Sunday, January 1, 2017

Five Things Every Commercial Lender Should Know About Environmental Liabilities

Accepting a property with known or potential environmental issues as collateral creates special challenges for the commercial lender. This could include properties with old tanks and old spills or leaks - even those that may long ago been have been cleaned up and closed by State agencies.

Although more challenging, such properties can be addressed in a reasonable time frame, while minimizing the potential liabilities for the Lender. Five key points the commercial Lender must keep in mind are :

1 - Old Issues - Even "Closed" Issues Can Effect The Value Of The Asset.

For the Lender, the key risk to be managed is the potential that contamination on a property can have a material impact on the property value, and/or make the property less marketable in the event the Lender comes to own the property due to foreclosure. Old issues can directly affect the future use of a property. When old contamination issues are "closed" by agencies, it is common that restrictions are put in place that limit the future use of the property, or that require further cleanup if any redevelopment of the site is planned. This can reduce the value of the property to prospective Buyers.

2 - If The Lender Ends Up Owning A Tank, They Own The Liabilities.

In most States, laws protect Lenders from being financially responsible to investigate and cleanup contamination on a property they acquired through foreclosure. The exception is for tanks that remain on the property. The responsibility for investigations and cleanup of leaking tanks falls to the "owner" of the tank, which is typically the property owner. If a Lender comes to own tanks on a property due to foreclosure, the Lender may be responsible to remove the tanks, and if leaking tanks are discovered, the Lender may be directly responsible for the remediation Therefore, Lenders need to pay particular attention to tanks left on a property, especially if tanks have been abandoned in-place.

3 - Plan Ahead For  You And Your Borrower  To Obtain Liability Protections.

If you or your Borrower require liability relief letters, such as a no further action or no association letter, you will need to factor in the time required for these issues to be addressed. It is important to remember that agencies will issue these letter only if contamination is actually documented on the property, not simply based on the possibility that contamination could be present. Therefore, in some cases a site investigation needs to be conducted. As an example, a typical scenario might be:

2 weeks - Phase 1 Environmental Site Assessment
3-5 weeks - Phase 2 Investigation
1 week - Prepare and submit request to agency
4 weeks - Agency review and issuance of letter

Therefore it is not unusual for it to take 10-12 weeks to go through the process.

4 - "Closed" Or "No Further Action" Does Not Mean "Clean"

When agencies issue a closure letter, no further action letter, or similar, they will often allow some contamination to remain on the property. The agency has simply concluded that the remaining contamination does not pose a significant risk to human health or the environment - under the existing conditions. These determinations are always "as-is, where-is" determinations. This does not mean that the agency has determined the site to be clean or that future uses or redevelopment of the property will not require further investigation and cleanup.

5 - Unfortunately New Issues Can Be Discovered.

One of the most challenging situations is when new contamination issues are uncovered, especially coming from neighboring properties. Leaking tanks and other sources of contamination are newly discovered each year, which can create additional issues which may need to be resolved between the Lender, the Borrower and the State agency. In addition, over time cleanup standards can change and new information on risks from contamination can "reopen" some closed issues. One example is the current interest in "soil vapor encroachment"; many leaking tank sites that were closed prior to 2010 were not evaluated to determine if contaminants are migrating though soils and into nearby buildings. Although these sites may be closed, they can be reopened to address soil vapors. Therefore, evaluations of soil vapor intrusion have become increasingly common, especially since 2013.

By understanding the process, the Lender can play an important role in transforming these formerly contaminated properties into usable and marketable properties, increasing their value and the value of nearby properties. And at the same time, manage the Lender's future liabilities.

For more information go to:
Phase 1 Environmental Site Assessment Buyer's Guide
Regulatory Briefing - Landowner Liability Protections and All Appropriate Inquiry

Tuesday, December 20, 2016

Five Things Every Realtor Needs To Know When Representing Contaminated - Potentially-Contaminated Properties

Representing a property with known or potential environmental issues creates special challenges for the commercial real estate professional. This could include properties with old tanks and old spills or leaks - even those that may long ago been have been cleaned up and closed by State agencies.

Although more challenging, such properties can be sold in a reasonable time frame, while minimizing the liabilities of both the Seller and the Buyer. Five key points the real estate professional must keep in mind are :

1 - The Seller "Owns" The Liabilities.

