11-25-14 master new waste site cleanup rules

8/10/2019 11-25-14 MASTER New Waste Site Cleanup Rules

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Environmental Business Council of New EnglandEnergy Environment Economy

EBC Site Remediation andRedevelopment Program

What Do the New Waste SiteCleanup Rules Mean for

Development & Construction inMassachusetts?



Introduction


Stephen SakakeenyProgram Chair & Moderator

PrincipalSAK Environmental LLC



2014 MCP Amendments

November 25, 2014Environmental Business Council

Liz Callahan, MassDEP Bureau of Waste Site [email protected]

mailto:[email protected]




• Process Improvements :- Eliminate Tier I Permits- Simplify Tier Classification- Streamline AULs, Notices of AULs on Federal Sites

• Enhanced Protection :- Updated Cleanup Standards based on latest science

- Triggers to expedite vapor intrusion assessment- Clearer requirements for addressing Sources of OHM

Intent of the Amendments



• More Ways to Achieve Closure : - Vapor Intrusion sites- Petroleum sites with “LNAPL”- Closure with “Conditions” but no AUL

• More Transparency

- Clearer closure terms

- Clearer documentation ofclosure conditions

Intent of the Amendments



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Of the 1,928 MCP Numerical Standards -

• 408 values (21%) went up (less stringent)• 192 values (10%) went down (more stringent)

• 1,328 values (69%) stayed the same

Enhanced Protection: UpdatedStandards



Notable Standard Changes

• Lead (Pb)S-1: 300 → 200 mg/kg S-2 and S- 3: 300 → 600 mg/kg

• PCBsS-1: 2 → 1 mg/kgS-2 & S-3: 3 → 4 mg/kg

• Trichloroethylene (TCE)GW-2: 30 ug/L → 5 ug/L

• NickelS-1 (& RCS-1): 20 → 600 mg/kg

• CadmiumS-1 (& RCS-1): 2 → 70 mg/kg



• More specific triggers on when to look for vaporintrusion based on conditions near schools, daycare facilities and occupied residences

• Results in 72 hour notification and performanceof Immediate Response Actions

Enhanced Protection: ExpeditePotential Vapor Intrusion Assessment



Expedite Assessment -Potential Vapor Intrusion

lEvidence of Vapor

MigrationAlong Preferential

Pathways

VOC Groundwater Contamination >GW-2

VOCs in Soil Gas VOCs in Soil

30 ft.

<15 ft.

MonitoringWell

Volatile LNAPL ≥ 1/8 inch

School, Daycare,Residence



12

Enhanced Protection: SourceControl Provisions

• Clearer Definition of Sources of OHM

• Performance Standards for PermanentSolutions and Temporary SolutionsSource Elimination or Control

Migration ControlNonaqueous Phase Liquid



13

More Ways to Achieve Closure



• Subslab depressurizationsystems - most effective& reliable VI mitigationmeasure, particularly athigher concentrations

• (pre-2014) MCPdisallowed PermanentSolution if Active O&Mis ongoing

Inability to reach closurewith an active subslabdepressurization systemwas a disincentive fortheir use

15

More Ways to Achieve Closure – Vapor Intrusion Sites



• Remove obstacle forclosure where the

only ongoing O&Mis an Active ExposurePathway MitigationMeasure

• Ensure requirementsrelated to Sources

and plume migrationare clear, well-defined

• Ensure adequatechecks and balances

16

Amendments



Soil

Contamination

Active Remedial System Active Exposure PathwayMitigation Measure



Active Exposure Pathway MitigationMeasures

Operating at

the point ofexposure

18



Required withAEPMM?

Perm. Soln. withConditions

ROS, Temp. Soln.

AUL with standard

conditions

Remote Monitoring

Notification after30 days ofshutdown

Status Reports &RMRs

Annual Certification



• No Non-Stable NAPL• Removal to Extent Feasible

• AUL for NAPL with MicroscaleMobility

• Eliminated the ½ inch NAPLUpper Concentration Limit

Achieving Closure – LNAPL Sites



Release Source

VaporPhase

Modified from Huntley and Beckett, 2002

DissolvedPhase

LNAPL

Achieving Closure – LNAPL Sites



22

More Transparency



23

A-1 B-3

Former Response Action OutcomeCategories Worked Well, IF…

… You Knew the Code!



