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Due Diligence – we’ll discuss how to go about doing it – and the approach may varydepending on your HUD project.depending on your HUD project.

What this training is NOT – You will not a qualified EP.

Rather, this is Overview of the topic – NEPA is interdisciplinary – hopefully, this will giveyou knowledge and tips on how to conduct due diligence – a good start. Also want tocover situations where a formal, complex DD may not be required – such as SF Rehab –but where some degree of DD is necessary. In other words, the approach to DD will berelative to the HUD activity.

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Love Canal – HUD assisted project

• Housing development built on a buried canal containing more than 21,000tons of toxic waste generated from Hooker Chemical Corporation

• The site was contaminated with polychlorinated bi-phenols (PCBs), Dioxinsand Furans, and Benzene

• Contamination was discovered with the emergence of an abnormally highoccurrence of cancers, birth defects and other health problems

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Note that the HUD policy applies to both Part 50 and Part 58.

The distinction is who must perform the environmental review - the Responsible Entity(if Part 58) or HUD (Part 50).

HUD Mission/Policy – 1949 Housing Act, Section 2 = Provide a decent home and asuitable living environment for every American.suitable living environment for every American.

Sustainability is reflected in the Department’s current management plan.

Financial =•Increased liability & exposure for cleanup costs•Increased liability & exposure for cleanup costs•Affects borrower’s ability to re-pay loan•Knowing the costs of remediation “up-front” allows sponsor/grantee/etc to build thosecosts into the project budget at the outset – just like with any environmental matter thatmust be mitigated

One of the country’s early Superfund sites (1982). Took 15 years to clean up.Waste oil used on road. What did St. Louis County spend to spread the dioxin-Waste oil used on road. What did St. Louis County spend to spread the dioxin-contaminated oil? Perhaps a few thousand dollars?

{Source: http://www.npr.org/2010/12/28/132368362/a-chemical-conundrum-how-dangerous-is-dioxin}

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Choice-limiting actions include real property acquisition, leasing, disposition,demolition, rehabilitation, repair, construction and site improvementsdemolition, rehabilitation, repair, construction and site improvements

Commit = legally binding agreement or contract.

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Specific contaminants are listed or defined in federal statutes, including but not limitedto:to:• Substances defined in CERCLA §1321(b)(2)(A)• Listed as hazardous wastes in RCRA §3001• Listed as hazardous air pollutants in CAA §112• Section 1317(a) of Clean Water Act refers to toxic and pretreatment effluent standards

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Previous site uses, nearby land uses

Potential Sources:-Railroad yards-Foundries & incinerators-Auto & truck garages, gas stations & service centers-Dry cleaners-Dumps – landfills and junkyards-Commercial printing operations-Hospitals-Waste treatment, storage, disposal, processing or recycling facilities-Agricultural operations-Tanneries-Mining operations

Caused by:

o Industrial or commercial operations not properly managed, resulting in spillsand careless waste disposal practiceso Leakage of gasoline or other products from underground storage tankso Municipal waste disposal sites may contain solvents, paints and heavy metalswhich can leach out if not properly managedo Agricultural and other land with past use of pesticide and herbicideso Intentional and illegal discharges on and in land, air and water

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If the previous business on/near the proposed HUD-assisted project site stored,manufactured or handled hazardous chemicals, there is possibility of spills (“release”)manufactured or handled hazardous chemicals, there is possibility of spills (“release”)related to those chemicals and potential migration of these chemicals towards theproposed area for development of the HUD-project.