Until the transfer of ownership, the Seller (the current property Owner) owns the environmental liabilities on the property. A prospective Buyer is motivated to identify these liabilities to determine if they could impact the value of the property or restrict their use of the property. In the absence of definitive information, Buyers will tend to over estimate the impact of these potential or actual liabilities, on the value of the property.

2 - Sellers Cannot Control Future Use Or Activities On the Property & Cannot Control A Buyer's Future Risks.

When spills or leaking tanks are discovered on a property, the agency (typically the State) will oversee cleanup, either through enforcement actions or through a voluntary cleanup program. Once the agency determines that any remaining contamination at a site is no longer a significant risk , the agency will "close" the site or issue a "no further action", and allow any remaining contamination to be left in-place. The important point to remember is that this closure is an "as-is, where-is" approval. As long as property use remains the same, and any remaining contamination is left undisturbed, then this closure could be transferred to any future property owners. If a future owner chooses to change the property use, redevelop the property, etc., then the agency may need to be notified and further cleanup may be needed. A seller has no control over future actions on the property which could potentially reopen closed contamination issues.

3 - Plan Ahead For Buyer and Their Lender To Obtain Liability Protections.

If Buyers or their Lender require liability relief letters, such as a no further action or no association letter, you will need to factor in the time required for these issues to be addressed. It is important to remember that agencies will issue these letter only if contamination is actually documented on the property, not simply based on the possibility that contamination could be present. Therefore, in some cases a site investigation needs to be conducted. As an example, a typical scenario might be:2 weeks - Phase 1 Environmental Site Assessment
3-5 weeks - Phase 2 Investigation
1 week - Prepare and submit request to agency
4 weeks - Agency review and issuance of letter Therefore it is not unusual for it to take 10-12 weeks to go through the process.

4 - Buyers and Sellers Must Work Together

For a successful transaction, the Buyer and the Seller must work together. This may mean the Seller granting access to the property for a Phase 1 environmental site assessment and a Phase 2 investigation, if required. The Seller will also need to be involved if contamination is discovered so that proper agency notify occurs. This notification opens up a pathway for the Buyer and their Lender to get liability protection letters from the agency. Likewise, the Buyer will need to communicate all results to the Owner (if the Buyer directed a Phase 2 investigation) to ensure the Seller has the information they need to notify agencies. The Buyer will also want to let the Seller know if they intend to request liability protections from the agency - it is possible that the Seller can also request similar types of liability protections for themselves.

5 - Unfortunately New Issues Can Be Discovered.

One of the most challenging situations is when new contamination issues are uncovered, especially coming from neighboring properties. Leaking tanks and other sources of contamination are newly discovered each year, which can create additional issues which may need to be resolved between the Seller, Buyer, Lenders and the State agency. In addition, over time cleanup standards can change and new information on risks from contamination can "reopen" some closed issues. One example is the current interest in "soil vapor encroachment"; many leaking tank sites that were closed prior to 2010 were not evaluated to determine if contaminants are migrating though soils and into nearby buildings. Although these sites may be closed, they can be reopened to address soil vapors. Therefore, evaluations of soil vapor intrusion have become increasingly common, especially since 2013.


By understanding the process, the real estate professional can play an important role in transforming these formerly contaminated properties into usable and marketable properties, increasing their value and the value of nearby properties.


For more information go to:
Phase 1 Environmental Site Assessment Buyer's Guide
Regulatory Briefing - Landowner Liability Protections and All Appropriate Inquiry

Sunday, December 11, 2016

Five Things Due Diligence Auditors Should Know About New RCRA Rules

The Hazardous Waste Generator Improvements Rule (Federal Register Volume 81, Issue 228 , November 28, 2016) includes some new elements to the RCRA – some of which are more stringent compared to the existing rules and some less stringent. The rule becomes effective on May 30, 2017. The rule will affect all facilities that generate hazardous waste, regardless of size. Therefore, EH&S auditors should be aware of these rule changes and the clarifications the rule provides, especially in the Preamble, on EPA's interpretations of existing RCRA requirements for hazardous waste generators.


All auditors that review hazardous waste compliance as part of due diligence should review the final rule, including the Preamble. Some key points are:

1 - Clarifications on EPA's Expectations On Identifying & Handling Hazardous Waste.