24

TEMPORARY SOLUTIONS PERMANENT SOLUTIONS

PERMANENT SOLUTIONWith NO CONDITIONS

PERMANENT SOLUTIONWith CONDITIONS

NATURALBACKGROUND

RESIDENTIAL/UNRESTRICTED

NO AUL REQUIRED

ACTIVITY & USE LIMITATION

NOTHINGFEASIBLE

Working TowardsPermanent Solution



Makes you ask... “ What Conditions ?”

Permanent Solutions withConditions



1. Residual contamination within a public way orwithin a rail right-of-way

2. Recommended Use of Gardening BMPs3. Elevated OHM attributable to Anthropogenic

Background4. Absence of an occupied building, but OHM in

groundwater greater than GW-2 levels(potential future vapor intrusion concern)

Permanent Solutions with Conditions- No AUL Required

h k d h l l f



Anthropogenic Background means those levels ofoil and hazardous material that would exist in theabsence of the disposal site of concern and whichare:

27

(e) petroleum residues that are incidental to the normal operation of motorvehicles.

(d) releases to groundwater from a public water supply system; or

(c) associated with sources specifically exempt from the definitionsof disposal site or release as those terms are defined in MGL c.21E and 310 CMR 40.0006;

(a) attributable to atmospheric deposition of industrial process or engineemissions and are ubiquitous and consistently present in theenvironment at and in the vicinity of the disposal site of concern;

(b) attributable to Historic Fill;



Historic Fill means Fill Material that based onthe weight of evidence and consistent with theConceptual Site Model:

(a) was emplaced beforeJanuary 1, 1983;

(b) may contain, but is notprimarily composed of,

construction anddemolition debris,reworked soils, dredgespoils, coal ash, woodash or other solid wastematerial;

28

ll f



Historic Fill Definition, continued…

(c) was contaminated with metals, hydrocarbons, and/or polycyclicaromatic hydrocarbons prior to emplacement, at concentrationsconsistent with the pervasive use and release of such materialsprior to 1983;

(d) does not contain oil or hazardous materials originating fromoperations or activities at the location of emplacement;

(e) is not and does not contain a generated hazardous waste, otherthan Oil or Waste Oil

(f) does not contain chemical production waste, manufacturingwaste, or waste from processing of metal or mineral ores,

residues, slag or tailings; and(g) does not contain waste material disposed in a municipal solid

waste dump, burning dump, landfill, waste lagoon or otherwaste disposal location.

29



Background & Historic Fill

Background

Natural

Background

AnthropogenicBackground

Historic Fill

Other

PERMANENT SOLUTIONNO CONDITIONS

PERMANENT SOLUTIONWITH CONDITIONS

NO AUL



• Provisions at 310 CMR 40.1067 (4) & (5) Management of Remediation Waste

Installation of SSD system/vapor barrier• Most work can be conducted as a Release

Abatement Measure

• If pathway elimination measure needed tomaintain No Significant Risk, AUL required

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Permanent Solutions with Conditions – Post Closure Site Development



32

Guidance to Support

Implementation



33

Information specific to the 2014 MCPimplementation is located athttp://www.mass.gov/eea/agencies/massdep/cleanup/regulations/site-cleanup-regulations-and-standards.html#6

http://www.mass.gov/eea/agencies/massdep/cleanup/regulations/site-cleanup-regulations-and-standards.html
















34

Guidance Status Discussions

MCP Q&A final

Greener Cleanups final

Gardening BMPs Draft – comments

receivedAUL Guidance Draft – comments

received

LNAPL Guidance Draft – comments

received

December 16, 2014

Vapor Intrusion Draft – comments dueFebruary 2, 2015

December 11, 2014

Historic Fill Draft under

development

G Cl G id



Greener Cleanups Guidance

• Greener cleanups consistent

with Commonwealth’smandates to improve energyefficiency, reduce emissionsand expand the use ofrenewable energy resourceswhere practicable.

