changes in the environmental industry you need to … · u.s. small business administration...
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Changes in the Environmental Industry You Need to Know Broadmoor Hall E 1:45 pm – 2:45 pm
Stephen Reynolds
Chief, Environmental Department
Sacramento Loan Processing Center
U.S. Small Business Administration
Environmental
and
Energy
ASTM E1527-13 Standard
• Updated the definition of Recognized Environmental Condition (REC).
To identify conditions indicative of releases and threatened releases of hazardous substances on, at, in, or to the property.
• Updated the definition of Historical Recognized Environmental Condition (HREC).
Limited to include only past releases that have been addressed to unrestricted residential use.
• Added the definition of Controlled Recognized Environmental Condition (CREC).
The regulatory agency allows contaminants to remain in place under certain restrictions or conditions.
Recent Environmental Changes
ASTM E1527-13 Standard
• Added clarification to the definition of de minimis condition. A Phase 1 Environmental Site Assessment will provide information on past corrective actions conducted
and contamination left in place.
• Revised the definition of migrate/migration to include vapor migration.
A Phase 1 Environmental Site Assessment will provide information on releases that migrate onto the
property via a vapor pathway.
Recent Environmental Changes
Submitting Environmental Investigations to Sacramento Loan Processing Center (SLPC)
• Ensure all appendices and attachments to the environmental site assessment are submitted.
• Ensure all environmental documents are submitted as document type:
EX-16 when using the E504 system.
• Ensure all energy reports and the resubmissions are submitted as document type: Energy Documents when using the E504 system.
Tips to reduce environmental screen outs
Tips to reduce environmental screen outs
CDC Checklist for Submitting Environmental Investigation
• Ensure the CDC Checklist is included for all environmental document submittals.
• The CDC must provide comments and sign the CDC Checklist.
• Provide the SBA loan number or the control number on the CDC Checklist.
Tips to reduce environmental screen outs
CDC Checklist for Submitting Environmental Investigation (cont.)
• If a 504 loan is approved after pre-application, include the control number and/or
SBA loan number so the documents can be associated with the pre-application
file.
• If the loan is for more than one property, a CDC Checklist for Submitting Environmental Investigation must be submitted for each property.
• If a property is the subject of more than one SBA 504 loan, submit a copy of any previous SBA environmental approvals so that SBA can cross-reference the submittals.
Tips to reduce environmental screen outs
Address Changes
• If the addresses on the CDC Checklist, the environmental documents, and the
loan authorization don’t match, please provide an explanation.
• Submit a 327 form for an address change prior to submitting the environmental documents.
• Please provide a copy of the approved 327 form with the environmental submittal.
Tips to reduce environmental screen outs
Resubmissions
• For resubmissions, send in only the requested environmental documents – not all
previously submitted documents.
• Follow the instructions provided in the environmental response from SBA
submittals.
Tips to reduce environmental screen outs
Environmental Questionnaire
• State the past and current use of the property and the adjoining properties in an
Environmental Questionnaire (EQ).
• If the owner is unable or unwilling to sign the EQ and the property is not in an
environmentally sensitive industry , then a Transaction Screen Analysis is the
minimum requirement for submission.
• If a property is a daycare center, child care center, nursery school or a residential care facility occupied by children, state the construction date of the building. If the date of construction is prior to 1980, a lead risk assessment (for lead based paint) and testing for lead in drinking water is required.
Tips to reduce environmental screen outs
Reliance Letters
• Any Transaction Screen Analysis, Phase I Environmental Site Assessment or
Phase II Environmental Site Assessment must be accompanied by the SBA Reliance
Letter and Certificate of Professional Liability Insurance.
• Ensure the SBA Reliance Letter is not altered or modified with one exception:
The SBA Reliance Letter may be adjusted to reflect ASTM E1527-13 if that is the
standard applied by the environmental professional.
Tips to reduce environmental screen outs
Reliance Letters (cont.)
• Ensure the coverage period in the Certificate of Professional Liability Insurance
includes the date of the environmental assessment.
• Ensure that the SBA Reliance Letter is addressed to the CDC and the SBA.
Note: The SBA Reliance Letter does not need to be addressed to the third party lender.
• Ensure the SBA Reliance Letter is signed by the environmental professional and a
representative of the firm. If an environmental professional is a sole practitioner,
it should be noted in the signature line.
Tips to reduce environmental screen outs
Contamination
• If requesting approval of funds with known contamination, on-going remediation, monitoring, or CRECS on the property, then ensure all information is submitted in accordance with SBA SOP 50-10(5) (F), Subsection G (Approval and Disbursement of Loans When There is Contamination or Remediation).
Environmental Professional Recommendations
• If the environmental professional concludes that no further investigation is warranted, but the Phase I Assessment reveals “contamination” at the property, a response to Subsection G factors is required
Tips to reduce environmental screen outs
Environmental Professional Recommendations (cont.)
• If the RSRA indicates an “elevated” or a “high risk,” the next step is to conduct a Phase I Environmental Site Assessment prior to conducting any necessary Phase II Environmental Site Assessments.
• Recommendations by the environmental professional should be completed before
submission to the SBA.