The final rule provides clarifications auditors can refer to on how generators are expected to identify, characterize and manage wastes. Although this does not change existing requirements, the Preamble to the Rule discusses the accuracy of waste determinations, where in the process wastes should be characterized/sampled, and other technical clarifications auditors need to be aware of. Interestingly, EPA estimates that 20-30% of generators are currently not in compliance with existing rules on identifying and characterizing waste streams.
Because these clarifications to existing rules do not change rules, they are already "effective".

2 - Independent Requirements verses Conditions of Exemption.


For auditors, some of the more interesting portions of the Rule's Preamble provide a detailed discussion of "Independent Requirements" and "Conditions of Exemption". Although this provides useful clarifications to the existing RCRA rules, it does not change existing requirements. It also provides needed clarifications on how the different types of requirements are applied by EPA to RCRA enforcement action.
In summary, independent requirements are rules that apply to all hazardous waste generators, regardless of generator status. For example, the requirement to identify hazardous wastes. Conditions of Exemption are requirements generators can chose to meet in order to avoid more stringent requirements. For example, LQGs store wastes on-site for less than 90 days to avoid being regulated as a TSDF. They could elect to store wastes longer than 90 days, but would then be held to the requirements that apply to TSDFs.

3 - Sections of RCRA Rule Have Been Reorganized.


One of the purposes of the Hazardous Waste Generator Improvements Rule is to make the requirements for hazardous waste generators more accessible and logical, especially for new generators. To accomplish this, EPA has reorganized the sections of the RCRA generator rules, and many existing sections have been renumbered.
The practical implications of this change for auditors is that regulatory citations referencing the Federal rules in audit reports may change. Although not required, authorized States may opt to reorganize sections of State rules.
One of the challenges facing auditors will be auditing against State rules that incorporate portions of the Federal RCRA rules by reference, especially if references to 40 CFR are no longer accurate.

4 - Effective Date Will Have Limited Immediate Impact


The effective date of the final rule is May 30, 2017. However, the number of generators who will be subject to the Rule on that date is limited. The Rule will be effective on May 30th only for generators in States or Territories that do not have authorized RCRA programs, including:
  • Iowa
  • Alaska
  • Tribal Lands
For States with authorized RCRA programs, the Hazardous Waste Generator Improvements Rule (or portions thereof) will only become effective once State programs are updated. Auditors should be aware of one caveat - some States have incorporated Federal RCRA rules into their State rules by reference. Therefore, in those States the potential exists that revisions to the Federal Rule can be immediately effective.

5 - States Will Only Be Required To Enact Limited Changes To State Programs ; Differences Between State Programs May Increase.


The final Hazardous Waste Generator Improvements Rule includes elements that are more stringent compared to the existing rules and some elements that are less stringent (allow more flexibility). Authorized States will only be required to incorporate portions which are more stringent, and have the discretion to include, or not, those portions which are less stringent than existing State rules.
Therefore, environmental compliance auditors need to be cognizant that the differences between State program requirements for hazardous waste generators may increase as State programs are updated.


Click here for more detailed summary on the key changes to the RCRA requirements for hazardous waste generators.


Caltha LLP assists Sellers, prospective Buyers and their Lenders in meeting Due Diligence, Environmental Site Assessment and Environmental Review requirements. To request a quote on-line, go to Caltha Environmental Assessment Quote Web Page.
For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website

Sunday, August 28, 2016

Small Business Adminstration Environmental Record Search - 3-5 Day Turn Around

The US Small Business Administration guaranteed loan program requires some level of environmental review for all loans. This ranges from a simple Environmental Questionnaire to a full ASTM Phase 1 Environmental Site Assessment.


One of the most requested services Caltha LLP provides to SBA Lenders is a "Record Search With Risk Assessment" or RSRA Report. Caltha prepares hundreds of RSRA report for banks and other lending institutions across the country that participate in the SBA guaranteed loan program.


Typical turn-around time: 3-5 business days
Format: Electronic report in PDF format
Geographic Coverage: Any property located in US


To request a quote to prepare an RSRA report, fill out the quote request form. You will receive a quote by email the same day, you can then authorize the work by email.


RSRA Quote Request Form



Thursday, August 25, 2016

Owner and Lender Responsibilities Under Ohio Cessation of Regulated Operations Program

The Ohio Cessation of Regulated Operations (CRO) program was first created in 1996 and places requirements for notifications if facilities cease or temporarily cease operations where hazardous materials are used or stored.


