I will start with the example that Mattfox used, but I will ignore any of the liability associated with off-site migration.  In this case, I see BER associated with contaminated soil or groundwater generated during future construction.  This is common when contamination is left in place under a risk-based closure or environmental land use restriction (ELUR). 

Soil contaminated with petroleum or PCBs may not be considered a risk if left under a building or parking lot, and regulatory closure would define this as a de minimis condition.  But if that same soil is excavated during construction, that same regulator may require that the soil be managed as a regulated waste.  Soil with PCBs (TSCA remediation waste) can be especially expensive to transport and dispose of, and oversight costs may include higher rates for “hazardous conditions” and personal protective equipment.

Impacts to groundwater may also be allowed to remain in place or naturally attenuate if the groundwater is not used.  However, building construction may require pumping of groundwater during excavation for the foundation.  Contaminated water must be contained and treated or hauled away for treatment, which can also be expensive and time consuming.

If a contractor is not made aware of the regulatory status of any soil or groundwater, they may discharge contaminated water or haul impacted soil off-site.  Other examples of BER would be the fines from the regulator for discharge of contaminated water, the cost to recover and dispose of the soil that may have been given away as clean fill, and unscheduled delays to construction.

BER in its nature is different on every transaction and of course depends on exactly what your client is acquiring. On that basis, to adequately evaluate business risk, you need a solid understanding of the transaction, and what the client (and its associated interested parties) may be interested in. I have touched on this in other posts, but what may appear to be a solid REC, my not even appear on the deal radar as a BER. For example, a REC may have a maximum (likely worst case) $ liability of say US$2MM. On a single-site deal, involving a transfer of the real estate, that may be a significant issue with material BER attached. However, on a larger deal involving the transfer of real estate on multiple sites (and assuming that is the only issue), that US$2MM (and other associated liability, such as potential 3^rd party and tort) may not represent a significant risk when considered in the aggregate with the portfolio as a whole.

Similarly, BER can be mitigated in other ways, contractually and otherwise, so that the actual risk is adequately managed from a fiscal and operating perspective. There are a number of vehicles available to afford protections and reduce potential liability to a more acceptable level.

Other examples of business risk that may not be on the REC radar, or outside of ASTM, could include:

·        Asbestos-containing building materials. Even though they are adequately managed and in good conditions (etc.), they may represent additional costs associated with redevelopment or improvement to the existing structures, or changes to operations. Then there could be knock-on effects (likely at significant cost) with respect to business and operational interruption.

·        Contaminated building materials that require special handling and disposal during redevelopment. Oil-soaked wood block flooring comes to mind.

·        Potential existing soil/groundwater contamination and vapor-phase contamination that is otherwise controlled, but could be uncovered and lead to exposure during ground excavation/ foundation construction. – additional costs/time

·        New operation on a site with closed/NFA’d soil and groundwater issues associated with a former occupant, where the new operations may involve some commonality of chemical materials used to those known NFA’d impacts. – potential to be dragged in to any reopeners, or established as a PRP.

·        Poor relationships with local agencies, or the nature of the local regulatory environment (particularly outside North America).

·        Odor or noise concerns, both of which can entail potentially significant costs to mitigate.

·        Co-mingling of storm water and wastewater streams from neighboring facilities. Sometimes co-mingling of wastes.

·        Poor environmental stewardship in consumer-driven industries, from shopping malls to manufacturers to airlines.

well in NY, contaminated fill and pesticide from prior use as farm have no regulatory programs. The fill material is already contaminated but there is no on-site release or even a threat of release where it is completely covered up nor will there be any regulatory action so it could be considered de minimis. It cant be HREC since it was not remediated. Could be BER if client is contemplating re-development and will incur extra costs for managing the disturbed fill.

I have often had consultants list non-RECs as "other environmental concerns" or similar words. I think EP could do that on its own unlike a BER that really should have client input.  

