32A — April 27 - May 10, 2012 — Spring Preview — Mid Atlantic Real Estate Journal
www.marejournal.com
R emediation
By Donald W. Richardson, CPG and Paul J. Lesti, RSP, CSSC Reducing scope & cost of site cleanup and safely leaving a legacy of low levels of contamination
I
mplementing institutional and engineering controls is a proven means to perform
risks that arise for long-term post remediation care obliga- tions after cleanup completion. These obligations may have a significant long-term cost and liability implications. State and federal regulators across the country are developing new policy, generating more ways to collect fees and deploying new technology to monitor post remediation care compliance. While this trend supports the regulators’ goal to enhance pro- tection of human health and the environment associated with these site controls, the burden and risks to maintain compli- ance rest with the responsible
(or remediating) party. Recent regulatory reform by the New Jersey Department of Environ- mental Protection (NJDEP) is an example of these trends. EWMA has a solution to meet- ing these risks by managing both cost and liability risks. To increase compliance with post remediation care require- ments, the NJDEP recently developed a remediation action permit (RAP) program for both soil and groundwater institu- tional and engineering con- trols. The new RAP program’s framework is similar to the existing biennial certification program for institutional and
engineering controls, with some exceptions. One key difference is a new financial assurance requirement for implementing engineering controls. Finan- cial assurance obligations are tied to the cost to monitor, and maintain and inspect the engineering controls. Typical engineering control costs can range from $10s to $100s of thousands over the life of the control (up to 30 years). Reme- diation trust agreements, bank letters of credit guarantees, and environmental insurance are listed as the only NJDEP acceptable means to post finan- cial assurance for engineering
controls. Self guarantees are not allowed as a financial as- surance mechanism. EWMA’s new guaranteed cost and liability assumption approach is designed to meet the post remediation care needs of responsible parties, espe- cially under the new permit program in New Jersey, and is applicable nationwide. These needs involve liability, techni- cal and financial assurance obligations. The approach in- tegrates environmental in- surance and environmental structured settlements into a guaranteed fixed-price contract. An environmental structured settlement uses a guaranteed annuity funding agreement mechanism to match for all the known monitoring and maintenance costs. Combined with an and a environmental site liability insurance policy is used to this cost effectively manages liability and risks. is a cost effective means The Environmental Struc- tured Settlement also provides unique legal and financial assurances through guaran- tees and the way the fund- ing agreement is owned. The funding agreement is issued by a large U.S. life insurance company and the owner is guaranteed by this same large financial institution. The fund- ing agreement is owned so that the future payments will still be paid even if the property owner, the remediating party, the tenant, the developer, or the cleanup company enters bank- ruptcy. Stakeholders may also recapture some of the funding agreement’s future payments if the cleanup is performed sooner or at a lower than expected cost. This program is also de- signed to help innocent pur- chasers of contaminated prop- erty maintain defense from state and federal liability. States like New Jersey are casting a wide net of liabil- ity on all parties associated with a real estate transac- tion involving long-term site controls. More clarity is now available for federal defenses to liability. The new ASTM Standard Guide for identify- ing and complying with con- tinuing obligations (E2790-11) was released in June 2011 to develop a consistent voluntary approach to maintain institu- tional and engineering con- trols for continuous liability continued on page 34A
cost effective r i s k - b a s e d cleanups. By using these e n v i r o n - mental site controls the responsible (or remedi- ating party)
Donald Richardson
benefits by reducing the scope (and cost) of site cleanup and safely leaving a legacy of low levels of contamination that is consistent with future site use. The trade-off, however, is
Timely Response. Time-proven Solutions.
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