Who is subject to CRO rules? All facilities in Ohio that use or store hazardous materials which are reportable under EPCRA Tier 2 reports. It is estimated that more than 7,000 facilities are potentially subject to CRO rules.


What does Cessation of Regulated Operations mean? "Cessation of Regulated Operations" means the discontinuation or termination of regulated operations or the finalizing of any transaction or proceeding through which those operations are discontinued.


What are Regulated Operations? “Regulated Operations" means the production, use, storage or handling of regulated substances, including Extremely hazardous substances (EHS), Hazardous substances, Flammable substances; or Petroleum.


What are facilities required to do? Within 30 days from the CRO you must:
  • Submit a notice of CRO on a form prescribed by the director to Ohio EPA, Local Emergency Planning Committee (LPEC) and local fire departments where the facility is located;
  • Designate a contact person;
  •  Secure and post warning signs around areas that contain or are contaminated with a regulated substance; and
  • Maintain security and warning signs
Within 90 days of the CRO you must:
  • Submit to the Ohio EPA the most recent emergency and hazardous chemical inventory form submitted to the SERC;
  • Submit to the Ohio EPA a current OSHA hazardous chemical list or SDS for each chemical at the facility required to be on file with the SERC;
  • Submit to the Ohio EPA a list of every stationary tank, vat, electrical transformer and vessel that will remain at the facility that contains or is contaminated with a regulated substance prior to or at the time of cessation;
  • Drain and remove all regulated substances from each stationary tank, vat, electrical transformer and vessel and from all piping;
  • Dispose, sell or transfer the regulated substances off-site;
  • Transfer off-site all debris, non-stationary equipment, furnishings, containers, motor vehicles and rolling stock that contain or are contaminated with a regulated substance; and
  • Certify that the actions required in the previous three items have been completed.
After you submit the certification, Ohio EPA must conduct an inspection to determine compliance with the CRO rules.


If I am a lender or security holder, what must I do? The holder of first mortgage and a fiduciary of a reporting facility both have specific statutory duties under Ohio law. No later than 15 days after the first mortgage holder receives a notice of abandonment and within 60 days after the fiduciary receives a notice of cessation of regulated operations, the holder and fiduciary are required to do the following if the operator fails to take the required steps under the CRO program. You must secure and post warning signs around areas that contain or are contaminated with regulated substances, maintain security and warning signs; and submit a notice of abandonment to Ohio EPA, the LEPC and the local fire department. Thirty days before filing the release of the mortgage and/or releasing all rights to the facility and ending security and warning measure, you must notify Ohio EPA, the LEPC and the local fire department where the facility is located.




Caltha LLP assists Sellers, prospective Buyers and their Lenders in meeting Due Diligence, Environmental Site Assessment and Environmental Review requirements. To request a quote on-line, go to Caltha Environmental Assessment Quote Web Page.
For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website

Sunday, August 7, 2016

Wisconsin Phase 2 Vapor Encroachment Study - Tier I Vapor Encroachment Screening Assessment

In 2013, US EPA determined that exposure due to vapor intrusion, also referered to as vapor encroachment, needed to be evaluated prior to closure of federal CERCLA sites. In response, many States now include vapor intrusion in site investigations for closure of LUST, LAST and voluntary cleanup sites run by the State. In practice, this has resulted in reassessment of numerous closed sites, and investigation of soil vapor on nearby sites.


Caltha LLP provides expert technical support to conduct vapor intrusion investigations in Wisconsinin conformance with WDNR guidelines and soil vapor intrusion screening values. Caltha conducts Tier I Vapor Encroachment Screening Assessment in accordance with ASTM Standard  E2600-10.


Caltha LLP assists Sellers, prospective Buyers and their Lenders in meeting Due Diligence, Environmental Site Assessment and Environmental Review requirements. To request a quote on-line, go to Caltha Environmental Assessment Quote Web Page.
For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website

Tier I Vapor Encroachment Screening Assessment ASTM Standard E2600-10 For Iowa Properties

In 2013, US EPA determined that exposure due to vapor intrusion, also referered to as vapor encroachment, needed to be evaluated prior to closure of federal CERCLA sites. In response, many States now include vapor intrusion in site investigations for closure of LUST, LAST and voluntary cleanup sites run by the State. In practice, this has resulted in reassessment of numerous closed sites, and investigation of soil vapor on nearby sites.


