Industrial and commercial real estate transactions usually require a certain degree of environmental due diligence to identify recognized environmental conditions. In most cases this means that a Phase I Environmental Site Assessment (ESA) is performed. The industry standard for performing Phase I ESAs is based on the American Society for Testing and Materials (ASTM) Standard E 1527, which specifies industry accepted minimum requirements for evaluating the environmental condition of a property. The ASTM Phase I ESA is largely focused on issues of property use that could result in contamination of the site. The Phase I ESA provides a foundation for the use of a Baseline Environmental Assessment to provide liability protection.

However, there are other issues that are not necessarily related to environmental contamination, but may still represent a significant financial liability. The presence of asbestos containing materials, wetlands, lead based paint, abandoned polychlorinated biphenyls (PCB) containing equipment, abandoned water supply wells, and radon all represent potential environmental concerns. The cost for removal of asbestos materials, abandonment of old water wells, disposal of old PCB-containing equipment or lead removal may easily exceed all other environmental due diligence costs.

While some of these issues are addressed to a limited degree in an ASTM Phase I ESA, the user should consider customizing the Phase I ESA to their specific needs. The following table may help you decide on some options to include in addition to the standard ASTM Phase I ESA.

 During the last few years, Envirologic has seen an increasing number of environmental due diligence projects associated with the corporate acquisition of an existing operation. In such cases, it is wise to evaluate the operation’s environmental performance to identify any administrative liabilities.

With the Baseline Environmental Assessment process, companies can purchase an operation and escape liability associated with the clean up of contaminated land and groundwater. However, the Baseline Environmental Assessment does not offer any protection from an operation’s failure to obtain a permit, comply with record-keeping and reporting requirements, or other administrative requirements. The cost and time required to meet certain requirements may be an important consideration in the deal. For example, an audit may identify a process which requires an air emissions permit and additional pollution control equipment. The cost of the equipment required may be an important financial consideration. Since obtaining a permit can take six months to a year, the acquiring company may wish to establish that the non-compliance condition pre-existed their ownership. In such cases, a company can use the Audit Privilege and Immunity laws to assist in documenting responsibility.

Envirologic has developed two products for evaluating compliance: an Environmental Compliance Review and an Environmental Compliance Audit. The Review is a limited inspection of operations and records to assess compliance with major environmental programs. The Review is designed to be completed in a short period of time for a relatively low cost. The Audit is a complete review of all applicable environmental regulations and is a significantly greater effort.

Companies who have developed and implemented an Environmental Management System will also be interested in Compliance Review and Audits to help meet their commitment to compliance with environmental and applicable regulations.

Other Recent Developments

• MDEQ rules may increase Wetland Permit fees from the standard $25 for any size project to a range of $100 to $2,000 per project.
• A reminder to all UST owners and operators: UST's must be upgraded by December 22, 1998.
• Envirologic urges your support of the Clean Michigan Initiative - the state program designating $675 million for cleanup of polluted sites and improvement of state parks