• Advocates for the use of the ASTM Standard Guide forGreener Cleanups in additionto other available resources

• Case studies



36

Amended MCP -

Experience to Date



37



• 6 disposal sites (3 NERO, 1 CERO, 1 SERO, 1 WERO)

• 15 AEPMMs – 12 Remedy Operation Status

– 1 Phase V O&M

– 2 Post-Temporary Solution O&M

38

Registered Remote Monitoring Systems

- Active Exposure Pathway Mitigation Measures



Jun Jul Aug Sept Oct Nov(partial)

Total

Permanent Soln - No Conditions 95 71 79 89 77 31 442

Permanent Soln with Conditions – AUL 21 2 8 5 11 4 51

Permanent Soln with Conditions – No AUL 1 8 9 9 8 2 37

Gardening BMPs 1 1 2 4

Anthropogenic Background 2 5 2 2 11

OHM in Rail/Road Right of Way 1 3 4

Groundwater > GW-2, no current bldg 1 1 1 1 4

More than one condition 5 2 3 4 14

Temporary Soln 9 1 3 6 3 4 26

593

Closures Aft er June 20, 2014




How the New Rules Change Design& Development

Ileen Gladstone, P.E., LSPVice President

GEI Consultants, Inc.



consulting engineers and scientists

How the New

Environmental Ruleswill Change Designand Development

Ileen Gladstone, P.E., LSP, LEED APNovember 2014

MCP Ch h Aff D i d



• Permanent Solutions with Conditions – GW2 Areas with No Buildings – Best Management Practices for Gardening – Historic Fill

– Extended MCP Deadlines• Lowered (i.e., more conservative) standardsexpand the number of MCP sites

• Expanded Response to Potentials for Vapor

Intrusion (VI)• Incorporate Principles of Green Remediation• Brownfield Tax Credits

MCP Changes that Affect Design andDevelopment



• Vacant property currently GW3, but OHM ingroundwater is greater than GW2 standards• Permanent Solution WITH Condition, but NO

AUL• Identify during due diligence• New buildings

– Demonstrate VI pathway is not significant – Design sub-slab system to mitigate VI pathway

• Confirm passive or active – Record AUL

No Building where OHM > GW2



• Did not meet Method 1 standards orquantitative Method 3 for “unrestricted use”

• Permanent Solution with Conditions: BMPs

• Challenge: – Communicate need for BMPs to tenants or owners – Knowledge of compliance with BMPs

Residential Gardening BMPs



• Anthropogenic Background is Attributable, in part, to Historic Fill• Anthropogenic Background

– Permanent Solution WITH Condition, but NO AUL – Simplify site closure

• Historic Fill – Placed prior to January 1, 1983 – May contain metals, petroleum, PAHs, construction and

demo debris, wood/coal ash – Does not contain OHM originating from operations

– Is not and does not contain a generated hazardous waste• The improvement is that previously historic fill meant you had to have

an AUL

Historic Fill



• Urban Fill —Historic Fill• Naturally occurring arsenic• Industrial or manufacturing history• Former gas station• Former dry cleaner• Underground storage tanks (USTs)

– Often found during construction• Former Manufactured Gas Plant (MGP) Site• Landfill• Odorous organics

Development on Contaminated Property



• During due diligence for a transaction• During the geotechnical investigatio n

– Can be cost effective• As close to the start of construction as feasible (?)

– Delays reporting to MassDEP for as long as possible – Complete construction within 4 years of notification (before

the Phase II Report is due) – Need data for design documents and specifications

• Reporting exemptions (should you use them) – Contaminants associated with coal/wood ash – Naturally occurring arsenic – Avoids MCP compliance costs but precludes filing for

Brownfields Tax Credits

When to Look for Contamination – It Depends



• From Time of Tier Classification – Phase II now due 3 years (was 2) – Phase III now due 4 years (was 2) – Phase IV now due 4 years (was 3) – Permanent Solutions or Remedy Operation Status

(ROS) still 5 years

• Four years from notification to Phase II

• Simplify compliance with just Release Abatement Measure (RAM)

Complete Construction before Phase II Due



• Health and Safety – Occupational Safety and Health Administration

(OSHA)-trained personnel• Excavated Materials Management

• Earthwork – Backfilling and compaction – Chemical testing requirements for backfill

• Dewatering

• Well Decommissioning• Underslab Vapor Barrier• Soil Gas Venting System

Design Documents – Specifications



• Early analysis and estimate of cut/fill• Sources of excess soil

– Basements, garages, utilities, foundations, stormwater retention/infiltration

• Soil pre-characterization – Know where the building is going – Sample collection, chemical testing

– Typically soil borings• Soil stockpiling during construction

– Room to stockpile

How Will Contaminated Soil Be Managed



• All contamination is not created equal…

How Dirty is the Dirt?

