Environmental Due Diligence

The environmental due diligence process is a phased approach most often performed prior to or during commercial, industrial, and agricultural real estate transactions (e.g. acquisition, lease, redevelopment, or foreclosure) and generally involves the evaluation, identification, and investigation of potential, or known, environmental concerns. Upon completion of this process, Certus’ clients are well equipped with the necessary tools to make educated decisions and to secure protections from environmental liability and risk.

It’s important to know just because a property is suspected or known to have contamination does not necessarily indicate you shouldn’t consider purchasing or leasing such a property – the environmental due diligence process is essentially in place to provide the means for new owner/operator’s (O/O) to acquire liability protections.

Certus performs environmental due diligence services for an array of property transactions from large-scale industrial facilities and commercial operations to multi-tract ‘greenfield’ sites and small vacant lots. Additionally, Certus’ professionals are well versed in a variety of financial programs including Small Business Administration (SBA), Michigan State Housing Development Authority (MSHDA), and Brownfields redevelopment.

A number of firms offer environmental due diligence services, but Certus differentiates ourselves from others because our environmental professionals understand each site can present unique challenges. An experienced project manager that understands your company’s needs, the environmental concerns, and state regulations will manage your project throughout the entire due diligence process. Our approach to each site is intended to provide the most comprehensive environmental assessment possible to our client.

The aforementioned process is initiated with a Phase I Environmental Site Assessment (ESA) to evaluate historical and current uses of a property with the intention of identifying Recognized Environmental Conditions (RECs). When RECs are not identified, the process may be complete. Conversely, if RECs are identified, a Phase II ESA is subsequently conducted to investigate the RECs via sampling and characterizing soil, groundwater, and/or vapor concerns. Depending on the state in which the property transaction occurs, and if conditions warrant, a liability protection document may be available to new owner/operators [i.e. a Baseline Environmental Assessment (BEA) in Michigan]. The final phase is managing risk through Continuing Obligations (e.g. Due Care) and may include forms of mitigation and/or remediation necessary to protect human health and the environment. Implementing and maintaining these continuing obligations are necessary for upholding one’s liability protection.

Phase I ESA

Conducting a Phase I ESA is a critical step in the due diligence process and is most often performed prior to or during commercial, industrial, and agricultural real estate transactions (e.g. acquisition, lease, redevelopment, or foreclosure).

Certus conducts Phase I ESAs in conformance with the American Society for Testing and Materials (ASTM) standard ASTM E 1527-13 (and 1527-21), Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. In following this standard, our ESAs are consistent with the United States Environmental Protection Agency’s (EPA) 40 CFR Part 312 Standards and Practices for All Appropriate Inquiries (AAI).

The purpose of a Phase I ESA is essentially to evaluate the current and historical uses/conditions of a Property with the goal of identifying conditions indicative of releases and threatened releases of hazardous substances or petroleum products on, at, or to a property (i.e. RECs). Certus is proficient and experienced in utilizing various resources to obtain information to complete, at a minimum, the four main components of the ASTM Standard – records review, site reconnaissance, interviews, and the report. A properly completed Phase I ESA is intended to permit a User of the ESA to satisfy one of the requirements to qualify for a liability protection defense under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) landowner liability protections (LLPs) – innocent landowner, contiguous property owner, or bona fide prospective purchaser.

Phase II ESA

After a Phase I ESA identifies Recognized Environmental Conditions, a Phase II ESA is a common next step.

Phase II ESA activities often include a subsurface investigation using drilling technologies, or excavation, to evaluate site conditions and to attempt to determine the absence/presence of environmental impacts. Field screening techniques such as visual, olfactory, and photoionization detector unit (PID) readings are employed and samples of environmental media (i.e. soil, groundwater, air, surface water, and/or sediments) are collected and submitted to a laboratory for analysis.

The number of sampling locations, and number and type of environmental media to be sampled, varies from site to site; however, Certus is experienced with Phase II ESAs and we devise strategies that effectively target the identified concerns and are cost-efficient for our clients.

Certus conducts Phase II ESAs in conformance with the ASTM standard ASTM E 1903-11 and regulatory agency environmental guidance and practices.

BEA and Due Care Obligations

In Michigan, when a site is discovered to be contaminated beyond a specific threshold, otherwise known as a “facility”, new owners or new operators have the ability to obtain liability protection from environmental cleanup if they did not cause or contribute to the contamination. In addition, O/O’s having knowledge their site is a facility, even if not liable for the contamination, must comply with due care obligations.

The Michigan Department of Environment, Great Lakes, and Energy (EGLE) generally defines “facility” as any area, place, or property where one (1) or more concentration of a hazardous substance, detected in soil or groundwater, exceeding its residential cleanup criteria screening level for unrestricted residential use has been released, deposited, disposed of, or otherwise comes to be located.

Requirements

If a facility, a new O/O has the option to complete a BEA – a Michigan-specific liability exemption document. In order to obtain/maintain certain environmental liability protections, the O/O of a facility must, at a minimum:

• Complete the BEA report within 45 days of becoming an O/O of a facility, whichever is earliest;
• Submit the BEA report, along with its BEA Submittal Form, to EGLE within six (6) months of becoming an O/O; and
• Disclose the BEA to any subsequent purchaser or transferee (including lessees) prior to transfer of the interest in the Property.

It’s important to understand that not all sites are eligible for a BEA, even if a facility. Sites that may not be eligible include, for example, those identified as Treatment, Storage, and Disposal Facilities (TSDF) or are on the EPA’s National Priority List (NPL).

Due Care Obligations

Due Care obligations include the following:

• Undertaking measures to prevent exacerbation;
• Undertaking response activities necessary to mitigate unacceptable exposure to hazardous substances, mitigate fire and explosion hazards, and allow for the intended use of the facility in a manner that protects public health and safety;
• Taking reasonable precautions against reasonably foreseeable acts or omissions of a third party and the consequences that foreseeably could result from those acts or omissions;
• Providing reasonable cooperation, assistance, and access to the persons that are authorized to conduct response activities at the facility, including the cooperation and access necessary for the installation, integrity, operation, and maintenance of any complete or partial response activity at the facility. Nothing in this provision shall be interpreted to provide any right of access not expressly authorized by law, including access authorized pursuant to a warrant or court order, or to preclude access allowed pursuant to a voluntary agreement; and
• Complying with any land use or resource use restrictions established or relied on in connection with response activities at the facility, and not impeding the effectiveness or integrity of said restrictions employed at the facility in connection with those response activities.