Presented by Richard A. Maloy, MAI, SRA, JD Maloy and Company, Inc. 2212 3 rd Avenue, North

All Appropriate All Appropriate Inquiry Inquiry

International Right of Way AssociationInternational Right of Way AssociationAppraisal InstituteAppraisal Institute

Federal Agency Update, January 15, 2009Federal Agency Update, January 15, 2009

Presented by

Richard A. Maloy, MAI, SRA, JD

Maloy and Company, Inc.

2212 3rd Avenue, North

Birmingham, AL 35203

800-280-2185

[email protected]

Appraisal Institute 2

Introduction

What is a Brownfield What the Act means to the real estate worldObtaining liability protection as a bona fide prospective purchaserHow to coordinate All Appropriate Inquiry


An industrial or commercial property that remains abandoned or underutilized in part because of environmental contamination or thefear of such contamination

http://www.brownsfieldcenter.org/big/glossary.shtml

What is a Brownfield?



Real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.

U.S. EPA Definition



Abandoned, idled, or underused industrial or commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination.

(State of Mass. Environmental Dept.)


AbandonedIdledUnderutilizedCommercialIndustrialWhere redevelopment is complicatedEnvironmental contaminationPerceived contamination



More Terms and Definitions

CERCLA - (“Superfund”) Comprehensive

Environmental Response, Compensation and

Liability Act

CERCLA created a tax on the chemical and

petroleum industries and provided broad Federal

authority to respond directly to releases or

threatened releases of hazardous substances that

may endanger public health or the environment.

Congress established the Superfund Program in

1980 to locate, investigate, and clean up the

worst contaminated sites nationwide.


CERCLIS - Comprehensive Environmental Response, Compensation and Liability Information System

CERCLIS is a database listing all the sites managed under the CERCLA program



RBCA (Rebecca) - Risk Based Corrective ActionA streamlined approach in which exposure and risk assessment practices are integrated with traditional components of the corrective action process to ensure that appropriate and cost-effective remedies are selected, and that limited resources are properly allocated.



RBCA (Rebecca) - Risk Based Corrective ActionThe goals of a RBCA process are:

Protection of human health and environment

Practical and cost-effective application of risk-based decision-makingConsistent and technically-defensible

administrative process



Remediation - Treatment or cleanup of a contaminated area.

Voluntary Cleanup Plan (VCP) - State programs where parties may engage in supervised voluntary cleanup of contaminated sites, and, in return receive certain liability protections.



Hazardous Material - A substance or combination of substances which because of its quantity, concentration, or physical, chemical or infectious characteristics, may either (1) cause, or significantly contribute to, an increase in mortality or an increase in serious, irreversible, or incapacitating reversible, illness; or (2) pose a substantial present or potential hazard to human health or environment when improperly treated, stored, transported, disposed of or otherwise managed.Such as: Perchloroethylene, BTEX, Asbestos, PCB’s and petroleum products



The Small Business Relief and Brownfield Revitalization Act of 2002.


Superfund Amendment affording protection to secured creditors that provide financing for contaminated sites



Creation of liability exemption and EPA enforcement policy not to prosecute owners of land whose groundwater is contaminated from off site sources

Liability exemption for Prospective Purchasers of contaminated sites post 2002


Before

After


5. Brownfield exemption for small business and non-profit organizations responsible for only de minimis waste contribution.

6. Issuance of EPA policies for Comfort letters, no further action letters, RFR certifications (ready for reuse) in situations where liability exemption is not available.




Petroleum contamination sites are now included as brownfields (were not in the 1997 legislation)


Landowners who qualify for liability protection and what must they do to qualify

A) Bona Fide Prospective Purchasers

B) Contiguous Property Owners

C) Innocent Party Defense

Brownfields Act


The 1986 Brownfield Amendments had a liability exemption for “innocent landowners” who were able to establish that they purchased property without knowing contamination was present.

Practically, purchasers who bought contaminated property also bought into the liability.

Bona fide Prospective Purchasers


The 2002 Act provides statutory exemption for a new “Bona Fide” Prospective Purchaser of a Brownfield site (both owners and tenants) who satisfy pre and post acquisition requirements. These prospective purchasers are exempt from liability even if they learn of contamination before the acquisition.



Bona fide Prospective PurchasersThe Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

It did not cause or contribute to the contamination and that all disposal of all contaminants occurred before the date of acquisition



It is not potentially liable or affiliated with the party that caused or contributed to contamination of the site.