Cost of cleanup

Complexityof cleanup

Urban fill

Metals

Solvents

PCBs

Oil



Checker Board Soil



• Establish budget for soil disposal early – Pre-characterization reduces uncertainty and risk

• Establish budget for dust monitoring• Soil management options

– Reuse, capping, stabilization, solidification, off-sitedisposal• Optimize/minimize soil disposal costs

– Reuse lightly contaminated soil; dispose of clean soil

• Limited landfill capacity – Cost and schedule implications – Potential liability issues and associated due diligence

How Will Contaminated Soil Be Managed



• Excavated MaterialsManagement – How soil is managed – Dig and haul – Stockpiling requirements – Sampling requirements – Categories of soil for reuse

or disposal – Disposal options – Dust monitoring and dust control – Treatment for lead contaminated soil – Truck decontamination – Odor control

Design Documents – Specifications

How Will Contaminated Groundwater Be



• Construction dewatering effluent – Recharge vs. discharge• Permitting

– City, Massachusetts Water Resource Authority (MWRA), U.S. Environmental

Protection Agency (EPA)• Treatment

– Sedimentation tank, oil separation, filtration, carbonadsorption, ion exchange

• Testing – Start up and ongoing effluent monitoring

• Discharge – Storm water system, surface water, sewer system

How Will Contaminated Groundwater BeManaged



http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=22cTPRO2Zee_CM&tbnid=BbbTzVqfcID9ZM:&ved=0CAUQjRw&url=http://www.caslab.com/News/vapor-intrusion-encroachment.html&ei=8fNCU6_wLKPmyQHxzIHQCA&bvm=bv.64363296,d.aWc&psig=AFQjCNGN8oro2ylRdHfMecidG5zme2DTEw&ust=1396983151418612




Vapor I ntrusion: Conceptual Site Model (NJDEP)

h d






• Some soil and groundwater contaminants can affectindoor air quality – Dry-cleaning chemicals [Tetrachloroethlyene (PCE)] – Solvents [Trichloroethylene (TCE)] – Gasoline

• Very high priority for MassDEP – Reduced standard for TCE from 30 micrograms per liter

(µg/L) to 5 µg/L – Coming soon: PCE from 50 µg/L to 20 µg/L

• Building over contaminated groundwater plume• Leaving contaminated soil beneath new building• Renovating a building located over contaminated

groundwater and/or soil

When to Protect Indoor Air

P I d Ai Mi i i O i



• Intrinsically safe design – Open air first level parking

• VI barrier

• Sub-slab venting system (passive)• Sub-slab depressurization system (SSDS)

(active)• Testing for effectiveness• Deed restriction (AUL) to require system

Protect Indoor Air – Mitigation Options

Complex Design Considerations for Vapor



• Design considerations – Vapor barrier (contaminant dependent) – Sheet vs. spray applied membrane – Piping and subgrade ventilation layer

– Vent stack(s) above roofline – Power for fan – Automated notification to MassDEP of system failure

• Construction considerations – Welded or taped membrane seams – Seals around penetrations (utilities, columns) – Quality control testing including smoke testing

Complex Design Considerations for VaporMitigation

V B i D il



Vapor Barrier Details

L T C id i



• Deed restriction: AUL – Affects Brownfields Tax Credits• Passive system

– Indoor air testing at least 3 times over 2 years• Active system

– Indoor air testing during heating season and verify pressuredifferential across slab

– Annual checks for pressure drops and fan operation – Remote telemetry that notifies owner and MassDEP upon

system failure

– Notify occupants and MassDEP of system shutdowns lasting30 days – Owner certification that the $$ is available for repairs – Annual certification that system is operating

Long-Term Considerations

Transactional Impacts Associated with VI Issues



Transactional Impacts Associated with VI Issues

• More uncertainty concerning what it takes to achieve MCP• Extended timeframes to conduct sampling• How do you evaluate a site that was closed under the “old” system?

