BASE REALIGNMENTBASE REALIGNMENTAND CLOSURES:AND CLOSURES:

THE NEW THE NEW BROWNFIELDS INITIATIVEBROWNFIELDS INITIATIVE

(EPA BROWNFIELDS 2000 CONFERENCE)(EPA BROWNFIELDS 2000 CONFERENCE)(October 12, 2000)(October 12, 2000)

Michael O. HillMichael O. Hill

Senior Vice PresidentSenior Vice President TRC Companies, Inc.TRC Companies, Inc. 202/342-8451202/342-8451

mhill@trcsolutions.commhill@trcsolutions.com

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Recent FindingsRecent Findings

• ““The private sector is typically on the The private sector is typically on the sidelines of BRAC property transfer, yet sidelines of BRAC property transfer, yet they are uniquely qualified to identify and they are uniquely qualified to identify and create value in such property, thereby create value in such property, thereby accelerating transfer.”accelerating transfer.”

Source: “Issues And Alternatives For Cleanup And Source: “Issues And Alternatives For Cleanup And Property Transfer Of [BRAC] Sites,” 8/1/00 Paper By The Property Transfer Of [BRAC] Sites,” 8/1/00 Paper By The Institute For Defense Analyses, App. G, at G-215 (8/1/00)Institute For Defense Analyses, App. G, at G-215 (8/1/00)

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Recent Findings (cont’d)Recent Findings (cont’d)

• ““Given the success that industry has Given the success that industry has demonstrated in accelerating property demonstrated in accelerating property transfer . . . the government should transfer . . . the government should consider adapting industry strategies to consider adapting industry strategies to achieve its goals [of remediating BRAC achieve its goals [of remediating BRAC properties.]”properties.]”

Source: “Site Remediation And Redevelopment” a 3/23/00 Source: “Site Remediation And Redevelopment” a 3/23/00 Paper for DoD by Lockheed Martin Corporation & The Paper for DoD by Lockheed Martin Corporation & The Institute For Defense Analyses, Prepared To Enable Faster Institute For Defense Analyses, Prepared To Enable Faster Transfer Of BRAC ProopertyTransfer Of BRAC Prooperty

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Concept Of Exit StrategyConcept Of Exit Strategy®®

• TRC Assumes Complete Liability And TRC Assumes Complete Liability And ResponsibilityResponsibility– ContractualContractual– Regulatory (Regulatory (e.g.e.g., as a Superfund PRP), as a Superfund PRP)

• Insurer Issues Financial Assurance And Insurer Issues Financial Assurance And Insurance To Guarantee PerformanceInsurance To Guarantee Performance

• Flexible: Custom Designed For Each Flexible: Custom Designed For Each Customer SituationCustomer Situation

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Applications Of Exit StrategyApplications Of Exit Strategy®®

• Individually-Owned Sites Individually-Owned Sites (Discontinued Operations -- e.g., Brownfields -- (Discontinued Operations -- e.g., Brownfields -- as well as Ongoing Operations)as well as Ongoing Operations)

• Mergers, Acquisitions & DivestituresMergers, Acquisitions & Divestitures

• Multi-Party Superfund SitesMulti-Party Superfund Sites

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Benefits As To Benefits As To Individually-Owned SitesIndividually-Owned Sites

• Eliminate Risk Of Cost Uncertainties Eliminate Risk Of Cost Uncertainties And Regulatory ChangesAnd Regulatory Changes

• Eliminate Need To ManageEliminate Need To Manage

• Possible Tax AdvantagesPossible Tax Advantages

• Possible SEC Reporting AdvantagesPossible SEC Reporting Advantages

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Benefits As ToBenefits As ToM&A SitesM&A Sites

• SellerSeller– Obtains “Market” PriceObtains “Market” Price– No Future InvolvementNo Future Involvement

• BuyerBuyer– Eliminates Risk Of Future DiscoveriesEliminates Risk Of Future Discoveries– No Dependence On Seller’s SolvencyNo Dependence On Seller’s Solvency– No Resource Commitment To CleanupNo Resource Commitment To Cleanup

• BothBoth– Transaction Gets Done (“Tail” Does Not Wag “Dog”)Transaction Gets Done (“Tail” Does Not Wag “Dog”)– Independent Assessment Of CostIndependent Assessment Of Cost

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Benefits As To Benefits As To Superfund SitesSuperfund Sites

• Eliminate/Avoid Attorney’s Fees And Eliminate/Avoid Attorney’s Fees And Other Transactions CostsOther Transactions Costs

• Eliminate Risk Of Cost Uncertainties Eliminate Risk Of Cost Uncertainties And Regulatory ChangesAnd Regulatory Changes

