geoscientist/Geologist P.G. Firm
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Licensed Asbestos Consultant Agency
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Licensed Mold Assessment Company
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Certified Lead Firm
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Storage Tanks - Corrective Action Specialist (CAS) & LPST Corrective Action
Manager (CAPM)
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Wetlands - United States Army Corp of Engineers Delineation Course Certified
Stormwater & Pollution Prevention -Certified Preparer of SWPPP (CPSWPPP) and
(CCIS)
The Takeaway
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Know your EP/consultant – are they qualified & have the applicable
licenses and or certifications and up to date on the current
regulations and standards?
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Do you want a firm that uses sub contractors or in house qualified
EP’s?
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Check with Insurance Carrier on type of insurance (professional
liability – E & O) and current status
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Phase I /Phase II meet or exceed the ASTM standard and EPA AAI
Rule? All Environmental Reports are not created equally!
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Know your Lender Policy - Conventional and SBA
Questions and
Comments
Thank You For Your Time!
Melanie Edmundson, P.G.
Licensed Asbestos & Mold Consultant
Certified Lead Based Paint Risk Assessor
713-476-9844
www.PhaseEngineering.com