Heavy MetalsLead, Arsenic, Mercury

Asbestos & RadonChlorinated Solvents

DegreasersDry cleaning solvent

Petroleum SolventsDry Cleaning

Petroleum fuels & oilsPesticides & herbicidesPCBs

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NAPL means “Non Aqueous Phase Liquids”

NAPL – “Many common contaminants are liquids that, like oil, do not dissolve readily in

water. Such liquids are known as NAPLs, of which there are two classes: light NAPLs(LNAPLs), such as gasoline, are less dense than water; dense NAPLs (DNAPLs), such asthe common solvent trichloroethylene, are more dense than water.” – National ResearchCouncil, 1994NAPL – “A liquid solution that does not mix easily with water. Many common groundwater contaminants, including chlorinated solvents and many petroleum products, enterthe subsurface in nonaqueous-phase solutions.” – National Research Council, 1993NAPL – “Many contaminants, including chlorinated solvents and petroleum products,enter the subsurface in the form of an oily liquid, known as a NAPL. NAPLs do not mixreadily with water and therefore flow separately from ground water. If the NAPL is moredense than water (known as DNAPL), it will tend to sink once it reaches the water table.If the liquid is less dense than water (known as an LNAPL), it will tend to float on thewater table.” – National Research Council, 1997

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References:• U.S. EPA - Patricia Overmeyer, 3/30/2006, PPT presentation to HUD environmental• U.S. EPA - Patricia Overmeyer, 3/30/2006, PPT presentation to HUD environmentalofficers on AAI rule• ATSDR “ToxFAQs”: www.atsdr.cdc.gov/toxfaqs/index.asp• Meth labs: State of Michigan Health Dept.

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HUD’s MAP Chapter 9 (Office of Housing - FHA) provides a template for approachingRBCA – e.g., Part 58 grantees can use the procedures of MAP. MAP Chapter 9 is usefulRBCA – e.g., Part 58 grantees can use the procedures of MAP. MAP Chapter 9 is usefulguidance (not a regulation).

HUD SF Housing Insurance:Soil contamination – Evidence of hazardous substances in the soil, such as stressedvegetation, stained soils or pavement, drums or odors.Proximity to dumps, landfills, industrial sites that could contain hazardous wastesIf there are leaky Underground storage tanks, or any other persistent soil deteriorationcondition, further analysis or testing is required.

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Pay particular attention to dumps, landfills, industrial sites, or other locations on site orin general proximity that contain, or may have contained, hazardous waste.in general proximity that contain, or may have contained, hazardous waste.

Due diligence: Process of evaluating property for potential environmentalcontamination prior to acquisition or commitment of funding.

Decision-making rests with Responsible Entity (Part 58) or HUD (Part 50).

Investigation ranges from simple to the complex.

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Is Phase I always needed?NO! But still need to use reasonable and good faith effort to conduct due diligence. KeyNO! But still need to use reasonable and good faith effort to conduct due diligence. Keyhere is that the approach to due diligence depends on your project – construction ofhospital is different than SF rehab – But always use a reasonable, consistent andprofessional approach.

Part 58 – does not require Phase I. However, SF Rehab project is CEST (§58.35(a)(3)(i)) &so is required to comply w/ HUD’s contamination policy at §58.5(i)(2).

Note that some HUD activities – e.g., utility assistance, TBRA, public services,homeownership assistance, etc – do not require any due diligence. These projects areCENST under §58.35(b) – i.e., not subject to the contamination policy. [For moreinformation: contact your HUD environmental officer regarding “level of review.”]

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You may consider additional studies, as necessary, depending on the scope of theproject and likelihood for contamination. Lead-based paint hazard control, for example,project and likelihood for contamination. Lead-based paint hazard control, for example,is required in HUD’s regulations at 24 CFR Part 35. Consult your state agencies and localHUD field environmental officer for technical assistance on what additionalcontaminants could be of concern for your specific projects.

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ASTM International (formerly known as the American Society for Testing and Materials(ASTM)) is a globally recognized leader in the development and delivery of international(ASTM)) is a globally recognized leader in the development and delivery of internationalvoluntary consensus standards. Today, some 12,000 ASTM standards are used aroundthe world to improve product quality, enhance safety, facilitate market access and trade,and build consumer confidence.

ASTM Phase IUsed primarily for commercial real estate transactions and CERCLA liability protections.Also used to assess business environmental risk concerns .

Does NOT delineate contamination or quantify the risk of contamination.

Current online price = $57. Download directly from ASTM website.

(Note: An equivalent “Phase I” due diligence may be achieved by conducting “AllAppropriate Inquiries” (AAI) using 40 CFR Part 312. AAI was added as amendment toSmall Business Liability Relief and Brownfields Revitalization Act of 2002. Rule becameeffective Nov 2006.)

