Should business' environmental due diligence ever be "public"?

7 Apr 2010

When one business investigates another during the purchasing process, should the government get an inside look at the results?  At present, under federal law, when one conducts a due diligence inquiry on a parcel of property, that inquiry is private between the persons conducting it and possibly a lender or an interested buyer or seller.  In Michigan, environmental due diligence doesn’t become publicly available until a buyer, occupant or foreclosing lender submits a BEA (baseline environmental assessment) to the MDNRE to obtain liability protection.

However, both the EPA and MDNRE are making noises about insisting that due diligence and other knowledge be made available to the government.

The EPA is talking about requiring even Phase I Environmental Site Assessments (which generally don’t really determine anything other than the possibility of environmental concerns) reported to state and federal authorities. At the same time, MDNRE is talking about (as part of a larger package of changes), forcing property owners who know about environmental problems to disclose them and buyers of property to report environmental issues before a transaction is even consummated (if it ever is).

In their haste to draft private persons into governmental service under an argument that the “public has a right to know,” these government agencies are forgetting that these are private persons conducting private investigations relating to a private transaction. It’s one thing to require confirmed data of a contamination to be reported (as it is now in Michigan to establish the status quo) in exchange for liability protection or for brownfield incentives, it’s quite another to require someone in the process of due diligence to have to report incomplete information that may result in killing a deal and stirring up controversy when final information might support an orderly approach.  Also, ultimately, one has to question why the government believes that it is entitled to this information which smacks of a violation of multiple constitutional rights against self-incrimination.

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