Transcript Environmental Due Diligence Meth Labs & Underground Storage Tanks

Environmental Due Diligence
Meth Labs &
Underground Storage Tanks
Environmental Due Diligence
… is the process of inquiring into the
environmental condition of the real
estate to determine the presence of
contamination from hazardous
wastes and petroleum products, and
to determine what impact such
contamination may have on the
market value of the property.
Why do Environmental Due Diligence?
 Preserve the continued marketability
of the property (Salability)
 Protect the health and safety of the
occupants (Safety)
 Protect the security of the property
(Security)
 Note: Environmental Due Diligence
NOT required under WEP
Due Diligence Requirements:


Direct Single Family At Loan Making (See HB 3550
Attachment 5-B Single Family Housing Site Checklist)
and Before Foreclosure).
Guaranteed Single Family by Lenders per HUD Form
VC (Valuation Conditions) or “home inspector
deemed qualified.”
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Safety During Site Inspections:
 Note general site conditions
. clearly labeled
 Note materials
 Do NOT handle
materials
 Maintain safe distance from materials
 Stay out of unventilated, confined spaces
 Leave final determinations on materials to experts
 Report concerns to your SEC
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Takeaway
 Elevate hazmat issues to the RD National Office
 Involve OGC early in the process
 Do NOT get personally involved in environmental
compliance, investigation or cleanup decisions
 Don’t make agreements with buyers without
consideration of environmental risks
Key Agency Risks
 Risk of Direct Liability to RD
 When taking a security interest in the property
 Risk of the Loan Package
 Liability of borrower
 Impairment of collateral
Liability Risks
 Federal and state laws impose liability on owners
and operators of contaminated property – even if
they did not cause or contribute to the
contamination
 The Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”) is the
best-known cleanup law affecting loan-making and
servicing
CERCLA Liability
 Costs can be quite high:
 Investigation
 Cleanup
 Operations and maintenance
 Land Use Controls
 Natural resource damages
 Defense costs
II. Risk of the Loan Package
 If borrower faces significant compliance or cleanup
costs, its ability to repay the loan may be at risk
 Similarly, environmental contamination affecting
the collateral creates a material financial risk in the
event that the borrower is unable to repay the loan
Minimizing Financial Risk Associated
with Hazmat Issues
 Why due diligence is important:
 Crucial informational and decision-making tool
 Legal benefits in certain instances
 Timing of due diligence:
 Prior to any decision on a loan or guarantee
 Prior to any decision to foreclose
Minimizing Financial Risk
 RD AN No. 4617 refers to two types of
environmental due diligence:
 Transaction Screen (ASTM E 1528-06)
 Phase I ESA (ASTM E 1527-05)
 Other more extensive due diligence efforts may be
warranted in particular circumstances (e.g., nonscope issues, Phase II sampling)
Agency Guidance
AN 4621 (1940-G) Environmental Due Diligence, February 9,
2012
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AN 4673 (4279-A, 4279-B, 4279-C, 4280-B, and 4287-B)
Business and Industry Guaranteed Loan, Biorefinery
Assistance, and Rural Energy for America Programs
Transaction Screen Questionnaire and Phase I Environmental
Site Assessments
AN 4673
 Rural Business-Cooperative Service, considers the use of
the: (1) initial investigation using the Transaction Screen
Questionnaire (TSQ); and (2) environmental professional
evaluation using the Phase I Environmental Site
Assessment (ESA) sufficient to conduct environmental
due diligence. The TSQ and Phase I ESA standards are
published by ASTM International (formerly American
Society for Testing and Materials).
Transaction Screen Questionnaire (TSQ)
ASTM E-1528-14 “Standard Practice for
Environmental Site Assessments: Transaction
Screen Questionnaire”
 Preparation of TSQ by Agency Only
 Should be done for those projects where there is
low probability of previous environmental
contamination
 If TSQ concludes a Phase I ESA is not needed,
provides documentation but does not meet the
“all appropriate inquiries” established by EPA for
CERCLA lender liability exclusion

