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Successive Approximation:

A problem-solving or computational method in which a succession of approximations, each building on the one

preceding, is used to achieve a desired degree of accuracy.

Graduated Steps of Environmental Due Diligence

DESKTOP REPORTS Question: Is your goal to learn about the property? Or is it to paper the files

with the minimum amount of due diligence?

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Records Search with Risk Assessment

Scope of Work is not well defined, allowing firms to provide very limited information. A Reliance Letter not used with RSRA’s and therefore the EP has no skin in the game.

Transaction Screen Analysis

Car Wash Only Facilities I No Signature on RSRA I In Place of RSRA

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ASTM E 1527

2013 Updates and Issues

ASTM in a nutshell

• Industry’s Standard Practice for Environmental Site Assessments

• Created by ASTM as a baseline process for conducting All Appropriate Inquiry (AAI)

• Reviewed every 8 years – could either re-ballot as is, or make changes.

Updates for ASTM 1527-13 have been approved by the EPA. They are currently open to public comment until

September 16.

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KEY CHANGES

• REC simplified Language more concisely describes a REC, but meaning is unchanged.

• HREC revised More definitively describes the scope of a HREC: regulatory closure, contamination may still be present but only if below residential cleanup standards

Updated REC and HREC Definitions

Controlled Recognized Environmental Condition (CREC) refers to sites where the contamination incident has received a risk-based closure, but could still pose ongoing or future obligations for the owner, such as special precautions during development or maintenance of an engineered control such as a vapor barrier.

A New Category:

These definition adjustments will allow EPs to provide greater clarity in disclosing the degree of risk. Not expected to increase cost of report delivery times.

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Greater emphasis on assessing Vapor Risk

• No differentiation between solid, liquid or gas

• Clarified definition of ‘migration’ and ‘release’

• E2600-10 referenced as vapor screening standard

• Contaminated vapor migration now clarified to be associated with a release

VAPOR MIGRATION

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REGULATORY FILE REVIEWS

• Review of regulatory files and/or records now explicitly recommended for adjacent properties.

• If EP deems not warranted (or reasonably ascertainable) justification must be provided in the report

• Will improve depth of ESA, but depending on state or agency may also add to report production times and cost depending on the regulatory agency involved

How will the revisions add to cost or report delivery times?

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Phase II’s

Phase II cont’d

The Phase II investigation will typically indentify environmental concerns through soil and groundwater sampling and analysis. The results of the Phase II assessment may result in the identification of necessary response actions. This information can be used to identify remediation costs and/or property devaluation.

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Phase II indentifies that there is contamination

Phase III or “Site Characterization”

Need to quantify the contamination by determining the vertical and lateral extent of the contamination. This costly and more involved process might require multiple iterations of testing, however you need this information if you plan on doing remediation on the subject property.

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Remediation

Soil Remediation Bio Remediation

Steps of Environmental Due Diligence

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NAICS Codes

311 Food manufacturing (if underground fuel tanks present)

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Presenters

Moderator: Jan Garlitz

NADCO General Counsel

Panel: Steve Olear

SBA - Environmental Appeals Committee

Steve Reynolds

SBA - Environmental Engineer, SLPC

Nikole Reynolds

ERI, LLC

Gary Reynolds

Partner Engineering & Science

Submitting Environmental Investigations to SLPC

• Ensure the environmental submissions on CDs are properly labeled and in PDF format • Ensure all appendices and attachments to the environmental assessment are submitted • Ensure all scanned documents are legible

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CDC Checklist for Submitting Environmental Investigation

• Ensure the CDC Checklist is included for all environmental document submittals

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• Ensure the correct NAICS codes for the past and current use of the property is included on the CDC Checklist • The CDC must provide comments and sign the CDC Checklist • Ensure the CDC comments on the CDC Checklist match the environmental professional’s recommendations and conclusions • Provide the SBA Loan Number or the control number on the CDC Checklist • If a 504 Loan is approved after pre-application, include the control number and/or SBA Loan Number so the documents can be associated with the pre-application file

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Any Transaction Screen (TSA or TSR), Phase I Assessment or Phase II Assessment must be accompanied by the SBA Reliance Letter and Certificate of Professional Liability Insurance Ensure the SBA Reliance Letter is not altered or modified

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• Ensure the Certificate of Professional Liability Insurance with Errors and Omissions statement is submitted with the SBA Reliance Letter. • Ensure the SBA Reliance Letter has the same date as the TSA/TSR, Phase I or Phase II

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Resubmissions

• Send in only the new documents for resubmissions – not all documents • For all resubmissions, follow the instructions provided at the bottom of the environmental response from SLPC

Environmental Questionnaires

• State the past and current use of the property and the adjoining properties in an Environmental Questionnaire (EQ)

• The EQ must be signed by the owner or operator of the site and the CDC.

• If the owner is unable or unwilling to sign the EQ and the property is not in an environmentally sensitive industry (ref Appendix 4 of SBA SOP 50-10(5)), then a Transaction Screen Analysis is the minimum requirement for submission

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Contamination, Environmental Professional Recommendations and Gas Station Loans

• Ensure all information- as stated in SOP 50-10(5)(C),

Subsection G (Approval and Disbursement of Loans When There is Contamination or Remediation) - is submitted if requesting approval of funds with known contamination on the property

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• If there are contaminants on the Property, get the environmental documents to SLPC as soon as possible – SLPC will need concurrence by SBA District Counsel

• If RSRA indicates “elevated” or “high risk,” conduct a Phase I Assessment – not a Phase II Assessment

• Recommendations by the environmental professional need to be completed before submission. Send in documentation such as contractor’s receipts, etc.

• In addition to a Phase I Assessment, gas station loans must include testing of all USTs, lines and related equipment by an independent contractor. Regular monitoring and inspection results do not meet this requirement

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Environmental Appeals Committee

• Attach any SBA Environmental Appeals Committee decisions with the environmental submissions and resubmissions

• All requests for an exception to SBA’s SOP environmental policy must be sent to the SBA Environmental Appeals Committee at environmentalappeals@sba.gov

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Current Information on Environmental Issues

• For the most current information on environmental issues, check out the 504Loans@wiki page at :

• http://www1.atwiki.com/504loans/pages/26.html

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