• Redevelopment of VI sites, if at all, may be conducted in a muchmore conservative manner – This is particularly so with respect to proposed residential and

mixed-use site redevelopment projects• More sampling; more data; more remediation (beyond NSR?)• More time, more money, and a more conservative approach results

in fewer sites being redeveloped

G R di ti



• EPA: “ The practice of considering all environmental effectsof remedy implementation and incorporating options tominimize the environmental footprints of cleanup actions.”

• MassDEP: Five core elements for reducing theenvironmental footprint of a cleanup: – Minimizing total energy use and maximizing renewable

energy use; – Minimizing air pollutants and greenhouse gas emissions; – Minimizing water use and impacts to water resources;

– Reducing, reusing and recycling material and waste; and – Protection of land and ecosystems

Green Remediation

Standard Guide for Greener Cleanups



• MassDEP adopted ASTM E2893-13• Process to incorporate Best Management

Practices (BMPs) to reduce environmentalfootprint

• BMP process – Opportunity assessment – Prioritization

– Selection – Implementation – Documentation

p( ASTM E2893-13)

E l G R di ti BMP



• Use local staff (including subcontractors) when possible tominimize resource consumption• Use local laboratory to minimize impacts from transportation• Use stressed vegetation to locate contaminant hotpsots to guide

development of sampling and analysis plans and optimize

design of monitoring well network• Minimize clearing of trees throughout investigation and cleanup• Restore and maintain surface water banks in ways that mirror

natural conditions• Implement an idle reduction plan for vehicles• Use gravel roads, porous pavement, and separated pervious

surfaces rather than impermeable materials to maximizeinfiltration

Example Green Remediation BMPs

Brownfield Tax Credits



• Created in Massachusetts in 1998• Goal: Encourage redevelopment of

Brownfields

• Some of the significant requirements: – A Permanent Solution or Remedy OperationStatus (ROS)

– 50% tax credit if no AUL is used to close out the site

– 25% tax credit if an AUL is used to close out the site

Brownfield Tax Credits

New Regs and Tax Credits



• Historic fill sites – Condition without AUL – 50% tax credit

• VI sites – Permanent solution or ROS – AUL – 25% tax Credits

• NAPL sites – Permanent solution now possible – AUL – 25% tax credit

New Regs and Tax Credits

Takeaways



• Soil management will continue to be a costly andsignificant aspect of development• Urban fill is now less regulated by MassDEP, but

it still costs a lot to dispose of

• More projects will require vapor mitigation• The design and installation of vapor mitigationsystems are more complex because ofMassDEP’s requirements

• Think about the underground, early and often, asyou develop programming.

Takeaways

Questions?



Questions?

Ileen Gladstone, P.E., LSPGEI Consultants sultants.com 400 Unicorn Park DriveWoburn, MA [email protected]

Phone: 781-721-4012

http://www.geiconsultants.com





Environmental Business Council of New England

Energy Environment Economy

Perspective from a MajorPetroleum Retailer

Raymond Leather

Vice President of Environmental andRegulatory Affairs

The Cumberland Gulf Group of Companies



The Impact of MCP Regulatory Revisionson Development & Construction

A Petroleum Retailer’s Perspective

Ray Leather, Vice President of Environmental & Regulatory Affairs



G lf S i



Gulf Station

G lf T i l



Gulf Terminals

Ch l T i l



Chelsea Terminal

C b l d F G lf Wh



• 584 Cumberland Farms stores in 8 states• 400 Gulf Owned Stations in 9 states

• 2,800 Gulf licensed stations in 33 states

• 12 Petroleum distribution terminals

• +7,000 employees

Cumberland Farms – Gulf: Who we are

C b l d F G lf Wh



• Headquarters: Framingham, MA• Home grown, family owned business• Charitable contributions: $600,000• We’re part of the fabric in the community • Vested interest with environmental regulations

Cumberland Farms – Gulf: Who we are

UST C li C F ti



PermittingTestingTraining

RegulatoryKnowledge

UST Compliance Core Functions

InspectionsRelease DetectionSpill Response

Financial Assurance

C li & E i t l



Compliance & Environmental

The Environmental team handles spills thatoccur below the surface, installmonitoring wells and remediatethe site, following all Federal, Stateand Local regulations.

