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What will be the top green stories of 2014?

8 Jan 2014

greatlakesAs this new year kicks off, we thought we’d look ahead at what we think may be the big stories of 2014 at MichiganGreenLaw.com, in no particular order:

Wetlands – Will EPA and the Army Corps of Engineers finalize guidance regarding the scope of waters regulated under the Clean Water Act? Or will there be new rules or even new legislation?  There are members of Congress on  both sides of this issue and it is unclear which way this issue will go, although the federal trend is to try and govern as many bodies of water no matter what. This fall, EPA published a draft connectivity analysis which many view as a prelude to new regulations attempting to vest the federal government with broad jurisdictional over virtually every drop of water in the country. It will be interesting if the federal government tries to delete the “significant” portion of the Rapanos “significant nexus” test.

• Hydraulic Fracturing –  this continues to be a lightning rod for controversy.  At the end of 2013, the Associated Press reported on both alleged and confirmed environmental problems in 4 states including Ohio and Pennsylvania.  Michigan looks to beef up its oversight of, and its communications regarding, fracking proposals and operations.  The University of Michigan continues to study the technical issues.  The focus on this issue seems to be shifting toward the volumes of water used in fracturing and monitoring withdrawals used for oil and gas production. It appears that the 2012 U.S. Department of the Interior draft rules for fracking on federal and Indian lands remain draft – will they ever be finalized?

• MDEQ Brownfield Process Streamlining.  MDEQ has promised to convene a short-term task force to work on harmonizing, improving and streamlining the various funding mechanisms currently used to incentivize brownfield redevelopment. This can only be a plus.

• MDEQ Cleanup Rules – as required by the Legislature, MDEQ proposed adopting its previously informal standards as formal cleanup rules late in 2013.  The MDEQ will continue to work on improving and in some cases broadening its cleanup rules and criteria – we expect more work on the assumptions of exposure underpinning the standards, more work on vapor intrusion standards and more work on standards and processes applicable to groundwater venting into surface waters.  MDEQ also continues to discuss more rules and standards defining what constitutes “due care” which is an issue for property owners who are not liable pursuant to a BEA and for other reasons.

• Keystone Pipeline.  As we predicted, President Obama and Congress continue to be locked in a politically charged dispute over the Keystone XL pipeline, a proposed 1,700-mile oil pipeline from Canada to Texas.  The President deferred it and lately the pundits have argued that pipelines are safer than transporting shale oil by truck and train.

• Energy Policy In Michigan – at the end of the year, and after a year of “listening” sessions and collecting information, Governor Snyder indicated that he intends to seek legislation improving Michigan’s energy policies, focusing on lowering costs, improving reliability and minimizing environmental impacts.  This will be interesting.

EPA issues its new year’s resolution – ASTM 1527-13

31 Dec 2013

epa_logoAs you know, at Halloween, EPA gave us a “trick” by withdrawing its proposed rule adopting the new ASTM all appropriate inquiry standard.  As you may remember, EPA proposed to leave the old, 2005 standard in place and also allow the use of the new 2013 standard.  This caused some confusion and angst and resulted in EPA’s October 31st action.

Well, as we get ready to start 2014,on December 30th, EPA published an announcement that it was immediately adopting the 2013 standard as satisfying the Federal All Appropriate Inquiry “safe harbor” protecting a new owner, tenant or foreclosing lender from Superfund liability.    EPA kept its “two track” approach of recognizing both the 2005 and 2013 standards as acceptable but repeatedly asserted that it encouraged and anticipated that environmental professionals would “embrace the increased level of rigor” of the 2013 standard and that it intended to publish a proposed rule to remove references to the 2005 standard but wasn’t doing that just yet.  Most interestingly, EPA stated that if it determines in the future that the enhanced standards of the 2013 standard are not being widely adopted, EPA may examine the need to explicitly require the actions specified in the 2013 standard.  With threats like that, it seems likely that the 2013 standard will become de rigueur.

Will 2014 be the year that Michigan Brownfields take off?

30 Dec 2013

brownfieldFor the last 20 years, we have seen the innovative and aggressive Michigan brownfield liability and redevelopment laws move redevelopments forward.   While some of these projects have been big, all of them have been what I like to characterize as “low hanging fruit.”   This makes sense because, for all the incentives available, at the end of the day, if you rehab a building that no one wants to occupy, the incentives available won’t make the difference.  While not easy to redevelop, these sites have been redeveloped while other major environmental sites (either very large, very contaminated or in less desireable locations) continued to lay fallow.

So, it is logical that downtown Detroit and areas of Ann Arbor and Grand Rapids and Lansing have seen major brownfield redevelopment pushes and that smaller projects in outer ring suburbs with sound economies have also benefited from the State’s brownfield programs.

