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Jon Walker EDR Vice President, Commercial Real Estate Services, provides insight on environmental industry trends, best practices and happenings related to all stakeholders involved in environmental due diligence and environmental risk management efforts.
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Recent Blog Entries
There’s nothing more beautiful than a fresh snowfall.Yesterday’s load of snow and ice closed schools, highways and airports throughout the day. Anyone traveling yesterday in the northeast risked being stranded at an airport hotel for the evening, as almost 3,000 flights were canceled.
So how does this affect our industry? January is traditionally not a bang-up-month for most environmental consultants, but Mother Nature is definitely not helping.
For an industry that needs to walk and assess properties, visit local Environmental agencies, and conduct local interviews, EPs have been challenged—to put it mildly. January has been a paralyzing month for some.
How has this snowstorm affected you and your Phase I practice? Please share your story. Misery loves company.
The good news is spring is 51 days away.
After almost 18 years at EDR working with thousands of environmental consulting firms, I have heard many "interesting" requests from our clients. The one passed on to me by an Account Executive just yesterday could take the cake.
A client was asked by his client to perform a Phase I ESA on an RV – that’s right a recreational vehicle. But it gets better. The client had no address for the RV; rather, he was provided a Vehicle Identification Number! You can’t make this stuff up. Needless to say our Account Executive had a tough time locating the Latitude-Longitude of the RV.
Even if we did find the Latitude-Longitude of the RV, what if the RV is off doing an errand at the time a field visit was being completed?
I am sure there are many off the wall Phase I ESA requests such as an ESA on an RV. Please share yours!
Over the past few years, we’ve all been on the professional ride of our lives.
We’ve gone from the euphoria of the bull market, to the unease and denial that that bull market was eroding, to the inevitable reality that the bull market was actually gone which led us to downright gloom.
This year has brought us some hope that the worst is behind us. We’ve moved from despair to hope and optimism. Over the past few months I have met with many leaders in the real estate industry. They echo the same sentiment: “cautious optimism.”
Is anyone else sick of this phrase?
People who don’t have the guts to say things are going to get much better or much worse seem to run with “cautious optimism.” I don’t see it.
It’s true that commercial real estate transactions are modestly rising, and for this we are all thankful and appreciative. But I don’t view the increased deal flow as healthy, predictable business. For instance, we are all grateful the administration has been stimulating SBA deal flow (until recently), but is this bump in RSRA work sustainable? What happens if funding isn’t reinstated?
Many are busy with bank foreclosure work, but is this sustainable to fuel our businesses for years? Other than the big banks, are we seeing any new healthy lending?
From a macroeconomic standpoint, unemployment remains a significant concern. So do interest rates that are too low, and huge deficits that grow larger by the hour.
And what about the $1.4 trillion in commercial real estate loans due in 2012? How is this going to (bail) play out? Will this lead to a double dip recession?
Any bullish folks want to set me straight?
Ho hum, regulators shut down five more regional banks this Friday, bringing the total number of US bank failures to 77 this year. In aggregate, each of the past nine Fridays has brought us 40 bank closures.
Making this past Friday a little less “ho hum” was the announcement of the Colonial Bank failure, the biggest bank failure of 2009, with $25 billion in assets and $20 billion in deposits. We all knew this was forthcoming, but indeed it was big news. BB&T will take over all of the deposits and about $22 billion of the assets, while the FDIC will keep about $3 billion in assets—most likely its toxic assets.
So since it appears that every Friday a bank gets seized, how exactly does the FDIC close a bank? When I sought to find the answer, I found a very telling 60 Minutes segment detailing how the FDIC conducts its Friday evening (stealth) bank closings: http://www.cbsnews.com/video/watch/?id=4852631n. This segment does seem have a strong “propaganda” undertone, but nonetheless, it is very interesting to see exactly how the FDIC swoops in and closes a bank.
