Vapor Intrusion, Due Diligence, Outsourcing Headline EBA Summer Conference

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The Environmental Protection Agency's addition of vapor intrusion to the Hazard Ranking System (HRS) for superfund sites, mitigation of vapor intrusion through the use of innovative new technology and a robust mock debate over whether existing conditions at a site constituted a recognized environmental condition were some of the major themes at a national conference aimed at environmental financial professionals.

The conference, presented by the Environmental Bankers Association, was held in Ft. Worth, Texas.

The ‘Texas Trifecta'

John Slavich, a shareholder with Guida, Slavich & Flores, P.C. in Dallas, discussed three legal approaches unique to Texas: municipal setting designations (MSD), the state's dry-cleaner remediation program (DCRP) and local environmental enforcement initiatives.

The state's latter initiative grants to local governments enforcement authority equivalent to that of the Texas Commission on Environmental Quality. This enables local governments to enforce civil penalties, rather than remediation requirements.

The DCRP is a cleanup regime dedicated solely to dry cleaners; the program provides for the registration and regulation of dry cleaners, but more importantly creates a fund for cleanups that is funded through fees.

If a contaminated site ever involved dry cleaning and has been ranked and prioritized by the state, Texas then can use money from that general fund to clean up the site.

According to Slavich, the DCRP has been very successful in remediating old dry-cleaning sites but faces a few limitations because it addresses only “dry-cleaning solvents from retail commercial dry-cleaning facilities” and expires in 2021.

Slavich was especially enthusiastic about the state's MSD program, which helps sites with contaminated groundwater achieve accelerated regulatory closure from the state.

Shallow groundwater contamination is common in urban areas, Slavich said, so Texas came up with a unique policy solution: a new amendment in the state safety code that allows potable use of actual or potentially contaminated groundwater at designated properties and changes state risk-based corrective action standards to reflect the lower risk to human health.

These changes mean contaminated groundwater at some sites can remain in place without required cleanup.

“This means a significant reduction to cost, time and uncertainty in obtaining regulatory closure,” Slavich said.

The state has seen significant real estate benefits flow from the MSD program, including “more comfort to lenders, a reduction in the potential for liability, an alternative to the Innocent Landowner/Operator program and a real halo effect of redevelopment around these sites,” he said.

Vapor Added to NPL Ranking

Meanwhile, Chris Villarreal, a superfund Remedial Project Manager with EPA's Region 6 office in Dallas, discussed the scope and potential impact of the EPA's rule adding vapor intrusion to the HRS.

Villarreal explained in detail the factors the agency currently considers when determining whether or not to add a site to the superfund National Priorities List (NPL).

“The Hazard Ranking System is a set of rules for assigning values to pathway factors to arrive at a site score,” said Villarreal.

In calculating the HRS score, EPA takes into account “multiple questions,” he said.

These include whether any contamination has escaped from the site; if so, how bad and how much; and who and what could be harmed by potential escaped contamination.

The HRS now will consider vapor intrusion as a separate pathway to help determine which sites should be put on the NPL.

Villarreal cautioned, however, that just because a site could qualify based on its HRS score calculation does not mean the site automatically will be placed on the NPL.

“It really is a highly fact-specific determination,” he said.

The addition of a vapor intrusion component in ranking sites has been supported by recent comments submitted to the EPA over the last few weeks (25 EDDG 37, 5/19/16).

The EPA announced the proposal in early February and allowed a 60-day comment period (25 EDDG 13, 2/18/16).

The HRS currently scores sites based on evaluations of groundwater migration, soil exposure, surface water migration and air migration, but vapor intrusion also poses a significant risk as a pathway to exposure, Villarreal said.

New Mitigation Technology

Mitigation of vapor intrusion was another key focus of the conference sessions.

Dan Spinogatti, Vice President of EBI Consulting in Burlington, Mass., presented on the use of sub slab depressurization systems (SSDS) to mitigate vapor intrusion in existing buildings.

SSDS refers to a network of PVC piping with an inline fan connected to the pipes designed to prevent sub slab vapors from entering occupied buildings above the slab.

When the system is activated, the fan applies a vacuum beneath the slab, which then directs outside the building any vapors contained in the soil beneath the slab.

“Traditional remediation involves soil extraction and is traditionally installed as a cleanup remedy,” Spinogatti said.

Although there are multiple mitigation measures available for vapor intrusion, including coatings, HVAC adjustments, indoor air treatment and aerated floor treatment, “SSDS mitigates the pathways of exposure, meaning that passive remediation occurs at a cheaper price point,” he said.

Richard George, a Senior Program Director with EBI , then walked the audience through the actual processes of determining whether a specific site is a good candidate for SSDS mitigation.

According to George, SSDS should be considered whenever the extent of vapor contamination in the soil is defined, good airflow exists beneath the slab, other exposure pathways have been mitigated and impacts to groundwater will be minimal.

SSDS may not be the most appropriate mitigation option if the site is located in an area with shallow groundwater, clay-based or permeable soils, or poor or no airflow under the slab.

Outsourcing Reviews

In one of the more practice-based sessions, Derek Ezovski and Jan Sheinson led a participatory discussion on outsourcing environmental reviews.

Ezovski is the President of Outsourced Risk Management Solutions , a risk management consulting firm based in West Hartford, Conn., that helps lenders manage their property risk program by evaluating, developing, implementing and monitoring their due diligence policies and procedures. Sheinson is the Environmental Risk Manager at BMO Harris Bank in Chicago.

According to Ezovski, lenders outsource if they lack the on-staff expertise or capacity to specialize in the types of environmental expertise and professionalism necessary to negotiate some environmental deals.

“Outsourcing environmental reviews and risk management has become more popular as lenders have increased their loan volume and continue to be asked to do more with less,” Ezovski said.

He discussed numerous benefits associated with outsourcing environmental reviews, including the significant savings on staffing costs, access to what generally is a higher level of knowledge and the established relationships with environmental vendors that can save time and money in the long run when banks normally would have to approved vendors.

“While there are always risks involved with utilizing services that are not under the roof of your organization, the expertise, increased capacity and access the resources offer is the key to a successful outsourced risk management program,” Ezovski said.

“The biggest takeaway is that different lenders have different needs,” Sheinson said.“Many larger lenders already have the resources in place to understand environmental issues on potential properties, but some smaller banks and credit unions might not be as sophisticated with regard to environmental issues or the due diligence options available,” he said.

For More Information

More information on the Environmental Bankers Association is available at http://www.envirobank.org/ or by e-mailing Derek Ezovski at dezovski@orms.com .