Caltha LLP provides expert technical support to conduct vapor intrusion investigations in Iowa conformance with Iowa DNR guidelines and soil vapor intrusion screening values. Caltha conducts Tier I Vapor Encroachment Screening Assessment in accordance with ASTM Standard  E2600-10.

Caltha LLP assists Sellers, prospective Buyers and their Lenders in meeting Due Diligence, Environmental Site Assessment and Environmental Review requirements. To request a quote on-line, go to Caltha Environmental Assessment Quote Web Page.
For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website

Vapor Intrusion Investigations In Minnesota Using MPCA Vapor Encroachment Guidelines

In 2013, US EPA determined that exposure due to vapor intrusion, also referered to as vapor encroachment, needed to be evaluated prior to closure of federal CERCLA sites. In response, many States now include vapor intrusion in site investigations for closure of LUST, LAST and voluntary cleanup sites run by the State. In practice, this has resulted in reassessment of numerous closed sites, and investigation of soil vapor on nearby sites.




Caltha LLP provides expert technical support to conduct vapor intrusion investigations in Minnesota in conformance with MPCA guidelines and soil vapor intrusion screening values. Caltha conducts Tier I Vapor Encroachment Screening Assessment in accordance with ASTM Standard  E2600-10.






Caltha LLP assists Sellers, prospective Buyers and their Lenders in meeting Due Diligence, Environmental Site Assessment and Environmental Review requirements. To request a quote on-line, go to Caltha Environmental Assessment Quote Web Page.
For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website

Sunday, December 15, 2013

Phase 1 Environmental Assessments, Transaction Screening, Records Review With Risk Assessment, and Phase 2 Limited Site Investigations for MN, WI & IA bank

Caltha LLP Project Summary

Project: Phase 1 Environmental Assessments, Transaction Screening, Records Review With Risk Assessment, and Phase 2 Limited Site Investigations
Client: Regional Bank
Location(s): Minnesota, Wisconsin, Iowa

Key Elements: Phase I Environmental Review, Transaction Screening, RSRA, Phase II Studies

Overview: Caltha is a preferred provider of environmental due diligence services to this regional bank. Caltha preforms numerous Phase 1 ESA (ASTM E 1527), Transaction Screens (ASTM E1528) and Records Review With Risk Assessment (RSRA) for the multiple branches of the bank each year. Many of these assessments are conducted to meet environmental review requirements of the US Small Business Administration (SBA) which also require a SBA Reliance Letter. Depending on the results of the preliminary screening assessments, Caltha also performs Phase 2 Environmental Site Investigations and advises the bank on potential lender liability protections available through State agencies.

For more information on Caltha LLP services, go to the Caltha Contact Page

Caltha LLP assists Sellers, prospective Buyers and their Lenders in meeting Due Diligence, Environmental Site Assessment and Environmental Review requirements. To request a quote on-line, go to Caltha Environmental Assessment Quote Web Page.

For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website

Phase II Environmental Investigation of Gas Station in Minneapolis - St Paul Metro Area

Caltha LLP Project Summary

Project: Phase II Limited Site Investigation at Gas Station
Client: Regional Bank
Location(s): Minnesota

Key Elements: Soil and Groundwater Investigation

Overview: Caltha LLP was retained by a prospective lender to conduct a soil and groundwater investigation for this gas station located in Minnetonka, Minnesota. The investigation was required under internal bank policies which prescribed a site investigation be conducted prior to issuing loans on any current or former gas station properties. The gas station had been in business for many years and had previously reported leaking tanks; the LUST site had been cleaned up and closed, but it was anticipated that the Phase 2 may encounter residual contamination which had been allowed to remain on-site at the time the LUST was closed. As expected, some petroleum impacted soil was found at the site, but it could be determined that additional no releases had occurred since the previous LUST was closed. The bank was able to use the results of the investigation to determine that risks associated with the gas station had been addressed and the bank was able to enter into a loan agreement with a new buyer.

For more information on Caltha LLP services, go to the Caltha Contact Page

Caltha LLP assists Sellers, prospective Buyers and their Lenders in meeting Due Diligence, Environmental Site Assessment and Environmental Review requirements. To request a quote on-line, go to Caltha Environmental Assessment Quote Web Page.

For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website