Over the past few years our industry has fallen on some tough times, but it seems that environmental risk professionals bring tremendous value to the table in the new era of massive bank closures. Up until now, the majority of a bank’s toxic assets have been residential, but all signs point to the fact that bank portfolios are loaded with soon-to-be toxic commercial assets. If this is the case, it is likely that the FDIC will seek either an extensive environmental checklist or a Phase I Site Assessment performed by an EP on all commercial properties. And I am not talking about just a few properties.
I am curious what you all are seeing on the FDIC front? Are you seeing a windfall—or at least a weighty trickle—of Phase I work?
I might be tainted by the Monday morning quarterbacks opposing the Recovery Act, but I have been left here wondering if there really is any money for us environmental folks.
According to the EPA (http://www.epa.gov/recovery/map.html), there were $7.22 billion handed to the EPA from the Recovery Act. Has anyone seen a nickel of it? That is a question—has anyone? I am sure over the winter that environmental consulting board rooms were sizzling with strategy discussions on how to get a piece of the stimulus package. But has it worked out? That is a question— did it? I have not heard a peep from anyone who has struck gold…yet.
I decided to search the web to see if any environmental monies have been delved out to date. I found a very cool interactive map that tracks the funds appropriated and outplayed by the Recovery Act: (http://134.67.99.241/stimulus/EPA_RecoveryApp.html).
Basically what I learned from this site is that hardly any of the environmental funds set aside by the Recovery Act have been spent. As an example, in my home state of Connecticut, there is over $69M obligated and $0 handed out as of July. In our President’s home state of Illinois, there was $259M obligated and only a measly $31,023 used. In Texas, $364M has been obligated and only $14,108 dispersed.
Hooray, Obama’s promise of huge infrastructure projects, accelerated Brownfield efforts, Superfund opportunities and LUST work may still be on its way. The following is a summary of the stimulus funds that apparently awaits us:
· $100 million for competitive grants to evaluate and clean up former industrial and commercial sites. With this funding, I am sure municipalities are ramping up efforts to identify, assess, and clean up their Brownfield sites.
· $600 million to clean up hazardous and toxic waste sites. With this newfound money, I am sure the EPA will be seeking to work on Superfund sites that are ready for construction, but were never funded because of lack of funds…..not to mention the many sites that were in progress, but the funding went dry.
· $200 million for cleanup of petroleum leaks for the Leaking Underground Storage Tank Fund program. It is assumed this will go toward enforcement and cleanup of petroleum leaks from underground storage tanks at approximately 1,600 additional sites. There could be over 100,000 sites with the potential to contaminate our water supplies, but surely $200 million won’t cover that bill.
So, although I have not heard of anyone hitting a home run, I am left here hopeful that we environmental risk professionals will find opportunities from the Recovery Act’s environmental appropriations.
Do you share my optimism?
This may be calling out the elephant in the room, but do you ever wonder how companies individually spend millions of dollars each year on environmental remediation (most of it charged against earnings), but make very little progress in reducing their reported liability reserves? I do, and I have begun to ask others what they think on this topic. Specifically, why are environmental reserves not going down and when, if ever, will this drag on earnings from environmental remediation costs finally come to an end?
Many I spoke to on this topic suggest that reported liability reserves tend to decline by a few pennies, if at all, for every dollar spent on cleanup. How could this be? From a personal standpoint, this sounds egregious and nonsensical, but according to accounting rules this really is on the up and up. Environmental reserves are covered as a means to measure liabilities under FAS 5 and SOP 96-1, whereby owners must determine the likelihood of the occurrence of a loss that is probable and reasonably estimable to occur.
I sought to find a real world example of how companies could spend a fortune on environmental remediation, but make very little progress in reducing their reported liability reserves. There are many examples of how this can happen, but perhaps the most relevant to our community is that many companies include only the cost of remediation for the work that has been approved only by the regulators. So, even though long term remediation may be on the horizon, the company may only set aside reserves for sites in the assessment phase. When and only when, the regulators bang the gavel on the remedial plan will the reporting company set aside reserves for the costly next steps.
