We help prospective purchasers identify potential environmental liabilities.
“Environmental Due Diligence – Risk management and liability protection that just might make the difference between economic success and disaster.” Allan Blanchard, Regional VP, Ambipar Response
Why is Environmental Due Diligence So Important?
Purchasing a Property
In 1980, congress passed the Comprehensive Environmental Response, Compensation, and Liability Act—otherwise known as CERCLA or Superfund. Under CERCLA, liability for hazardous materials and pollutants is imposed regardless of fault, and can be imposed retroactively. The liability is also joint and several, meaning that liability for contaminants can be imposed regardless of relative contribution, including merely by purchasing a property.
Historical uses of a property where hazardous material spills or on-site disposal of hazardous waste (even if legal at the time) may become the responsibility of the unwary buyer. Liability may even extend to contamination that originated offsite!
Where hazardous and toxic chemicals have ended up in the soil and groundwater, the resulting contamination has the potential to compromise drinking water, impact indoor air quality, and spread to adjacent properties. The costs of a single cleanup can be significant, averaging between $200,000 and $2,000,000 and sometimes far exceeding that figure.
Acquiring a Business
Businesses must be in compliance with a wide range of environmental health and safety regulations including the Clean Air Act (CAA), Clean Water Act (CWA), and Resource Conservation and Recovery Act (RCRA) and many other State and Federal laws. Many, many different types of businesses, that you would not think would be subject to environmental regulations (example food manufacturers), are potentially out of compliance and subject to enforcement. Lawsuits, fines and government induced shut downs have negatively impacted companies all because someone did not do their homework.
What is Environmental Due Diligence?
Purchasing a Property
n 2002, Congress passed the “Small Business Liability Relief and Brownfields Revitalization Act” (Brownfields Amendments). The Amendments added specific criteria for conducting All Appropriate Inquiry (AAI) which later became known as the AAI rule. The AAI Rule provides an escape from liability called the “innocent landowner defense,” but this defense can only be used to escape liability if “appropriate due diligence” was conducted prior to the acquisition of the property.
The Brownfields Amendments to CERCLA allows that “appropriate due diligence” has been exercised only if a thorough investigation of the site’s current and former uses has been prepared. This investigation is the Phase I Environmental Site Assessment.
Acquiring a Business
Environmental due diligence for business acquisition should include the Phase I Environmental Site Assessment plus a comprehensive Environmental Audit of current and past manufacturing processes.
The Environmental Audit should include:
- Identification of hazardous materials
- Hazardous waste generation, handling, storage, transportation and disposal
- Environmental permitting
- Environmental control technologies
- Compliance reporting
- Review of compliance history
- Industry specific environmental health and safety requirements
Risk Mitigation
The stakes are high when dealing with EPA regulations. Proceed with an acquisition without proper environmental due diligence and you could potentially be liable for the cost of achieving environmental compliance and rectifying past mistakes. Understanding EPA regulations and all of their back references and guidance documents is a full-time job.