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:



The Prospective Purchaser conducted “all appropriate inquiry” at the time the property was acquired.




The prospective purchaser has taken steps to limit any effects on human health and the environment (participation in a VCP).




The prospective purchaser has cooperated with governmental authorities (for example providing access or providing information when requested)




The prospective purchaser has complied with any governmental agency institutional control requirements (including land use covenants or deed restrictions).




The prospective purchaser has provided all required notices in connection with site releases.



The 2002 Act exempts a class of owner whose property is or may be contaminated by contiguous or nearby properties. But this exemption exists only to the extent that the contiguous owner was unaware of contamination when it acquired the property.

Contiguous Land Owner Defense


The key is that the source is outside of the property.



Contiguous owners are charged with the same seven requirements that apply to the bona fide prospective purchaser except they do not need to show that the acts of disposal leading to the contamination occurred before the owner acquired the property.



CERCLA was amended in 1986 to exclude from liability, innocent landowners who conduct pre-acquisition appropriate inquiry and do not find contamination which is later the subject of enforcement action.

Innocent Landowner Defense


Innocent landowners must satisfy the same requirements as the Contiguous Landowner to qualify for the defense.



Appropriate inquiry for this defense is applied on a sliding scale

ResidentialInspection and title search

Industrial/CommercialASTM 1527 Phase Ior AAI



Environmental cleanup costs are fully deductible in the year they are incurred

On October 3, 2008, Congress passed, and the President signed into law, the Emergency Economic Stabilization Act of 2008 (EESA) including environmental expense deductibility for tax years 2008 and 2009.

Brownfield Tax Incentives


CERCLA 101(35)(2)(B)(ii) criteria

ASTM 1527-05 update of ASTM 1527-

00

All Appropriate Inquiry (AAI)

Building Department Records


The Responsibility is on theProspective Purchaser to perform “All appropriate inquiry”

The Environmental Professional

can perform part

The owner can perform part

Brownfields Act


1.) The results of an inquiry by an environmental professional

YES

NO




ENVIRONMENTAL PROFESSIONAL

Due diligence investigations, under the All Appropriate Inquiry Rule, must be conducted, for the most part, by an "Environmental Professional". Environmental Professionals must have sufficient, specific education, training and experience in order to develop opinions and conclusions regarding the environmental conditions of a property.



ENVIRONMENTAL PROFESSIONAL

EPA does not license, certify or approve professional certifications by organizations

It is the Environmental Professional’s own determination of whether the competency and experience requirements are met.

It is the client’s responsibility to select a qualified EP.



An Environmental Professional under the Rule includes:

a Professional Engineer or Geologist with three years of relevant experience; an individual with a scientific degree and five years of relevant experience; or an individual having 10 years of full-time relevant experience with a college degree.



Importantly, Environmental Professionals will be required to include two statements in their written All Appropriate Inquiry Reports. They must certify that they meet the definition of an Environmental Professional, and that they developed and performed the due diligence investigation in conformance with the standards and practices set forth in the Rule.


2.) Interview past and present owners, occupants or operators of the facility

Purpose is to gather information regarding the potential for contamination at the property




3.) Review historical sources chain of title documents, aerial photographs, building department records, land use records determine previous uses and occupancies of the real property since the property was first developed


1929

1966

19501966


4.) Searches - recorded environmental cleanup liens against the facility that are filed under federal, state, or local law


Physical Setting Map Detail Map



federal, state, or local recordswaste disposal recordsunderground storage tank recordshazardous waste handlingGeneratingTreatmentDisposalspill records

5.) Review materials concerning contamination at or near facility


6.) Visual inspections of the facility

and of adjoining properties




7.) Specialized knowledge or

experience on the part of the defendant



8.) The relationship of purchase price to the value of the property, if the property was not contaminated

Unimpaired ValueUnimpaired Value

TimeTimeBB DiscoveryDiscovery

CCAssessmentAssessment

DD RepairRepair

EEOngoing Ongoing costcost

AA



9.) Commonly known or reasonably ascertainable information about the property


10.) The degree of obviousness or of

the presence or likely presence of contamination at the property,

and the ability to detect the contamination by appropriate investigation


Presented by Richard A. Maloy, MAI, SRA, JD Maloy and Company, Inc. 2212 3 rd Avenue, North

Documents

Transcript of Presented by Richard A. Maloy, MAI, SRA, JD Maloy and Company, Inc. 2212 3 rd Avenue, North