But now, we have some major projects that are not “low hanging fruit.”  The Packard Plant is paid for and soon will be owned by a Brazilian developer with big plans. He calls it the “best opportunity in the world” and he sounds serious.  Work on the long-stalled Uniroyal site is reportedly moving forward.  DTE recently sold its Marysville Michigan Plant to a St. Louis developer with experience in Brownfields.  There has been talk for years about Detroit looking at Turin Italy as a model for post-industrial redevelopment and the TV show, Morning Joe recently came to Detroit to tout its urban revival.  I saw this article about the creative redevelopment of a Spanish cement plant, and now I wonder whether we will see this sort of investment and creativity in Detroit and southeast Michigan brownfields which are not the easiest of sites to redevelop.  If so, it will be a very exciting time in Michigan.  Michigan clearly has the supply; now it is time to see if there is sufficient demand.

EPA backpeddles on due diligence – now what?

31 Oct 2013

Tuesday, the EPA announced that it was withdrawing its August proposal to add the soon to be adopted ASTM 2013 due diligence standard to the possible acceptable approaches to meet the All Appropriate Inquiry due diligence standard.

Despite the fact that ASTM has not released the 2013 standard, EPA proposed to include this new “secret” standard as an alternative to the ASTM 2005 standard which it adopted almost exactly 8 years ago today.   One of the primary concerns expressed by the regulated community was, given that EPA was approving both standards, and given the differences between the standards, what should lenders and purchasers do when the standards differed?    Assuming that ASTM still promulgates this standard (which I expect it will), what does this mean?  EPA can certainly revisit this and perhaps dump the 2005 standard for the 2013.  EPA specifically said that it “will address the comments received in any subsequent final action.” Or EPA may let the 2005 standard stand.

Certainly, the introduction of a new standard may raise uncertainty in the field.  While we suspect that EPA’s failure to adopt the 2013 standard gives one “cover” to stick with the 2005 standard, one never knows what the Courts could do.  Certainly, it is worth considering further clarification of what a report means in discussing “Recognized Environmental Conditions (REC)” and “Historical Recognized Environmental Conditions (HREC).”

Further clarity is also advisable regarding past releases where some contamination remains in place but no cleanup is presently required and about what is and is not a  “de minimis” condition.

Certainly, one should consider seeking inclusion in Phase I ESAs information regarding vapor migration including the possiblity of vapor migration from off-site.  One point of contention and expense is likely to be whether one can rely on information obtained from database searches without reviewing agency files.  This practice would increase both the price of a Phase I and the confidence that users, or prospective buyers may place on site assessment results.  Merely relying on a database service has always been something of a tricky proposition in some cases.

Ultimately, if the new standard is viewed as more effective, the lending community will compel its use regardless of what  EPA says will satisfy CERCLA’s all appropriate inquiry standard.

New ASTM due diligence standard – Deadline to comment on EPA approval – Due Diligence Part 4

12 Sep 2013

A bucolic scene or something more ominous and will your Phase I ESA tell the difference?

Monday, September 16, 2013 is the last day to comment to EPA on a proposed new standard for environmental due diligence – ASTM E1527-13.  EPA has said that it will not require anyone to use the 2013 ASTM standard and that consultants may continue to use the current standard, ASTM E1527-05.

The challenge of the moment is that ASTM has not released the 2013 standard to the public and so only the EPA and the ASTM committee working on it know precisely what’s in it.  EPA has prepared a summary of the changes, found here.  Of particular note are the following changes (which is not a comprehensive list):

1. An updated definition of “Recognized Environmental Condition (REC)” aligning it with CERCLA’s direction to identify “conditions indicative of releases and threatened releases of hazardous substances on, at, in, or to the subject property.”

2. An updated definition of “Historical Recognized Environmental Condition (HREC)” tying it to past releases that have been somehow addressed to allow unrestricted residential use. A new term “Controlled Recognized Environmental Condition” includes past releases where some contamination remains in place but no cleanup is presently required.  Further, ASTM clarified that a CREC should not be called a  “de minimis” condition. As to the terms, I care less about what the consultant calls things than in understanding why they were or were not included in the report.

3. ASTM included vapor migration as a migratory concern to be identified in a Phase I. This continues to grow in prominence as an issue to be wary of.

4. ASTM revised the scope of the “User Responsibilities” section to clarify the aspects of a site assessment investigation that may be the responsibility of the report’s user (often the proposed purchaser), and not necessarily the responsibility of the environmental professional. This reflects my point about reading the whole report and not just the conclusions.

5. ASTM provided a standardized framework to verify information obtained from key databases.  Agency file reviews are expected to increase Phase I prices but also confidence that users, or prospective buyers can place on site assessment results.  This is something that I’ve been asking consultants to do for years. Merely relying on a database service has always been something of a tricky proposition.

Ultimately, if the new standard is more effective, the lending community will compel its use and while EPA says that either method is acceptable to satisfy CERCLA’s all appropriate inquiry standard, economic efficiencies (think Betamax and VHS) will lead to one method surviving.

