Originally published in Directions Magazine; October 1995

Environmental Liability? -- Not In My Backyard!

by Paul E.R. Packbier

Businesses received an expensive environmental wake-up call in the 1980’s. Newspapers and technical journals were filled with horror stories about companies and individuals who unknowingly purchased contaminated property. Lending institutions and business investors found out that in their eagerness to close a seemingly good real estate deal, they had become owners and victims of previous owners’ hazardous waste activities. Under new environmental laws passed towards the end of this decade, land owner liabilities and responsibilities became more defined and the concept of joint and several liability was introduced. This concept suggests that the seller of a property may not be relieved of potential environmental liability, even if the land was sold innocently, not knowing that it was contaminated with hazardous waste; even if the practices that contaminated the property were legal at the time; and even if the contaminated land is sold "as is" with full indemnification of the buyer.

On Guam we have seen evidence and implications of contaminated properties and the costs associated with remediating them. Development of what is now known as the K-Mart site was delayed for years due to contamination of the property by previous operations. Earlier this year, the Southern High School construction project became the main topic in the local news media, and even prompted legislative oversight hearings after civil work uncovered past waste disposal practices. Returning Federal lands to GovGuam has been delayed due to the extensive environmental baseline investigations that need to be performed in order to protect both parties in these transactions.

What does all this mean, and how can individuals or businesses protect themselves from being exposed to environmental liabilities that could literally run into the millions of dollars in clean-up costs? The gist of the matter is that the identification of contamination on a property obliges the property owner to take action to remedy the situation. Although local regulatory enforcement may be lacking, ignoring environmental contamination may expose a property owner to criminal charges under Federal and local laws. In addition, trying to identify liable parties and ordering them to take responsibility for clean-up of a contaminated site can take years in legal battles while the subject property remains useless and can not be sold.

One essential tool that should be used by prospective buyers is a hazardous waste site investigation. This type of assessment is more often than not a requirement for lending institutions following FDIC requirements, and trying to protect themselves as joint owners of a commercial property. Ideally, a site assessment is performed before executing a purchase agreement. In lieu of it, the purchase agreement itself should provide for the site assessment. The assessment should be something more than a typical field investigation and brief report for a couple of dollars. A proper site assessment should be conducted by, or under the supervision of, a professional with the qualifications to render the factual and scientific judgments in the assessment report. Correctly done, the site assessment involves the following:

Physical Survey. The physical survey should include the geologic setting of the property, topography, surface and ground-water flows, building and utility layouts, and the condition of all structures above and below the ground surface, including underground storage tanks. The survey needs to identify suspicious site characteristics such as soil discolorations, odors, liquid breakouts, and extensive filling or re-grading of the land. If warranted due to site conditions encountered, the site assessment report may recommend more intrusive actions such as investigations for buried drums or objects, and ground-water sampling and testing for contamination.

Historical Land Use and Ownership Survey. The history of the property should be evaluated to document industrial, commercial, and waste disposal activities. Identification of former and current owners and tenants, if possible, should be included to investigate prior land uses. Wastes that may be on the site should be anticipated due to the nature of the businesses occupying the property in the past.

Regulatory Agency Record Review. A review of the permit and the enforcement history of the property is needed to determine which former or present uses of the property were properly licensed or permitted by federal or local agencies. Enforcement records and lists are used to determine past releases of hazardous substances, either on or adjacent to the property, hazardous and solid waste management activities, pesticide use permits, underground storage tank releases, and industrial wastewater discharges from the property.

Identification of Other Contaminants. The assessment should include air and water pollution and the impact on downstream receptors, possible polychlorinated biphenyl (PCB) containing equipment on a property, and the presence of asbestos containing materials disposed of at the property.

The above described hazardous waste site investigation protocol has two distinct purposes: First, it is intended to identify potential liabilities associated with past uses of a property, and aid in determining if a subject site poses any environmental liabilities that a buyer might find unacceptable. Second, the site assessment report can be used as a "due diligence" document in establishing an innocent landowner defense in case environmental impairment is detected on the property in the future. The usefulness of the final document will be dependent on the reliability of information gathered, any constraints on the site assessment, and the preparer’s prior personal knowledge of the site.