• Possible Tax AdvantagesPossible Tax Advantages

• Possible Reporting AdvantagesPossible Reporting Advantages

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Wells Site Exit StrategyWells Site Exit Strategy®®

• Oil Recycling OperationOil Recycling Operation• Oil Sludge and Soil & Groundwater Oil Sludge and Soil & Groundwater

ContaminationContamination• Over 2,900 PRPs (including DoD, w/ 27%)Over 2,900 PRPs (including DoD, w/ 27%)

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PBWO RisksPBWO Risks

• Undefined Groundwater PlumeUndefined Groundwater Plume

• Cost Of RemedyCost Of Remedy

• Off-site Contamination of Drinking Off-site Contamination of Drinking WellsWells

• PRP ParticipationPRP Participation

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PBWO ResultPBWO Result

• Decree Entered May 30, 2000Decree Entered May 30, 2000

• TRC Assumed Full Legal TRC Assumed Full Legal Responsibility Under Consent Responsibility Under Consent DecreeDecree

• DoD and other PRPs (and State) DoD and other PRPs (and State) Protected By AIG-Issued Financial Protected By AIG-Issued Financial Assurance & InsuranceAssurance & Insurance

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Major Aerospace CompanyMajor Aerospace Company

• 3 Sites Available For Redevelopment3 Sites Available For Redevelopment– One LeasedOne Leased– One Under Sales AgreementOne Under Sales Agreement– One Sold and In RedevelopmentOne Sold and In Redevelopment

• Seller Needed To Reallocate Seller Needed To Reallocate Resources To Core BusinessResources To Core Business

• Buyers Needed Faster ActionBuyers Needed Faster Action

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RisksRisks

• Defined Problems But Undefined Defined Problems But Undefined ExtentExtent

• Previously Approved Remedies Previously Approved Remedies InappropriateInappropriate

• Development Delayed Due To Development Delayed Due To Environmental IssuesEnvironmental Issues

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ResultResult

• TRC Assumes Environmental and TRC Assumes Environmental and Contractual LiabilityContractual Liability– Fixed Price ContractFixed Price Contract

• Environmental Risk ManagementEnvironmental Risk Management– $50MM AIG Cost Cap Insurance$50MM AIG Cost Cap Insurance

• Financial AssuranceFinancial Assurance– AIG-Issued Bonds Secured PerformanceAIG-Issued Bonds Secured Performance

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Major Energy CompanyMajor Energy Company

• Purchase Of 18 Plants & 350 Ancillary Facilities ($1.4B)Purchase Of 18 Plants & 350 Ancillary Facilities ($1.4B)• Buyer and Seller Could Not Agree on Cost of Buyer and Seller Could Not Agree on Cost of

Environmental CleanupEnvironmental Cleanup

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RisksRisks

• Site Conditions Partially Defined Or Site Conditions Partially Defined Or UndefinedUndefined

• Lack Of Clear Regulatory StandardsLack Of Clear Regulatory Standards

• Off-site ContaminationOff-site Contamination– Cost of CleanupCost of Cleanup– Third Party Property DamageThird Party Property Damage

• Impact Of On-going OperationsImpact Of On-going Operations

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ResultResult• TRC Assumed Environmental TRC Assumed Environmental

Liability For All SitesLiability For All Sites

• AIG Finite Approach Provided AIG Finite Approach Provided Financial Assurance And InsuranceFinancial Assurance And Insurance

• Exit(s) To The Exit StrategyExit(s) To The Exit Strategy®® At Client’s At Client’s OptionOption

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Media QuotesMedia Quotes

• ““[TRC’s] Maine Experiment May Point The [TRC’s] Maine Experiment May Point The Way To Ending Tangle Of Litigation Around Way To Ending Tangle Of Litigation Around Superfund Law” (WSJ, 4/29/98)Superfund Law” (WSJ, 4/29/98)

• ““[S]ounds like good old American ingenuity to [S]ounds like good old American ingenuity to me.” (WSJ, quoting EPA Administrator C. me.” (WSJ, quoting EPA Administrator C. Browner)Browner)

• ““This is a great idea.” (WSJ, quoting Senator This is a great idea.” (WSJ, quoting Senator R. Smith, Chair Of Sen. Env. & Pub. Works R. Smith, Chair Of Sen. Env. & Pub. Works Comm.)Comm.)

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Media Quotes (cont’d)Media Quotes (cont’d)

• ““[TRC’s] arrangement is [TRC’s] arrangement is ‘revolutionary’ . . . A ‘new model’ for ‘revolutionary’ . . . A ‘new model’ for reducing cleanup and litigation reducing cleanup and litigation costs” (BNA Daily Envir. Rptr., 6/8/00, costs” (BNA Daily Envir. Rptr., 6/8/00, quoting Maine DEP official). quoting Maine DEP official).