Practical Solutions forPractical Solutions for Buying and SellingBuying and Selling

Contaminated Contaminated PropertiesProperties Presented by:

W&M Environmental Group, Inc

& Gardere Wynne Sewell

LLP

Houston Commercial Real Estate Network

January 4, 2008

Full service environmental consulting firm with offices

throughout Texas.

Leading Provider of environmental due diligence to real estate lenders,

brokers, and investors.

90 VCP/IOP Sites

10 MSD Sites

Environmental Practice Group has 17 attorneys in Houston and DallasEnvironmental Practice Group has 17 attorneys in Houston and Dallas

Degrees in Engineering, Geology and Health SciencesDegrees in Engineering, Geology and Health Sciences

Assist clients in closing real estate deals with potential environmental issues.Assist clients in closing real estate deals with potential environmental issues.

Experience with VCP, IOP and MSD Programs Experience with VCP, IOP and MSD Programs

Extensive Environmental Litigation Experience in state and federal courtExtensive Environmental Litigation Experience in state and federal court

#1 Make Money $$$

#2 Limit liability from off-site Third Party Lawsuits

#3 Avoid future problems during re-sale of property.

#4 Allows you to negotiate price and timing with seller.

#5 You buy it, you own it – the good with the bad.

Contamination identified during Environmental Due Diligence - Phase I ESA, Phase II, and/or asbestos survey.

Contamination will impact value of property, the question is how much.

Buyer, seller, and lender generally have differing views on the impact from contamination and resulting costs.

Common sources of contamination are underground storage tanks (USTs), dry cleaners, and industrial facilities.

PropertyPropertyContaminationContamination

Voluntary Cleanup Program (VCP)

Municipal Setting Designation (MSD) with VCP

Innocent Owner/Operator Program (IOP)

Dry Cleaning Remediation Program (DCRP)

Leaking Petroleum Storage Tank Program (LPST)

Corrective Action Program

Cleanup Strategies Cleanup Strategies for Contaminated for Contaminated

PropertiesProperties

Must meet cleanup criteria for all contaminants and all media.

Use risk-based strategies whenever possible, limiting physical remediation.

At completion, property owner obtains Certificate of Completion, which is transferred to future owners and serves as a release from future liability.

Closed VCP sites have remained closed with very few exceptions.

Recent legislation that reduces or eliminates groundwater and to some degree soil cleanup.

MSD ordinance is adopted by municipality that restricts groundwater use.

Houston ordinance effective November 1.

Excellent for chlorinated solvent sites (dry cleaners) that were difficult, if not impossible, to clean up.

Much lower costs to close sites compared to traditional monitoring and/or long-term groundwater treatment.

Used in conjunction with VCP to get TCEQ approved “closure” and maximum price for property.

Municipal Setting Municipal Setting DesignationDesignation

(MSD)(MSD)

Used for properties contaminated from off-Site source – owner did not “cause

or contribute” to contamination.

Must collect sample(s) to prove Site is impacted.

IOP applicant is not responsible for monitoring, cleanup, or closure of the contamination.

Certificate issued by IOP is not transferable. However, state generally approves after re-submittal and fee.

IOP does not eliminate issue with on-Site contamination that impacts construction activities.

State fund to assess and remediate sites contaminated by perchloroethene from dry cleaners.

$5,000 deductible

State contractor conducts investigation and cleanup based on state ranking.

State response may be slow and state may re-shuffle site to lower priority as more sites come into program.

Low cost option that eliminates on-going consulting fees (“shelf” site); but not likely a final remedy.

o Allocating the risk by the structure of the Deal

•Designating a responsible party

•Indemnification/release issues

•Escrow

•Insisting on environmental closureoWhat cleanup level?oTiming of closure?

•Consideration of land use restrictions to aid closure

•Insurance

•Access issues

Managing Environmental Liabilities That Come And Go With The Deal

Managing Environmental Liabilities That Come And Go With The Deal

o Allocating the risk by the structure of the Deal •Arbitration/Mediation considerations•“As-is” clauses

o Post-transaction issues•Communications/notices with buyer/seller•Delivery of closure notice, documents, certifications

Public Nuisance: could you be buying a lawsuit?

Managing Environmental Liabilities That Come And Go With The Deal

Managing Environmental Liabilities That Come And Go With The Deal

• Thorough Due Diligence• Look for liability protection from the

government (state and federal)• State programs do not generally provide

protection from private party litigation• Weighing the likelihood of litigation and the

success of litigation is a key part to any deal• Who will clean up? How much? When?• Need excellent coordination and cooperation

between the business, technical, and legal teams

W&M Environmental Group, Inc. Michael Whitehead

mwhitehead@wh-m.comPhone: 972-516-0300

www.wh-m.com

Gardere Wynne Sewell LLPCindy Bishop

Cbishop@gardere.comPhone: 214-999-4506

713-276-5303www.gardere.com

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