The fill material in NYC area was usually deposited in the 19th or early 20th century. It is not subject to any state regulatory program. In fact, EPA issued guidance in the 1990s to NYSDEC indicating that moving such material around on a property would be considered to be occurring within one disposal cell and therefore not be considered managing waste. The practice in NY has been that Phase 1 reports will discuss that there is fill material at the site but it is not generally flagged as a REC unless it has become contaminated from subsequent on-site use. Again, this is because DEC does not regulate contaminated fill material under its remedial programs and EPA has indicated the fill is exempt from RCRA Subtitle C so long as it is simply moved around on the site.

Once the fill material is excavated, though, its status can indeed change to a RCRA HW depending if it fails TCLP and could not be re-deposited since that would  contravene the so-called land ban. Thus, when new utilities are to be installed or soil is to be disturbed as part of a redevelopment, the owner might incur extra costs to properly manage what has been magically transformed from unregulated fill material to a waste. 

Of course, we have seen cases where old mine tailings are moved by a developer who then incurs liability as an CERCLA operator. And of course there have been residential properties that have been placed on the NPL or been subject to CERCLA response actions because of the presence of lead soil, radon slag and pesticides from former argricultural use. Some states have established presumptive regulatory standards for contaminated fill and former farmland. Thus, EP needs to look at each site individually and determine if the historic presence of contaminants represents  a REC.

This discussion started as what is a BER. Given the extra costs associated with the management of the fill material, the EP might want to discuss if this should be a BER where there would otherwise be no regulatory requirements if the fill was undisturbed. 

The EP needs to look at each site on its own  

here is a further complication. In most cases, the phase 1 will simply show that the property has been filled in but there is no information about the quality of the fill or if it is contaminated.

In the absence of sampling data, I do not believe the industry default  should be to assume all fill material is contaminated. Otherwise, vast swaths of land in our major cities are going to be flagged with RECs that are not subject to any regulatory requirements.

Except in those areas where there has been documented issues with the fill (e.g, Chicago's historic light district where there is radium-contaminated fill), the fill in its current condition (covered) does pose a risk of human health and would not result in regulatory action if brought to the attention of a regulator. This is the very definition of the ASTM de minimis condition.

However, if after consulting with the client, the EP learns the client plans to excavate fill materials or run new utilities, etc onto the property, then I would suggest it could be a BER due to the additional costs.  

I'm not a lawyer, but my experience has shown those century old, vast tracts of historic industrial city land are probably also "brownfields" (in addition to meeting the definition of "de minimis").   My experience has shown them very often to be contaminated and subject to state regulations. 

I still don't know where this idea of "RECs that are not subject regulations" is coming from.  Say we agree that a certain 40-year old former AST tank farm is a REC.  Clearly the existence of the site, its former use, and our professional opinion are not what are regulated, nor are the tanks which were removed prior to the existence of closure sampling rules.  Once you collect and analyze samples and document the presence of contamination, the site becomes regulated.  All the states I've worked in have an equivalent of "Duty to Nofity" when contamination is identified (unless specifically exempt by nature or volume) as a threat to waters of the state.  I realize there may be states where this isn't the law, I just haven't worked in any of them.  The "documented" issues in Chicago, etc. you note were identified by someone doing some sampling at some time and reporting it to the regulators. 

From my experience these historic waterfront districts, railroad corridors, etc. have varying degrees of contamination and definite costs related to development.  This is where we typically advise Phase II work to determine what the potential diminution value is that is attributable to historic contamination.  Having a multi-million dollar sediment clean-up in buying a million dollar property seems to me to be a significant role of due diligence, beyond strict CERCLA liability. 

I think the assumption that at some point in the future (e.g. years or decades) a property is going to be developed or redeveloped is a reasonable.  When and who takes the financial hit for continuing to pass the buck and not determine whether they're buying serious liability?

Does one communicate to their customer that the BERs are a dramatically more significant threat to the future of their business than the presence of floor drains?

You're right Larry.  It comes down to experience and professional judgement, tied into clients risk aversion levels, tied into a bit of tea leaf work. 

However, for the record, passing the buck on assessing whether a problem is present or not rubs me the wrong way and is not something I would feel comfortable advising a client to do (i.e. risk it all to save a few grand) by sticking their head in the sand just like the guy before them.  But, hey its their assets.