The way the rules are set up, there is quite a bit of management discretion in interpreting the “probably” and “reasonably estimable” requirements of FAS 5 and SOP 96-1. Thus, this practice seems to meet the compliance needs auditors and must pass muster of internal corporate policies.
Since fair market value measurement of liabilities is seemingly out the window, I guess we may never know the true environmental liabilities of a company. Well maybe not. There may be a solution for gleaning insight into what environmental liabilities really exist. The solution in Ensight™.
Greg Rogers from Advanced Environmental Dimensions has recently launched Ensight™, which can enlighten management, environmental professionals, attorneys and investors as to the level of accuracy in reported environmental loss reserves using data available to management and investors to predict future cash flows. Below is a mock up of an Ensight report. If you are an environmental risk manager tasked with managing exposure to environmental risk and/or involved in supporting an acquisition, I highly recommend checking it out: http://www.advancedenvironmentaldimensions.com/ensight.htm.
Earlier this week, the EPA advised property owners to minimize releases during hazardous weather events. The EPA's alert was designed to increase awareness among facility operators about their obligation to operate facilities safely and report chemical releases in a timely manner.
You ever heard the childish saying "No kidding Sherlock"...or something like that? It is quite obvious that, from an environmental standpoint, a hurricane poses a significant health problem, as industrial waste, raw sewage and oil spills will find their way into the soil and public water sources. In addition, a hurricane also poses an immediate danger to the public in that the potential for ignitable chemicals to be released in the air, land and soil is exacerbated.
The problem I see though is that many companies don't even have a handle on what types of environmental issues and chemicals reside on their properties. For instance, EDR works with many industrial companies that have locations in spots very susceptible to hurricanes, wind, etc. And all of these companies will admit that they don't have a systematic approach to manage their environmental issues on all owned and leased sites. So the problem is that although the EPA's request seems like a worthy one, many companies are not in a position to execute it.Perhaps the EPA's message should be to suggest that companies need to programmatically (through an electronic system) inventory and manage the locations of all properties with chemicals of concern to assess the human health impacts of a pending hurricane.
How can commonground(ers) help the cause...or better yet what is the business opportunity? My take is consultants need to work with their clients to evaluate risk issues (in this case chemicals of concern) across their entire real estate portfolio. Then when the hurricane hits or is taking aim on a port city/town, property owners will be able to "minimize releases during hazardous weather events".If anything, it is worth a prospect call to your best client or lead that has facilities in Region 6!
On Monday, May 4, 2009, there was a significant explosion that hit the Veolia Environmental Services Plant in West Carrollton, OH, that was estimated to have caused over $50 million in damage. The explosion is thought to be caused by a potential leak of ignitable liquid, possibly acetone or Tetrahydrofuran, that came in contact with gas-fired boilers. According to one press release, the explosion flung debris up to a quarter mile from the blast site.
In a catastrophic fire like this one, there are multiple emergency response issues to consider. For instance, there were significant amounts of storage drums and tanker trailers containing other toxic and explosive chemicals, as well as managing risk associated with potentially exposing any sensitive areas (schools, hospitals, day cares, public water supply wells, etc.).
Because I was curious, and because I have access to all environmental and receptor data, I ran the Veolia plant through EDR PropertyTracker™, an application to support clients to manage environmental risk of a property or portfolio through acquiring a baseline environmental property profile and then by monitoring the site(s) through quarterly alerts on changes to factors affecting the environmental profile....
Two years after the US Supreme Court confirmed the EPA’s authority to regulate greenhouse gas pollutants under the Clean Air Act, the EPA declared on Friday, April 17, 2009, that carbon dioxide and other greenhouse cases are pollutants that threaten public health.
Ok, the debate is over! Well, not really, but for argument’s sake let’s say it is.
According to Lisa Jackson, EPA’s newly crowned EPA Administrator, “The finding confirms that greenhouse gas pollution is a serious problem now and for future generations. Fortunately, it follows President Obama's call for a low-carbon economy and strong leadership in Congress on clean energy and climate legislation."