The Compliance team keep the stations incompliance with current Federal, State, and Localregulations by performing tank testing and filling outthe proper paperwork. Environmental Compliancehandles surface spills.

C t ti A ti iti



Construction Activities

• 23 major projects in MA• 185,000 tons of soil moved this past yearin MA

150,000 tons recycled35,000 tons landfilled

• Soil Management key to construction

MCP Hot Topics Impacting CFI G lf



MCP Hot Topics Impacting CFI Gulf

• SOIL MANAGEMENT/DISPOSAL

• VAPOR INTRUSION (VI)

• LIGHT NON-AQUEOUS PHASE LIQUID (LNAPL)

• ACTIVITY AND USE LIMITATION (AUL)

• GREEN REMEDIATION

Geotechnical and Soil Management for Site



Development: Soil Categories

“Clean” Soils – No detections and/or below established state

background levels (e.g., metals) . Typically from a “greenfield” site.

“Gap” Soils – Soil contaminated below applicable state remediationstandards for the generating location. Not Clean and not Remediation(not saturated with petroleum; not soil for residential use but possiblycould be re-used at commercial facilities or re-used on site).

“Remediation” Soils – Soils contaminated above stateremediation standards.

Major Construction Projects



Major Construction Projects

• Soil is the driver• Geotechnical investigation

• Soil Pre-Characterization

• Wider net- As, Pb, Cd, Pesticides, &Herbicides, etc.

• Minimize cuts

• Soil Management Plan

Re Use or Dispose?



Re-Use or Dispose?

• On Site Re-Use [Clean Soils-Gap Soils-possiblyRemediation Soils]

• Off Site Re-Use [Clean Soils-Possibly Gap Soils] (noRemediation soils to be re-used offsite)

• Off Site Disposal [Clean-Gap-Remediation Soils]



Vapor Intrusion



Vapor Intrusion

• Engineered Vapor Barriers• Major Construction Projects & Divestments

• Average annual depth to GW < 15’

• Chlorinated compounds in soil and/or GW

• Site specific criteria

• Depth to GW > 15’ modified vapor barrier

Vapor Barriers



Vapor Barriers

LNAPL



LNAPL

• Higher risk tolerance for acquisition withLNAPL

• Facilitates Closure

• LNAPL site achieve PS with AUL

• Facilitates divestment due to certainty

• LNAPL in bedrock and DNAPL guidanceneeded

Chlorinated Compounds



Chlorinated Compounds

• TCE lowered from 30 µg/L to 5 µg/L for GW-2

• Need to revisit sites RAO’ed with TCE

• Sub-Slab Depressurization System?

AUL



AUL

• AUL for LNAPL and AEPMMs for PS

• Simplified paperwork

• Online AULs

• More AULs

• Increased filing fee

Greener Cleanups



Greener Cleanups

• Green remediation evaluation

• Source removal through excavation and T&D?

• Green insitu remediation?

• ASTM Guidance available

• MassDEP end-point needed

Source Removal



Source Removal

Typical Spills



Typical Spills

Hazardous Materials Management



Hazardous Materials Management

• Asbestos Containing Materials (ACM)

• Lead Based Paint (LBP)

• Polychlorinated Biphenyls (PCBs)

• Mercury

• Historic Contaminants

Summary



Summary• MCP Reg Changes – We Applaud MassDEP

• Soil Guidance Needed to Avoid Town by TownApproach

• VI is a Double-Edged SwordA. AEPMM is positive in conceptB. Telemetry will increase costsC. Chlorinated Compounds = Revisit Sites

• LNAPL Reg Changes Employ Better Science



The Future



The Future

“The Only Thing That is Constant Is Change”

Heraclitus

Lending and Environmental Risk





Lending and Environmental RiskManagement

Susan P. Peck, Esq.Environmental Risk Director

Santander Bank, NA



Environmental Business Council NE, Inc.Meeting: November 25, 2014

Presented by: Susan P. Peck, Esq.Santander Bank, NAEnvironmental Risk Director

Lending & EnvironmentalRisk Management

Overview of Presentation107



Santander Bank: Who We Are

Internal Environmental Unit Staff: Why We’re Here

Environmental Regulations/Laws that drive Environmental Due Diligence

Understanding Environmental Risk

Types of Environmental Due Diligence Reports

Approach to Evaluating and Quantifying Environmental Risk

Difference between Lending vs. Work Out/Foreclosure Risk

Will the April 2014 MCP Changes Affect Environmental Due Diligence forFinancial Institutions?

