Environmental compliance issues can have a significant financial impact and should be incorporated into the scope of environmental due diligence. A formal compliance audit may be considered, and may have some additional benefits in reducing future liabilities. [read more about recent changes to EPA Audit Policy as it applies to new owners] However, given time and access constraints, a formal audit may not always be feasible during due diligence. This issues are not addressed in a standard Phase I Environmental Site Assessment. Four key areas related to environmental compliance are of high importance:
Non-compliance Issues that Could Result in Capital Improvements. Correcting some non-compliance issues can cost significant amounts of money. For example, tanks without the required secondary containment are expensive to retrofit. Upgrades to pollution control equipment, such as wastewater treatment or air emission control can also be expensive. It is important to understand industrial site operations, so those compliance items which typically involve capital improvements can be highlighted.
Asbestos. The management of asbestos-containing materials is regulated under OSHA, and often is not considered under “environmental compliance”. Management of asbestos in-place requires an Asbestos Management Plan, specialized training and employee notification. Ultimately, if areas with asbestos are disturbed, added costs for handling and disposal of the asbestos material will be realized. Understanding whether asbestos occurs and how it being managed is important to factoring in these future costs.
Missing Permits or Approvals. Changes made at a facility overtime can require new permits, revision to existing permits or pre-approvals for agencies. Understanding what permits and approvals are required is sometimes a complicated task; the result is that upon reviewing the operations, missing permits or approvals can be discovered. “After-the-fact” permitting is often a difficult and expensive process. Capital improvements may be required to comply with the permits, once obtained. The affected processes might need to be shut down until proper permits are obtained. All of these consequences can have a significant financial impact, which should be addressed during the due diligence process.
Upcoming Regulations. The fourth area is upcoming regulations. Although a facility may be in compliance with current requirements, these requirements can change. Impending regulations should be considered to assess any additional costs that will be incurred for the operation. Imminent regulations could, for example, could involve changes to air rules which may require upgrades to pollution control equipment. International regulations on products may also apply; for example, the Waste Electrical & Electronic Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) rules in Europe, which could impact US-based manufacturers.
Caltha LLP provides environmental due diligence services nationwide, specializing in Food, Manufacturing and Electric Utility sectors.
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