Gas Station Loans
• In addition to a Phase I Environmental Site Assessment, gas station loans must include a determination by the environmental professional stating whether or not the gas station is in compliance with all state requirements, if any, pertaining to tank and equipment testing.
Tips to reduce environmental screen outs
Gas Station Loans (cont.)
• For contaminated gas stations, at a minimum, the SBA Indemnification Agreement
must always be obtained and signed by the seller.
• A Phase I Environmental Site Assessment should always be obtained if the business sells, supplies, or dispenses fuel, gasoline, or heating oil, even if the NAICS code for the business is not identified on the list of environmentally sensitive industries.
Tips to reduce environmental screen outs
Concentrated Animal Feeding Operations (CAFO)
If a property is a CAFO, please include the following with your environmental submission:
• A copy of the Comprehensive Nutrient Management Plan (CNMP).
• A copy of the CAFO permit.
• A statement from the borrower setting forth how the animal waste and deceased animals will be disposed.
• A copy of the NPDES Permit (if treated waste is discharged into a water source).
• A copy of the Land Based Discharge Permit (if the waste will be disposed of on land).
Environmental Appeals
• All requests for an exception to the SBA’s environmental policy must be sent to the SBA Environmental Committee at [email protected].
• Attach any SBA Environmental Appeals Committee decisions with the environmental submissions and resubmissions.
Tips to reduce energy report screen outs
Energy Reports
• All energy reports submitted to meet the Energy Public Policy Goals are currently being reviewed by SBA environmental engineers. Energy goals include: a) reduction of existing energy use, b) use of sustainable designs, and c) use of renewable energy sources.
• The energy report must include the qualifications of the party performing the energy audit, engineering report, or other professional evaluation, each of which must be performed by an independent third party (an entity other than the applicant, the interim lender, the third party lender or any of their respective affiliates).
Tips to reduce energy report screen outs
Energy Reduction Goal – $5.5 million eligibility
• The energy report must demonstrate 10% energy reduction. If the project involves the construction or acquisition of a facility (the “new facility”), the new facility must replace an existing facility and the new facility must use 10% less energy than the existing facility.
• If the project involves the retrofit of an applicant’s existing facility, the retrofit must reduce energy consumption of that facility by at least 10%, regardless of the energy usage of any other facilities that the applicant may operate.
• The new facility must be located in the same local area (e.g. the same city, town, county, zip code, metropolitan statistical area or as otherwise deemed appropriate by SBA).
Tips to reduce energy report screen outs
Sustainable Design Policy Goal - $5.0 million eligibility
Per SBA SOP 50 10 5(F), “sustainable building design” has the meanings given those terms under the Leadership in Energy and Environmental Design (LEED) standards for green building certifications. An energy report by an independent third party is required that demonstrates use of “sustainable building design”.
Tips to reduce energy report screen outs
Renewable Energy Policy Goal - $5.5 million eligibility
• The energy report must demonstrate that renewable energy sources generates more than a de minimus amount (SBA interprets “more than a de minimus amount” to mean at least 10%) of the energy used by the applicant at the project facility.
• All improvements or equipment required to generate the renewable energy or renewable fuels must be included in the 504 project costs.
• Energy reports prepared by the vendor who will supply the renewable energy system are not acceptable; a report from an independent consultant is needed.
Please send all environmental and energy related questions, concerns or issues to us at:
Stephen Reynolds
Chief, Environmental Department
Sacramento Loan Processing Center
U.S. Small Business Administration
Environmental Due Diligence Levels
• New Phase I Changes (ASTM 1527-13) – CREC
– File Reviews
– Vapor
• New Transaction Screen Standard (ASTM 1528-14) – No pertinent changes
• RSRA – No pertinent changes
Environmental Best Practices
• Have as much control of the process as possible
• Train your lending partners
• Make the submission “look” good
– Make it easy for the reviewer to review the information
• Make sure things are correct prior to submitting
– Correct any mistakes prior to submitting
– Stay off the “radar screen”
Environmental “Specials”
• Day Care Facilities
– Lead Paint Assessment
– Lead in the Drinking Water assessment
• Gas Stations
• State Programs (CT/MA/NJ/MI)
• Green Building/Energy Efficiency issues
Closing Thoughts
• Don’t go it alone if you don’t have to
• Help the SBA say “yes” whenever possible
• Environmental is the “tail” on the dog…don’t give it more attention than it needs by waiting until the end… – #17 of 24 items on the CDC Checklist…
• SBA vs. Traditional Lending Hurdles
• Work with Experts
• Use the appeals process…wisely.
Examples
• Good results…
• “Not so good” results…
Questions??
Derek Ezovski
Outsourced Risk Management Solutions
877.407.ORMS
860.838.5388
What’s Up Next
• General Session II: SMART and Trends in CDC Oversight – Broadmoor Halls AB – 3:00 pm – 4:15 pm
• Regional Caucuses – 4:15 pm – 4:45 pm – Regions I, II, & III – Broadmoor Hall AB – Regions VI & V – Broadmoor Hall C – Regions VI & VII – Broadmoor Hall D – Regions VIII & IX – Broadmoor Hall E – Region X – Broadmoor Hall F