Vapor Intrusion and Environmental Liability—Learning from Past Mistakes
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Transcript of Vapor Intrusion and Environmental Liability—Learning from Past Mistakes
© 2012 Environmental Data Resources, Inc.© 2011 Environmental Data Resources, Inc.
Presented by:
• Joseph G. Maternowski, Shareholder at Hessian & McKasy, P.A.
• William C. Wagner, Partner, Taft Stettinius & Hollister LLP
• Stuart J. Lieberman, Esq., Lieberman & Blecher, P.C.
Vapor Intrusion and Environmental Liability—Learning from Past Mistakes
Vapor Intrusion and Environmental LiabilityLearning From Past Mistakes
EDR Insight Webinar, February 12, 2013
Presented by:
Joseph MaternowskiHessian & McKasy, P.A., Minneapolis,
MN
Vapor Intrusion In the News
Environmental Due Diligence
Meet CERCLA “All Appropriate Inquiries” StandardAssess Liability/Risk For Prospective Purchaser or Lenders Minimize Potential Legal Claims
Standard of Care
ASTM Standard Practice - 2013 RevisionASTM Vapor Encroachment Screening
What Is Vapor Intrusion?
General Definition:“The Migration of Volatile Chemicals Into Structures”
Vapor Sources
Dry Cleaners
Gas Stations
Manufacturing
Area-Wide
GROUNDWATER
Migratory Pathways of VOCs into Buildings
Dry Cleaners
Soil Contamination
Leaching Through Soil
Vapor IntrusionThrough Soil
Groundwater Contamination
From GroundwaterThrough Soil
Into Buildings
Migration of Contamination
Migratory Pathways of VOCs into Buildings
Soil and Groundwater Contamination
Soil gas sampling results adjacent to building can underestimate risk Sub-slab sampling required Groundwater plume serves as separate source for vapors
How Do You Know If There Is A Vapor Intrusion Problem?
Tier 1: Preliminary Vapor Screening (Historical Review, Receptor Survey, Source Area Sampling)
Tier 2: Subsurface Soil Vapor Sampling
Tier 3: Indoor Air Sampling
Need to Compare Results to Applicable Regulatory Standards
[Residential and Commercial/Industrial and
groundwater]
Vapor a Concern to Federal and State Authorities
U.S. Environmental Protection Agency (EPA)
State Environmental Agencies
Occupational Safety and Health
State or Local Health Authorities
Liability Concerns for Affected Parties
NeighborsTenantsLendersLand Owners
Vapor Intrusion Fixes
Mitigation Alternatives
Source RemovalSealing Points of EntryHVAC ModificationsSub-slab Depressurization Systems Vapor Barrier Venting Systems (Active or Passive)
Possible Long-Term Monitoring, Operations & Maintenance and Institutional Controls
Vapor Intrusion and Environmental Liabilityfor EPs and Lenders—
Learning from Past Mistakes
Vapor Intrusion and Environmental Liabilityfor EPs and Lenders—
Learning from Past Mistakes
William C. WagnerTaft Stettinius & Hollister LLP
One Indiana Square, Suite 3500Indianapolis, Indiana 46204
(317) [email protected]
(Bill Wagner Environmental Lawyer Blog)
Today’s GoalsToday’s Goals
• Learn from the mistakes of others, rather than your own
• Identify the threats to EPs and Lenders
• Provide a real life example of due diligence gone wrong
• Provide recommendations to EPs and Lenders
Legal Theories Against EPs for Phase I’sLegal Theories Against EPs for Phase I’s
• Breach of contract & breach of warranty
• Negligence / professional malpractice – All Appropriate Inquiries, ASTM E 1527, ASTM E 2600
– ASTM 1527, Section 1.6 – “This ASTM standard is not intended to represent or replace the standard of care by which the adequacy of a given professional service must be judged, nor should this document be applied without consideration of a project’s many unique aspects.”
