THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN...
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Transcript of THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN...
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THE BEST OF CLENOVEMBER 30, 2011
IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN
TRANSACTIONS
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TOP 10 ENVIRONMENTAL MYTHS IN TRANSACTIONS
presented by
DOUG CLOUD M2C2LAW.COM
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1. NO NEED FOR A PHASE I, IT’S JUST…
office, retail, vacant, farmland, lease
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CASE STUDY
2.0 acres in rural Georgia Vacant one-story, sheet metal
building Neighbors just residential, church Security for small commercial loan Default and foreclosure
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Call from the Georgia EPD
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Property on Hazardous Site Inventory
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Nearby Wells
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Due Diligence Today
What We Do Phase I ESA ASTM E1527-05 Standard
Transaction screen Asbestos, radon, lead
Phase II if necessary Review of prior reports, documents,
records Compliance audit as appropriate
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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2. INNOCENCE IS BEST DEFENSE
Major concern for environmental liabilities in transactions arose with federal Superfund/CERCLA
Spawned thicket of laws Broad liability scheme
Current and past owners and operators, generators, arrangers (transporters)
Strict, retroactive, joint & several liability Liability not limited to property
value/investment Innocence can be no defense
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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3. “CLEAN” PHASE I = NO CONTAMINATION
Scope of Phase I - site inspection, interviews, readily available records review
Apparent Recognized Environmental Conditions (presence or likely presence of hazardous substances or petroleum contamination)
Consultant qualifications (experience, reputation, insurance)
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DUE DILIGENCE
:Why We Do It To learn more about the
environmental risk profile (current or potential exposure and liabilities)
To qualify for certain liability defenses under CERCLA
To inform allocation of risks among parties
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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4. “CLEAN” PHASE I = NO LIABILITY
What CERCLA Defenses? Innocent Landowner Adjacent Landowner Bona Fide Prospective Purchaser
Must perform “all appropriate inquiries” per AAI Final Rule at 40 CFR Part 312
ASTM E1527-05 Standard Phase I complies
Shelf lifeATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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Buyer Beware
Under CERCLA, relatively few commercial parties have successfully avoided liability by virtue of these defenses
3000 E. Imperial, LLC v. Robertshaw Controls Co.
Ashley II of Charleston, LLC v. PCS Nitrogen
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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5. “CLEAN” PHASE I = NO PHASE II
Scope and limitations Contracting and reliance Get what you pay for
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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6. IF PHASE II ID’s CONTAMINATION, AGENCY NOTIFICATION IS REQUIRED
Regulatory gaps v. agency practice
Georgia’s special case (HSRA) Monitor consultants, parties to
the deal
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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7. AGENCY NFA MEANS NEVER
Reopener
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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8. OK TO RELY ON PRIOR PHASE I
Snapshot in time Shelf life Updates
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
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9. CONTAMINATED PROPERTY IS UNMARKETABLE
Never so many effective tools for managing environmental risks in transactions than those available in today’s marketplace
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Voluntary Cleanup & Brownfields Programs
Agency oversight Grants Liability protections Growing acceptance of RBCA
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Regulatory Protections
CERCLA defenses Agency
NFA determinations Comfort letters Prospective purchaser agreements
Secured creditor exemptions
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Environmental Insurance
Pollution Legal Liability (PLL)/Premises Pollution Liability (PPL)
Can offset some typical risks, including known and unknown onsite and offsite conditions In many ways, addresses "pollution exclusion" clauses in modern CGL policies
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10. Let’s Use the Environmental Short Form
Common knowledge that environmentally related hazards can be a source of substantial risk and liability. Over the years, environmental liabilities have grown and laws and lawsuits have proliferated. Sustainable allocation of environmental risks in transactions requires full disclosure and meeting of the minds