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THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN...

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THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS
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Page 1: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

THE BEST OF CLENOVEMBER 30, 2011

IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN

TRANSACTIONS

Page 2: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

TOP 10 ENVIRONMENTAL MYTHS IN TRANSACTIONS

presented by

DOUG CLOUD M2C2LAW.COM

Page 3: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

1. NO NEED FOR A PHASE I, IT’S JUST…

office, retail, vacant, farmland, lease

Page 4: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 5: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

Call from the Georgia EPD

Page 6: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

Property on Hazardous Site Inventory

Page 7: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

Nearby Wells

Page 8: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 9: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 10: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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)

Page 11: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 12: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 13: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 14: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

5. “CLEAN” PHASE I = NO PHASE II

Scope and limitations Contracting and reliance Get what you pay for

ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL

Page 15: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 16: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

7. AGENCY NFA MEANS NEVER

Reopener

ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL

Page 17: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

8. OK TO RELY ON PRIOR PHASE I

Snapshot in time Shelf life Updates

ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL

Page 18: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

9. CONTAMINATED PROPERTY IS UNMARKETABLE

Never so many effective tools for managing environmental risks in transactions than those available in today’s marketplace

Page 19: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

Voluntary Cleanup & Brownfields Programs

Agency oversight Grants Liability protections Growing acceptance of RBCA

Page 20: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

Regulatory Protections

CERCLA defenses Agency

NFA determinations Comfort letters Prospective purchaser agreements

Secured creditor exemptions

Page 21: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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

Page 22: THE BEST OF CLE NOVEMBER 30, 2011 IDENTIFYING AND RESPONDING TO ENVIRONMENTAL ISSUES IN TRANSACTIONS.

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


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