Due Diligence – Part 3 – what does a Phase I do, anyway?

3 Sep 2013

“Trust me, it’s a clean phase I”

When a client tells me “we have a clean Phase I,” that’s often when I start asking questions.  A Phase I  Environmental Site Assessment (ESA) is supposed to give a buyer or lender a reasonable picture of potential “residual” environmental conditions of a property.  First of all, a Phase I ESA isn’t an in-depth scientific study. Instead it calls for broad-based research known as “all appropriate inquiry” into past and current usages of the property.

A “clean” Phase I ESA does not free you from worrying about compliance with a myriad of environmental laws

As noted in Part 2, the investigation is to be conducted by a qualified environmental professional who will:

  • Visually inspect the property and buildings, along with a cursory look at adjacent properties.
  • Interview current and/or former property owners and tenants.
  • Review historical sources such as directories, maps or public documents.
  • Review official records at the local, regional, state, federal or tribal level.
  • Specifically consider any gaps in information available about the property.

The goal of the Phase I ESA is to confirm the existence of a “recognized environmental condition” or REC which means that there may or may not be an environmental problem on, in or under the site.  A “clean” phase I means that no RECs were identified and, often, the environmental due diligence stops there. While these reports may satisfy CERCLA’s requirement that one conduct “all appropriate inquiry,” they don’t necessarily completely shield property owners from liability.

A Phase I ESA does not look at:

  • Lead in drinking water;
  • Lead based paint;
  • Asbestos;
  • Radon;
  • Mold;
  • Wetlands;
  • Archaelogical concerns;
  • General site conditions and the need for repairs;
  • Developability; and
  • Operational compliance for a going concern.

These issues can be included in a Phase I ESA but will not necessarily be unless you specifically ask.

A “clean” Phase I ESA does not mean that you are free not to worry about compliance with a myriad of environmental laws.  For example, there might be obligations to comply with the Resource Conservation Recovery Act (RCRA) which deals with hazardous waste generation, treatment, storage and disposal.

A “not-clean” Phase I ESA does not mean that you have a contaminated site – it is merely the “jumping off” point for a further Phase II ESA (watch for part 4 of this series) that will hopefully determine if there is or is not contamination on, in or under the property and whether it will be a problem for your planned use of it.

Ultimately, when the Phase I ESA comes back, you need to be sure that it is read and understood so that you can take the appropriate action to protect yourself, your business and your tenants and/or employees.

Due Dilligence Part 2 – Picking the Consultant

24 Jul 2013

You’re not exactly what we’re looking for but….

In my prior post, I discussed the need for proper due diligence.  Today, I will explain how to pick the “environmental professional” who will conduct most of that work.

The federal All Appropriate Inquiry (AAI) Rule describes an “environmental professional” appropriate to conduct the inquiry as “someone who possesses sufficient specific education, training, and experience necessary to exercise professional judgment to develop opinions and conclusions regarding conditions indicative of releases or threatened releases of hazardous substances on, at, in, or to a property, sufficient to meet the objectives and performance factors of the rule.”

Once you’re sure that your environmental professional (for brevity’s sake, I’m going to use the term “consultant”) meets the minimums (listed below), you need to be sure that they will apply your risk tolerance – and understand your goals.  The importance of this step should not be underestimated.  As with any service professional, you need to be comfortable that the consultant will give you the service you expect.

Typically the consultant should be retained by your attorney for at least two reasons: (1) to try and shield the results as privileged; and (2) to ensure that you are properly protected in case the consultant errs.  This last point bears repeating – do not sign anything authorizing the consultant to proceed without consulting an attorney. 

Many consultants’ form contract limit the consultant’s liability in ways which render you effectively at your own risk.  If you sign without the assistance of counsel, you’ve given up all leverage to get favorable terms from the consultant.  These contracts are negotiable and, depending on market forces and your urgency, you may not get the best deal possible, but your lawyer should help prevent you from being at the mercy of a form drafted entirely in the consultant’s favor.

As I often say to consultants, “if you went to a surgeon and they asked you to agree before surgery that you could not sue them no matter how negligent they are, would you go through with it?”  Your attorney should also check to see that the consultant is properly insured.

The Minimums – be sure to ask if your consultant meets these standards. If they don’t – look elsewhere.  The AAI Rule states that the consultant must have:

• A state or tribal issued certification or license (typically a Professional Engineer’s (P.E.) or Professional Geologist’s (P.G.) License) and 3 years of relevant full-time work experience; or

• A Baccalaureate degree or higher in science or engineering and 5 years of relevant full-time work experience; or

• 10 years of relevant full-time work experience.

State- or tribal-licensed or certified individuals also must have the equivalent of 3 years full-time relevant experience to qualify.  Individuals who do not hold a license or certificate may still qualify through educational and experience requirements.