Transcript Considerations for Transactions Involving Environmentally

Considerations for Transactions
with Environmental Issues
Richard M. Fil, Esq.
Sources of Potential Liability
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Federal CERCLA / state counterparts
RCRA (federal and state)
Common law
Other causes of actions (e.g., public trust)
Types of Damages
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Environmental damage to real property
Bodily injury / personal property damage
Third party claims from off-site impacts
Claims for off-site / non-owned impacts
Operational non-compliance
– Capital costs
– Penalties
– Operational losses
Importance of Allocation
• Seller caused the problem
• Buyer owns the problem
• Failure to allocate may result in:
– Litigation
– Uncertainty
– Additional costs
Basic Considerations
• Condition of facility (current and historic)
• Operation of facility (current and historic)
• Divergent interests of buyer and seller
Potential Sources of Concern
• Compliance
– Permits
– Reporting / other requirements
• Contamination
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On-site
Off-site
Former sites
Neighboring properties (sources and
receptors)
Importance of Site
Characterization
• Potential compliance needs (e.g.,
permitting; Transfer Act)
• Identify site history / conditions
• Establish baseline
• Quantify remediation costs
• Allocate responsibility
Types of Site Assessments
• Environmental conditions
– Phase I
– Phase II
– Phase III
• Operational practices
– Necessary permits in place
– Compliance with permits
– Compliance with reporting / other
requirements
Considerations for Retaining a
Consultant
• Confidentiality
• Generate written reports only on request
• Stamp all reports “A/CP” and “Draft”
unless directed otherwise
• Product ownership
Considerations for Retaining a
Consultant (continued)
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Insurance
Access to all sites
Clearly identify the client
Time and cost issues
Reporting requirements
Potential Reporting Requirements
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CERCLA
C.G.S. Section 22a-450 (spills)
C.G.S. Section 22a-6u (S.E.H.)
RCSA Section 22a-133v-1 et seq. (LEP
Regulations)
• C.G.S. Section 22a-134g (termination of
operations)
• Federal SEC disclosures
• Aquifer Protection Regulations (in draft)
Ethical Considerations
• Identify your client
• Watch for conflicts that may arise
• Remain aware of divergent interests of
others
Important PSA Elements
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Definitions
Representations and warranties
Schedules of exceptions
Indemnification by buyer and seller
Definitions
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Environmental conditions
Environmental liability
Hazardous materials
Environmental laws
Representations and Warranties
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Potential on-site and off-site contamination
Actual or threatened claims or proceedings
Presence of USTs, asbestos, PCBs
Health & safety
Provision of all relevant documents
Permit status and compliance
Schedules of Exceptions
• Identify exceptions to representations and
warranties
• Typical thresholds may include materiality,
time period, and seller’s knowledge
• Examples:
– Spills
– Orders, NOVs, litigation
– Exceedance of permit limits
Indemnification
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Division of responsibility
Trigger for indemnification
Define compliance
Basket and cap
Limits on notice / time
Independent statutory claims
Considerations for Indemnification
• Define cleanup standards and options
• Identify party in control of cleanup and
agency contact
• Provide for adequate access
• Require cooperation
• Define survival period for right to
indemnification
Examples of Buyer- and SellerFriendly Agreements
• Buyer friendly terms
• Seller friendly terms
Other Forms of Protection
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Covenant not to sue
Prospective purchaser agreement
Comfort letter
Environmental insurance
Connecticut Transfer Act
• C.G.S. Section 22a-134 et seq.
• “Establishment”
• “Transfer”
“Establishment”
• Generation of more than 100 kg of
hazardous waste in any month since 11-80
• Handling of hazardous waste generated
elsewhere by another person
• Operated at any time since May 1, 1967 as:
– Dry cleaner
– Furniture stripper
– Vehicle body repair or painting shop
“Transfer”
• “Any transaction or proceeding through
which an establishment undergoes a
change in ownership,” with 20 exceptions
• Includes leases of 25 years or more
Transfer Act Filing
• Forms I-IV
• RCSA Section 22a-133k-1 et seq.,
Remediation Standard Regulations
(“RSRs”)
• “Certifying Party”
• Environmental Condition Assessment Form
(“ECAF”)
Transfer Act Non-Compliance
• Strict liability / damages to transferee under
C.G.S. Section 22a-134b
• Penalties under C.G.S. Section 22a-134d
• Other enforcement actions by DEP
RSRs and ELURs
• RSRs
– Soil and groundwater
– GA v. GB
– Residential v. industrial / commercial
• ELURs
– Limit site uses
– Impose controls
Other Relevant Requirements in
Connecticut
• Termination of operations
• Aquifer protection regulations
Hypothetical Transactions
• Consider the sale of a car dealership to:
– Another car dealer
– “Big box” retail developer
– Affordable housing developer
Conclusion
• Consider and address potential liability for:
– Compliance
– On-site and off-site contamination
• State and federal requirements
• Contractual and statutory liability