Presentation Summary & Take-Aways



Internal Environmental Unit Staff: Why We’re Here 109



• As an OCC regulated bank, an internal environmental risk unit isrequired. The OCC Comptroller’s Handbook booklet, “Commercial Real

Estate Lending,” provides guidance for bank examiners and bankers oncommercial real estate (CRE) lending activities.

• Other agencies, including but not limited to SBA, FDIC, Fannie Mae, andFreddie Mac, also require environmental due diligence reviews priorto real-estate collateralized lending transactions.

• The level of review is often dependent upon property risk (historicaland current), lending amount, and transaction type .

• The staff evaluates environmental risk as part of deal screens/lendingtransactions to limit potential future Bank losses and environmentalliabilities relative to real estate collateral.

• The staff provides timely and cost effective solutions to environmentalrisk issues.

Regulations that drive Environmental Due Diligencefor Borrowers

110



• OCC’ s Handbook booklet, provides guidance for bank examiners and bankers on commercial realestate (CRE) lending activities

• Comprehensive Environmental Response, Compensation & Liability Act of 1980 (CERCLA)1. CERLCA is commonly know as SUPERFUND2. Established to address abandoned hazardous waste sites and establishes a liability

framework for determining who can be held accountable for release of hazardous substances3. Provides protection for Innocent land owners, contiguous property owner or bonafide

prospective purchaser.4. Required to conduct “All Appropriate Inquiry (AAI)” in compliance with 40 CFR Part 312, prior

to acquiring the property; and, 2) Comply with all continuing obligations after acquiring the

property.• What Is “AAI” ?

AAI is the process of evaluating a property’s conditions and environmental liabilities and isdefined under EPA Final Rule Standards and Practices for All Appropriate Inquiries, effectiveNovember 1, 2006 or the ASTM E1527-13 standard .

AAI must be conducted or updated within one year prior to the date of acquisition of aproperty.

Why Banks conduct Environmental Due DiligenceDespite CERCLA Exemptions

111



• Under CERCLA/Superfund, Banks that take real estate as collateral (mortgages) associated withlending transactions are generally EXEMPT from CERCLA liability, as long as the Bank does not

“participate in management ”. “Participation in Management ” has been defined by the courts asexercising decision making control.

• Despite CERCLA Exemptions, Banks conduct Environmental Due Diligence Review for all CRElending transactions because ….

1. Regulators/Agencies (OCC/SBA/FDIC, etc.) require Review;

2. Contamination may result in decline in real estate collateral market value OR rendercollateral worthless;

3. Contamination may potentially have an adverse impact on collateral marketability due to on-site/off-site issues and associated stigmas;

4. Contamination may result in potential future restrictions on property use via deed restrictions ;

5. If borrower is held responsible for clean up/remediation costs, it may impair borrower’s abilityto repay the loan ; and,

6. Borrower’s operational non-compliance (while not real estate related) may also impairborrower’s ability to repay the loan.

Understanding Environmental Risk112



• Environmental risk is not limited to a single point in time . Must evaluate past andproposed future business operations.

• The physical appearance or attributes of a piece of real estate or a structure built uponthe real estate provides only a limited view of potential environmental issues. Mustunderstand the historical use of a property and the environmental regulatory complianceof present and past occupants, especially as related to off-site waste disposal.

• Environmental risk to a customer is not limited to the value of the specific propertybut can extend to considerable fines, fees and resultant remediation costs to be borneby any owner or operator who causes or contributes to a facility’s environmentalproblem.

• Environmental risk to a lender is not limited to impairment of collateral securing aspecific loan but can extend to amounts far beyond the principal of the underlying loanas outlined above, if the lender has exercised significant control over a borrower’soperations and is deemed to be the owner or operator.

Types of Environmental Due Diligence Reports1 P S E l i A I l B k P d d P d l i l i k d

113



1. Pre-Screen Evaluation: An Internal Bank-Produced Product to evaluate environmental risk anddetermine the appropriate level of environmental due diligence for the transaction.