Friday’s statement gives President Obama and the EPA the power, under the Clean Air Act, to order a reduction of emissions in cars, power plants, factories and office buildings.
Thankfully it is in Congress’ hands and not the EPA’s for now.
If you thought you knew the definition of grandstanding, well, just wait to see the fireworks that will go off in Congress en route to regulating greenhouse gas emissions and getting cap-and-trade passed. I predict road blocks (some laughable and some rationale) from both Republicans and Democrats.
In truth, if Congress can’t gain agreement on the curbing greenhouse gas emissions, then President Obama and the EPA will be single handedly in charge of the U.S. Economy!
As Ms. Jackson suggested, now it is for Congress to set limits on greenhouse gas emissions. Let’s hope they do it.
My colleague (Pat Coyne) caught a talk show this morning featuring Thomas Friedman which discussed the relationship between the mismanagement of our financial system (which has led to the current meltdown) and the massive risks posed by climate change. I missed it, but it sounded quite thought provoking.
In addition to the interview, Friedman wrote an Op-Ed in today’s NY Times entitled The Price is Not Right that is definitely worthy of one’s eyeball.
Friedman’s Op-Ed makes a thought-provoking point that the world should commit to a new accounting standard--”Mark to Mother Nature”. His opinion is that we are mispricing risk in both the financial and the climate system. Clearly we have mispriced risk in the financial system, as we are all feeling the pinch. But now Friedman is suggesting that the same miscalculation of climate risk could threaten the stability of the whole planet. Essentially the pumping out of high profit/cheap energy, without pricing in the future “cost” is putting us (and our children, children’s children, etc.) in a very unenviable spot.
He makes some sense. Just as we are all paying the freight for the mistakes of AIG, Lehman Brothers and the of the late sub-prime lending world, Friedman states that “oil companies, coal companies and electric utilities today are selling energy products at prices that do not reflect the real costs to the environment and real risks of disruptive climate change.”
Well, we all know the current remedy to today’s financial catastrophe….we taxpayers picked up the bill. So Friedman’s suggested solution to world economic leaders is to spare us tomorrow and place a tax on carbon today. Not rocket science. Why not? Let’s do it.
A few weeks back I penned a blog about the massive layoffs in corporate America: http://tiny.cc/ZnVVT. My clients consist mostly of corporate environmental risk managers, so I felt inclined to contact many of them to say hello. Not to sell anything, but truly just to see how they were doing during these tough times....
Many experts around the world feel that a water crisis is not far behind the climate crisis. As the growing threat of a fresh-water shortage looms, companies are now actively tracking their water footprints.
Corporate response to a water predicament was highlighted in yesterday’s Wall Street Journal within an article entitled “Yet Another 'Footprint' to Worry About: Water”: http://tinyurl.com/de4p5f. Here are a few highlights from the article:
· “It takes roughly 20 gallons of water to make a pint of beer, as much as 132 gallons of water to make a 2-liter bottle of soda, and about 500 gallons, including water used to grow, dye and process the cotton, to make a pair of Levi's stonewashed jeans.”....
Ok, it is bad out there. Really bad out there. I recently came across the following Forbes webpage with a tally showing that Fortune 500 companies have let go an astounding 350,000 employees over just the past three months. I read the papers and reluctantly watch the news each day (reluctantly because there is never any good news!), but I was not prepared for numbers like this.
Just this week, the following companies announced significant layoffs: Boeing, Starbucks, Target, Time Warner, and Caterpillar to name a few. Specifically, the layoff at Caterpillar was disturbing. It was not only significant in terms of sheer volume (over 20,000 employees were let go), but it was evidence of just how hard the construction industry has been hit by today’s economic turmoil. This affects every one of us who make a living in the environmental industry....
Amidst all the negativity spouted by the media and our peers alike, there may well be a silver lining coming to environmental risk management professionals.