Concerns During Site
Inspections:
 Distressed Vegetation
 Stained soils & UST fill pipes
 Drums and other containers
 Leaking containers
 Odors
 Current & past land use
 Transformers, abandoned
vehicles &
machinery
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Environmental Site Assessment (ESA)
 TSQ Issues: Proceed to Phase I Environmental Site
Assessment (ESA, not to be confused with Agency
EA)
 Preparation by professional environmental
consultants
 Funding of contract from Program Loan Cost
Expenses for REO Property
ESA’s vs. EA’s
 Environmental Site Assessment (ESA)
 Is the property “clean” or “dirty”?
 Comprehensive Environmental Response and Liability
Act (CERCLA)
 Environmental Assessments (EA)
 Primary purpose is to determine whether or not a
proposed action could have significant environmental
impacts that would require an Environmental Impact
Statement be prepared
 National Environmental Policy Act (NEPA)
Requirements
 When is a Phase I ESA Necessary?
- When RD is taking a security interest in the property (direct
loan, foreclosure, title transfer)
 When contamination is suspected to be on the property
 When banks require one
 Part of NEPA review?
 Yes, discuss and disclose findings and conclusions
Requirements
 Who does a Phase I ESA?
 Environmental Professionals – possess training and
experience to conduct site visit and interview then develop
conclusions regarding recognized environmental conditions
 Registered Engineers
 Registered Geologists
 Registered Environmental Assessors
 How to do Phase I ESA?
 ASTM E-1527-13
ESA’s
Confirmed
Or Suspected
Contamination?
Complete TSQ
No
STOP!
Proceed with loan
Decision Time!
Yes
Possible
Contamination?
Yes
Perform Phase I
ESA
No
STOP!
Proceed with loan
Perform Phase II ESA
Or Site
Characterization
Yes
Is
Contamination
Extensive?
Yes
No
If there is
contamination,
remediation
measures may need
to be discussed prior
to proceeding with
the loan
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Due Diligence Resources
EPA: “Enviromapper”
http://www.epa.gov/enviro/html/em/index.html
 HUD: Environmental Maps “E-Maps”
http://egis.hud.gov/egis/ then click on “Map My
Community”
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Methamphetamine Labs
 Guidance provided in AN 4718 (1940-G)
“Safety In and Around Illegal
Methamphetamine Laboratories and
Associated Environmental Cleanup”,
May, 2013.
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“Safety First”
 RD employees are not trained as “first
responders” in a meth lab situation. This is a
major personal safety issue. If you encounter a
lab, leave the property and contact your local
environmental protection or law enforcement
agency.
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Production of Methamphetamine
 Relatively easy to produce.
 Highly addictive central nervous system
stimulant.
 Meth “cooks” prefer rural areas to avoid
discovery.
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Signs of a Potential Problem
 Loan payments are not being made. (Occupant
may be in jail!).
 Find “Police Line Do Not Cross” tape when
approaching a structure.
 Chemical odors or lots of garbage, empty
containers on the property.
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What Does a Lab Look Like?
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AN 4718
If the Agency owns the property, we either have to 1) clean
it up and sell it 2) disclose it is contaminated, or potentially
contaminated, and sell it as is or 3) demolish it and call it a
loss.
Underground Storage Tanks (USTs)
 Any tank that has at least 10 percent of its
volume underground
 Includes the tank, underground piping, all
ancillary equipment, and containment system
 40 CFR Part 280 applies to USTs that store
petroleum products or hazardous substances
Unregulated USTs
 Farm or residential tanks holding 1,100 gallons or
less of motor fuel used for non-commercial
purposes
 Tanks storing heating oil used on the premises
where it is stored
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Unregulated USTs
 Not required, but consideration must be given to
closure of USTs
 Individual States can make policy to have abandoned
unregulated USTs closed
 Eventually, all USTs will leak
 How long depends on subsurface conditions
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What to look for…
 Soil staining
 Vent/fill pipes
 Petroleum odor
 Distressed vegetation
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Effects of USTs
on RD Programs
 Regardless of regulatory status the concern
is whether a leak has occurred
•
Effect on health and safety of
applicants, adjacent owners
• Negative effect on property
security value
USTs in RD Programs
 If the UST is regulated:
 Verify installation documentation
 Copy of the permit
 Ensure proper reporting and monitoring
USTs in RD Programs
• If not actively regulated
- Determine to either remove or close in
place
- Removal usually best course
• State regulations will govern process for closure
or removal
Emergency Situations
 Report spills to the National Response Center (NRC)
 NRC is sole federal point of contact for reporting oil, chemical,
radiological and biological releases
 Available 24/7 365 days/year
 (800)-424-8802 or (202)-267-2675
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Summary
 Due Diligence should be done before a property is
secured, foreclosed, or transferred (don’t make
agreements with buyers)
 A TSQ doesn’t satisfy the lender liability exclusion
under CERCLA while a Phase I ESA does
 A Phase I ESA should be done by qualified
environmental professional
 NO and OCG should be consulted early whenever
there are hazmat issues (need for Phase II, etc.)
 Do NOT get personally involved in environmental
compliance, investigation or cleanup decisions
Environmental Due Diligence
AN No. 4487
 Required in loan making and servicing actions,
particularly servicing actions that may lead to
foreclosure.
 Servicing Actions
1.
2.
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Actions Leading to Foreclosure on Real Estate Security (for all
programs).
Actions Involving Real Estate Owned (REO) Properties (after
foreclosure).
Transaction Screen Questionnaire Form (TSQ)
Environmental Site Assessments (Phase I )(ASTM E
1527)
Enviromapper
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EPA EnviroMapper
Doing a better job
…faster
…more accurately
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EPA EnviroMapper
 RD Environmental Due Diligence:
 Superfund (NPL) Sites
 Brownfields
 EnviroFacts
 Water Quality
 Clean Ups
 Environmental Justice
 Please note that NEPAssist also provides another
platform to access all of the Enviromapper data.
Formats are different, however.
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http://www.epa.gov/enviro/html/em/index.html
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Facility
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For Demographics
Click here
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Questions??
Email or call with any comments or questions on this webinar to
[email protected] or 202-205-8242
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