2. Transaction Screen Report; Developed by the American Standards for Testing Materials (ASTM)

under Practice E1528-06 and includes questionnaire and database search obtained fromcommercial vendor, summarizing federal/state government environmental records.

Questionnaire- completed by Relationship Manager and Borrower/Site Owner during Siteinspection.

Database Search - ordered by the Bank’s Environmental Unit from a pre -qualified vendor.

Alternative Approach: Screen Reports can be ordered from environmental consultant vendors.

3. Phase I: Developed by ASTM under Practice E1527-13, Completed by environmental consultantvendor and includes Site inspection, historic review of property use, review of federal/stategovernmental environmental records. Either the Unit orders/reviews the report or Unit reviewsborrower-provided report.

4. Phase II: Includes completion of soil and groundwater sampling in areas of concern.

5. MCP (or other state) Regulatory Submittals: Includes all investigation/remediation reportscompleted to address open release incidents.

Evaluating and Quantifying Environmental RiskAs Part of a Lending Transaction

114



Myth: Financial Institutions only lend on CLEAN properties!

• Review existing reports (Phase Is, Phase IIs, regulatory submittals (MCPreports) or ordering new reports – don’t always have to start over.

• Identify significant environmental issues and require further investigation

• Quantify environmental liabilities/costs for all areas of concern through SiteAction Plan including details on required environmentalinvestigation/remediation, associated costs, and timeframes for completion.

• Utilize appropriate tools to mitigate environmental risk at closing (i.e.:environmental reserve accounts/undertakings, environmental insurance, andconstruction budget line items/contingencies)

• Ensure loan documents allow for continued monitoring of knownenvironmental issues throughout the term of the loan .

Difference Between Environmental Risk Evaluationsfor Lending Transactions vs. Work Out/Foreclosure

E i l R i f L di T i

115



Environmental Review for Lending Transaction:

• Reasonably evaluate and quantify environmental issues and liabilities through reportreviews.

• Ensure borrower investigates and remediates environmental issues prior to OR withinshort timeframe post-closing

• Establish mitigants to ensure that Bank is protected in event of default and has resourcesto pay for environmental issues (environmental reserve/insurance/budgets)

• Do NOT participate in management or exercise decision-making control overenvironmental investigations/compliance.

Environmental Review for Work Out/Foreclosure Transaction:

• Update Information! Order new environmental reports to ensure no new issues andqualify for AAI protections

• Quantify any new environmental issues through investigation BUT no remediation pre-foreclosure

• Sell It!! After foreclosure, market property for resale/lease “at earliest practicable time,on commercially reasonable terms, taking into account market conditions and legalregulatory requirements.”

Will the April 2014 MCP Changes Affect EnvironmentalDue Diligence Reviews for Financial Institutions?116



• New MCP changes will not significantly impact Bank’s approach toevaluating and quantifying environmental risk

• Bank relies on expertise of qualified environmental consultants to completereports (do not complete internally)

• New MCP changes will require internal staff training to understand new

approach and terminology (no more RAOs, etc.)

• New MCP changes will likely simplify internal Bank review process , asregulations improve requirements for AULs (ensure restrictions transfer withdeed), less “releases” due to historical fill, and broader definition of background

conditions.

Presentation Summary & Take Aways…. 117



Effect of New

MCPRegulatoryChanges

Will not significantly impact Bank due diligence process

May decrease number of release Sites and improve processby ensuring use restrictions transfer with deed, result in less“releases” due to historical fill, and broader definition of backgroundconditions.

What if myproperty isContaminated?

Banks DO lend on impacted properties!

Various tools can be used to mitigate environmental risk atclosing (i.e.: environmental reserve accounts/undertakings,environmental insurance, and construction budget lineitems/contingencies)

Why Banks

RequireEnvironmentalDue Diligence

To Comply with Regulatory RequirementsIdentify and Quantify Environmental LiabilitiesLimit Borrower and Bank Risks



Thank you!

Susan P. Peck, Esq.Santander Bank, NA

Environmental Risk Director

2 Morrissey BoulevardDorchester, MA 02125

(617)757-5632//[email protected]

Networking Break