I am sure you are aware of this by now, but President-elect Barack Obama outlined his plan to create 2.5 million jobs by 2011. A significant portion of the proposed stimulus package (Approx. $25B) will go toward rebuilding roads and bridges.
Obama said his plan would launch “a two-year nationwide effort to jump-start job creation in America and lay the foundation for a strong and growing economy. We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels.”
What does this new policy mean to EDR’s clients in the government sector and those environmental professionals who support the government sector? More work for all of us to create environmental risk assessment documents and engineering services in the planning and development stages for the building and refurbishing of roads and bridges.
Oh, and I would not wait to pursue this opportunity in January when President-Elect Obama is sworn in. Governor Jodi M. Rell from Connecticut sees the potential stimulus spend as "use it or lose it money" . Governor Rell announced in November that in anticipation of a federal stimulus package she has directed state agencies to identify those infrastructure projects, including road, bridge, rail and public buildings and economic development and housing initiatives that have received all necessary permits and, as appropriate, final designs.
So whether you are a staunch Obama supporter or not, the President-elect’s early initiatives are favoring the environmental peeps. But before we begin celebrating, we must acknowledge that such an aggressive FDR-ish type stimulus plan may get caught up in the Beltway’s bureaucracy.
That is my opportunistic look at our collective business opportunity for now!
I am responsible for the development of new strategies, products and services in EDR’s corporate, legal and government markets. Accordingly, it is imperative I get out of the office and interact with industry leaders in the field.
Often, after attending an industry conference, I question whether it was worth leaving the office and my family for three or four days. This past week, I had a super industry experience that would qualify as “worth it”: Sustainable Property Transactions: Deal Making & Redevelopments of Contaminated Sites Conference put on by RTM Communications in San Francisco, CA.
Jeff Telego, Conference Chairman, once again delivered a forum to assist all stakeholders in contaminated transactions to learn about the tools to identify, assess, reduce and/or transfer risk associated with contaminated property transactions. In Jeff’s opening remarks, he indicated that there are over $450B in contaminated property transactions that are in the domestic deal pipeline. Clearly these deals are being affected by the current economic turmoil, but this conference provided "access" to the industry’s best minds to lend support to finding ways to get a deal done.
When I say access, I mean access. Telego’s speakers and attendees stick around and wish to learn from all in attendance. The list of truly technical and accomplished environmental risk management professionals, from diverse disciplines, who attend the RTM is astounding. Where else would one gain intimate access to the most experienced M & A attorneys and Brownfield attorneys in the country? Where else would you go to learn from the risk management experts specializing in emerging cutting-edge strategies and technologies surrounding sustainable development? Where else would you be able to pick the brain of the Director of Remediation or senior level Real Estate Managers from major Fortune 500 companies? Where else would you be able to learn of the use alternative due diligence standards from the practice leaders of the nation’s largest and most innovative Environmental Professionals? Where else would you be able to interact with federal and state regulators on reforms affecting Brownfield transactions? What other conference draws Practice Leaders from various major environmental insurance and environmental liability transfer companies with truly innovative offerings? And the list goes on…
In tough economic times, it is prudent to cut various costs including travel and entertainment. But, you can’t cut expenses to spite future opportunity. The RTM allows me to connect with my peers and potential business partners, and to participate in big-picture sessions that provide insight into the trends and market forces that will shape our industry and the future of our business. The RTM will have another show this spring in Washington, DC. I urge you all to consider attending. Not a better education and business development event for those that deal with contaminated property transactions.
Recent Comments
- February 1, 2011 - I did mine with ATC-- reputable nationwide company. They mentioned...
- January 31, 2011 - Tom, Great news on busy Jan but I hope you checked out the credentials...
- January 31, 2011 - Jon, not only does this weather wreak havoc with travel plans and site...
- January 31, 2011 - I'm actually having a very busy January-- very unexpected. I signed up...
- January 28, 2011 - Not. Fair. As community manager, I might consider this malicious...