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Vapor Encroachment (aka, vapor migration):

• Short term problems = respiratory, headaches, nausea, eye irritation• Long-term exposure = cancer• VE analysis often appropriate to conduct because a VEC (vapor encroachmentcondition) may not otherwise be identified by the ASTM Phase I – e.g., where vaporsource is down-gradient of the target property.• ASTM E 2600-10 “Standard Guide for Vapor Encroachment Screening.”• Uses iterative approach – are known or suspected sites in proximity that may havevapor contamination (e.g., drycleaners, gas stations, industrial uses)…If yes, performfurther assessment & may include sampling for soil gas or groundwatercontamination…Depending on various factors, a VEC may or may not be considered aREC.

VE is relevant to the earlier slide about “different programs, different requirements” –The VE analysis is required in MAP Chapter 9 – While only MAP requires it (forFHAinsurance programs), it may well be appropriate to conduct VE analysis forother projects, e.g., Part 58.

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Take-away: Phase I can only be performed by a professional who meets thequalifications of the ASTM standard.qualifications of the ASTM standard.Make sure you have a good EP!!

Both AAI and ASTM Phase I define qualified professional the same.• AAI: 40 CFR 312.10• ASTM E 1527-05: Appendix X2

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Phase I identify the following particulars about a property:• Uses and occupancies of property• Uses and occupancies of property• Uses of hazardous substances• Waste management activities• Corrective actions and response activities• Institutional and engineering controls• Nearby and adjoining properties with environmental conditions

Congress included in the Brownfields Amendments a list of criteria (including thoseabove) that the EPA had to include in the AAI regulations establishing standardsand practices for conducting all appropriate inquiries. In addition to providingthese criteria in(40 CFR 312) the statute, Congress instructed EPA to developregulations establishing standards and practices for conducting all appropriateinquiries in accordance with generally accepted good commercial and customarystandards and practices. The criteria are set forth in CERCLA section101(35)(2)(B)(iii).

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If between 180 days and 1If between 180 days and 1year old, the followingsections must be updated:Interviews, Environmentalcleanup liens, Governmentrecords searches, Site/visualinspections, Report & EP’sdeclaration.

If over 1-year, prior report can be used as a reference, but a new Phase I must becompleted.

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De minimis conditions are not RECs.

ASTM: “recognized environmental conditions—the presence or likely presence of anyhazardous substances or petroleumproducts on a property under conditions that indicate an existing release, a past release,or a material threat of a releaseof any hazardous substances or petroleum products into structures on the property orinto the ground, ground water, orsurface water of the property. The term includes hazardous substances or petroleumproducts even under conditions incompliance with laws. The term is not intended to include de minimis conditions thatgenerally do not present a threat tohuman health or the environment and that generally would not be the subject of anenforcement action if brought to theattention of appropriate governmental agencies.

ASTM uses “recognized environmental condition” (REC). AAI uses “identified condition”.The two are synonymous.

Neither AAI rule or ASTM Phase I practice:• Includes sampling and testing• Provides a basis for remediation costs• Is a guarantee regarding impacts• Is a risk elimination process

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Think of this is quality control.Ultimately, the RE/HUD is “on the hook” – responsible for the environmental decision-Ultimately, the RE/HUD is “on the hook” – responsible for the environmental decision-making.Get a copy of the ASTM standard & read it.

Training is available from ASTM.

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Note: Phase II activities are not required as part of AAI (40 CFR Part 312), but canprovide valuable information necessary for complying with “reasonable steps”.

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provide valuable information necessary for complying with “reasonable steps”.

Mention standards for Phase II or Phase III. ASTM has E1903 Standard Guide forEnvironmental Site Assessments: Phase II Environmental Site Assessment Process.Other CERCLA, RCRA, state guidance documents for required/useful for assessmentand cleanup.

Briefly discuss Phase III, et. al. – just overview.

