Author: Tim Andrews, PG – Senior Project Manager
Redevelopment of a previously developed property or a Brownfields site requires a lot of planning and investment. It’s easy to focus on tangible considerations, such as the planning for the redevelopment, construction permitting requirements, and the cost for construction. But what about the less obvious considerations that can pose a significant environmental risk to you, as the future owner of the property, and to your investment? A good redevelopment plan includes completion of appropriate due diligence up front to assure the less obvious environmental risks and concerns are identified and included in the big picture for the developer and all stakeholders.
UNDERSTANDING THE RISKS
Good due diligence starts with an American Society for Testing Materials (ASTM)-compliant Phase I Environmental Site Assessment (ESA); however, this Phase I ESA may be only one piece of a larger story when it comes to understanding liabilities related to environmental issues. To best position your redevelopment plans for success, it’s important to understand what kind of risks you face up front, as a prospective purchaser or developer. The majority of environmental due diligence considerations typically include three basic areas of risk:
- Environmental/Regulatory Risk
- Financial Risk
- Human Health Risk
While there are other areas of risk or concern, as determined by the type of site and project, your environmental due diligence should take these three risk categories into consideration. Let’s run through a brief explanation of these three risk categories and how proper due diligence can identify them.
Environmental and Regulatory Risk
When acquiring any property or considering a redevelopment, there’s always the possibility of buying the responsibility for any environmental impacts or regulatory compliance issues with it. A thorough Phase I ESA completed in accordance with the ASTM standards provides a defensible means of gathering available information to identify potential environmental regulatory risks that come with the property you’re considering purchasing. Environmental risks consider the existence or likely existence of environmental conditions that can result in a liability and regulatory responsibility for the property owner, regardless of whether the owner caused the conditions. For this reason, it is important to identify and document environmental risks prior to purchase of a property to avoid future regulatory liability and possible enforcement actions.
The cost considerations for a purchase and redevelopment should also include evaluation of costs driven by environmental conditions as part of due diligence. A Phase I ESA can identify some areas of concern, but not all of them, and it does not provide information about financial implications. For example, the presence of urban fill materials at a developed site containing low levels of contaminants may be regulatorily acceptable under certain conditions, but may still require management during construction. Impacted soils in an area proposed for future redevelopment may need to be removed from the property and disposed at a licensed facility due to the presence of contaminants. Depending on the contaminants, the volume of soil, and analytical/laboratory requirements, the costs involved could be a significant challenge if not considered in advance. Similarly, consideration for hazardous compounds (asbestos, lead-based paint, and PCB-containing materials) used in building materials are excluded from a standard Phase I ESA scope; however, these represent a potentially significant remedial cost when renovation or demolition is part of the redevelopment plan.
Human Health Risk
Risk to human health and the environment is the basis for the environmental regulatory drivers inherent with a given property; however, health risks that may apply to a specific property or condition can vary depending on the contamination present, the redevelopment planned, and the human population anticipated. For example, an apple orchard where pesticides have been legally applied may be completely compliant and may not be regulated as an environmental condition by state regulators; however, if the property is redeveloped for residential housing with yard space where children are present, the makeup of the population and the frequency of use of areas potentially impacted by pesticides changes from the original use. While this may not result in a regulatory risk depending on applicability to state regulations, this can still present a potential health risk to human receptors not previously considered.
IDENTIFYING AND MITIGATING THE RISKS
The three areas of risk outlined above frequently overlap with each other. The path to mitigation begins with properly identifying the risks and planning ahead. No project or site is the same, but in general, following are some of the steps you should consider:
- Partner with an environmental consultant conversant in state and federal environmental regulatory frameworks as part of your team and communicate your plans for redevelopment and investment with them. Sharing your plans can assist a professional in adequately communicating the findings, risks, and paths to mitigation so you can make informed decisions in planning your redevelopment. For improved efficiency, identify a multidisciplinary firm that can provide both environmental and engineering/civil site design services.
- Have an understanding of the potential support or anticipated push-back from the local community. Have the town/city administrators been through a similar development scenario or is this brand new to them? If new, that will require some time and energy to communicate and build trust with the community.
- Know your risk tolerance. Are you looking for a risk-free property or are you willing to purchase a property with ongoing regulatory obligations for the right price, with a potential beneficial return on your investment? Your consultant can assist you in weighing the options available, but ultimately, it’s up to you to define what kind of risk is acceptable.
- Have a Phase I ESA completed in accordance with the ASTM Standard (the current standard is E1527-13, but is expected to be revised later in 2021). A compliant Phase I ESA provides a baseline of environmental conditions for the property and provides some liability protections to a prospective purchaser.
- Work with your consultant to have a Phase II ESA designed to address findings of the Phase I ESA, with your redevelopment plans in mind. This could mean expanding an area of subsurface investigation to quantify impacted soil volumes for soil management, conducting a soil gas survey if vapor intrusion is a concern for your redevelopment, or conducting a hazardous building materials survey to plan for demolition/renovation of existing buildings. Phase II ESA costs can vary depending on the investigations needed, the contaminants involved, and the types of subcontractors required. It’s tempting to try to cut costs by reducing scope; however, cutting scope can lead to missing critical data that can come back to haunt you in the future.
- Your redevelopment plan needs to address any risk of exposure to future inhabitants of the property if environmental hazards do exist. This may mean the need for engineered controls to manage contaminated media, operations and maintenance plans, routine sampling of groundwater or indoor air, and state regulatory permits and approvals. Your plans for redevelopment should include considerations for these needs and how they can impact your planned use, your construction schedule, and your overall cost of the project.
- Weigh the costs associated with identified environmental impacts in comparison with the sale price of the property to assure issues that hinder development are fairly accounted for in the final value agreed upon with the seller.
Mitigating risks related to environmental concerns for your redevelopment project can be challenging and intimidating, but with the right team in place and a proactive approach to your planning, redeveloping an environmentally impacted site can be a beneficial investment that comes with positive impacts to local communities.