• Negligent misrepresentation (duties to unknown third parties who are not your clients)
• Constructive fraud
• Statutory claims (some states incorporate ASTM E 1527)
Real World ExampleReal World Example
Aircraft Parts Manufacturer: 1960s-1990sAircraft Parts Manufacturer: 1960s-1990s
1991 Buyer Purchased Manufacturing Business1991 Buyer Purchased Manufacturing Business
1991 Phase I – Missed Septic Drain in Degreasing Room1991 Phase I – Missed Septic Drain in Degreasing Room
2000 No Phase I – Developer Told Bank“It’s Always Been Farmland”
2000 No Phase I – Developer Told Bank“It’s Always Been Farmland”
2004 Builder’s Phase I – Identified Manufacturer In Voluntary Remediation Program ½ Mile Away2004 Builder’s Phase I – Identified Manufacturer In Voluntary Remediation Program ½ Mile Away
Solvent Plume Left The SiteSolvent Plume Left The Site
Indianapolis Star Newspaper Indianapolis Star Newspaper Lawsuits
• Three separate class actions lawsuits:– Personal injuries, emotional distress, and
medical monitoring damages from vapor intrusion
– Property damages (costs to investigate and remediate contamination), stigma damages, and holding costs
– Claimed $50+ million in total damages
• We defeated motion for class certification
• 140+ plaintiffs filed consolidated lawsuit
• Defendants included developer, builder, manufacturer/polluter, and realtors
• Nonparties – Builder’s EP and Lender
• Builder filed separate lawsuit against the manufacturer / polluter, developer, and the EP
LawsuitsLawsuits
• Site specific evidence
– No groundwater / soil exposure
– Vapor intrusion investigation
– Impermeable clay layer over contaminated groundwater
– Indoor air testing eliminated vapor intrusion pathway
• Cases settled years later very favorably to the defendants
Key Take Aways for EPs – Protect YourselfKey Take Aways for EPs – Protect Yourself
• Keep your continuing education up to date– Read the relevant federal and state guidance documents*
– Read the ASTM standards (E 1527, E 2600) and learn the nuances
• Develop and implement: – Standard Operating Procedures
– Training Protocols
– Quality Control Procedures
• Work with your lawyer, insurance broker, and malpractice insurer to: – Review your malpractice and CGL policies for coverages, exclusions, etc.
– Review your Phase I proposals – what are you promising to do or not do, e.g. meet AAI, E 1527, etc.; vapor intrusion; recommendations; non-scope items?
– Review your contract language, especially your warranty language, to defend negligent misrepresentation claims by third parties / non-clients
*http://www.envirogroup.com/links.php; Assessing Protectiveness at Sites for Vapor Intrusion, Supplement to the “Comprehensive Five-Year Review Guidance” (US EPA, OSWER Nov.14, 2012); Proposed Rule to Add a Subsurface Intrusion Component to the Hazard Ranking System, sent to OMB Feb. 3, 2012, to be published ~ May 2013.
Key Take Aways for Lenders – Protect YourselfKey Take Aways for Lenders – Protect Yourself
• Don’t make Phase I’s decisions based simply on the amount of the loan
• Make sure your EPs carry malpractice insurance
• Learn to identify red flags in Phase I’s – Review the federal/state guidance, SBA guidance*, ASTM standards
• Review your quality control procedures for Phase I’s
• Use your lawyer to direct EPs’ work and to maintain the attorney-client and work product privileges
• Have your lawyer review the EP’s contract language, warranties, and disclaimers
• Always consider cost recovery – forensic analysis and liability analysis
• Don’t be too afraid of the risks for revitalizing industrial sites – consultants are able to mitigate VI risks, and funding opportunities exist through federal and state Brownfield grants and tax incentive financing
*SBA SOP 50 57, 7(a) Loan Servicing and Liquidation, Ch. 5 - Environmental Risk Management, effective March 1, 2013; SOP 50 10 5(E), Lender and Development Company Loan Programs, Ch. 4 - Environmental Policies, effective June 1, 2012.
ASTM E 1527 Vapor as Standard Practice
Stuart J. Lieberman, Esq.
Due Diligence
Where vapor is scientifically likely, due diligence requires analysis of it.
Vapor Intrusion
All appropriate inquiry can not ignore vapor intrusion.
Innocent Landowner Defense
Innocent Landowner Defense applies to persons who did not know and had no reason to know
Hazardous Substances
Recognized environmental conditions include the presence or likely presence of hazardous substances.
Phase 1 Environmental Site Assessment
• The purpose of a Phase 1 Environmental Site Assessment is to reduce uncertainty regarding the potential for environmental conditions…vapor analysis is a must!
Due Diligence Auditor
Specialized knowledge of the user must be given to an environmental due diligence auditor, i.e. chemical processing companies, platters, dry cleaners.
Site Assessments
• Site Assessments – looking for signs of vapor• Exterior and Interior: you
cant have one eye closed
Uses of Property
• Need to take into account:• Current property uses• Past property uses• Current uses of adjoining
property• Past uses of adjoining property• Hydrogeological Conditions
Phase 1 Reports
Phase 1 reports should summarize all recognized environmental conditions and in certain instances recommend additional environmental testing when required
Testing and Morality
• Disease Potential• Water Pollution Potential
Potential Purchasers
Vapor Testing – critical to protecting potential purchaser of property
Dry Cleaners
Dry Cleaners area huge problem in New Jersey
Regional Chlorinated-Hydrocarbon Contamination
• Regional Chlorinated-Hydrocarbon Contamination• Example: Union County
Vapor Detection
Vapor detection and leaking neighborhood gas stations
Liability
Lawyer and consultation liability to clients and third parties
Thank you!
Stuart J. Lieberman, Esq.
© 2012 Environmental Data Resources, Inc.© 2011 Environmental Data Resources, Inc.
Q&A