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Missouri VCP – median time, from application to cleanup = 18 months (varies – e.g., ifgroundwater contamination, state will want to monitor for several quarters to see if

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groundwater contamination, state will want to monitor for several quarters to see ifstable)

VCP – aka, Brownfields program

RBCA = often called “Rebecca”

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Engineering controls are any physical mechanism used to contain or stabilizecontamination or ensure the effectiveness of a remedial action. Engineering controls

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contamination or ensure the effectiveness of a remedial action. Engineering controlsmay include, without limitation, caps, covers, dikes, trenches, leachate collectionsystems, signs, fences, physical access controls, ground water monitoring systems andground water containment systems including, without limitation, slurry walls and groundwater pumping systems.

Institutional controls are mechanisms used to limit human activities at or near acontaminated site, or to ensure the effectiveness of the remedial action over time, whencontaminants remain at a site at levels above the applicable remediation standard whichwould allow for the unrestricted use of the property. Institutional controls may includestructure, land, and natural resource use restrictions, well restriction areas, classificationexception areas, deed notices, and declarations of environmental restrictions.

Not every project requires a Phase I ESA.

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Is that a UST vent line? Or the periscope of a submarine?

Use a Field Inspection Checklist – HUD can provide you with one.

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7827 State Line Rd, KCMO, 64113

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Title Search is helpful, particularly is property is proposed for acquisition (in which casetitle search will be done anyhow)title search will be done anyhow)

Title search can yield additional information:• Environmental liens• Activity and Use Limitations

Other Sources of Historic Uses Newspaper archives Internet sites Community organizations Local libraries Historical societies Miscellaneous maps

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Report-generating services – like EDR – will perform the record search at a reasonablecost. There are many records (databases) that are searched (see next slide). Or, you cancost. There are many records (databases) that are searched (see next slide). Or, you cansearch yourself, using some on-line tools that we will talk about in a minute.

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Recommended Government Records Search Distances(ASTM Practice E 1527-05, Section 8.2.1)(ASTM Practice E 1527-05, Section 8.2.1)

Discuss NEPAssist – can add in radii for search distances.

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For real-time demonstration, use zip-code 64116 & Map the sites.• Go to RCRA-CA site• Go to RCRA-CA site• Go to Superfund site

This Example shows three types of icons: Brownfields + CERCLIS + RCRA

Brownfields (ACRES) The Assessment, Cleanup and Redevelopment Exchange System(ACRES) captures grantee reported data on environmental activities andaccomplishments (assessment, cleanup and redevelopment), funding, job training, anddetails on cooperative partners and leveraging efforts - a central objective of theBrownfields Program. The information in ACRES is provided at the property and grantlevel.

Superfund (CERCLIS) Superfund is the federal government's program to clean up thenation's uncontrolled hazardous waste sites. The National Priorities List (NPL) is the listof national priorities among the known releases or threatened releases of hazardoussubstances, pollutants, or contaminants throughout the United States and its territories.

Hazardous Waste (RCRAInfo) Hazardous waste is waste that is dangerous or potentiallyharmful to our health or the environment. Hazardous wastes can be liquids, solids,gases, or sludges. They can be discarded commercial products, like cleaning fluids orpesticides, or the by-products of manufacturing processes.

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For real-time demonstration, use zip-code 64116 & Map the sites.• Go to RCRA-CA site• Go to RCRA-CA site• Go to Superfund site

• Can “mouse-over” the sites to see links to additional info

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CEQ NEPA regulations: 40 CFR 1500.1(c) “Ultimately, of course, it is not betterdocuments but better decisions that count. NEPA’s purpose is not to generate

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documents but better decisions that count. NEPA’s purpose is not to generatepaperwork—even excellent paperwork—but to foster excellent action.”

Your determination must be substantiated not just by the data – but by analysis .

Caveat Emptor

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NEPA is the umbrella under which the environmental review is conducted –Contamination is but one spoke on the umbrella.Contamination is but one spoke on the umbrella.

NEPA is multi-disciplinary & analytical.

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Free publication: Call 800-767-7468 or 202-708-3151“Choosing Env Safe Site,” publication #6039“Choosing Env Safe Site,” publication #6039Also available as download from HUD environmental website.

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