PoCcy. Phoning and
•SERA     Selected Current
          in Property Transfer
          Environmental Assessment

            March  1989
            Prepared  for:

The  U.S. Environmental Protection  Agency
   Regulatory  Innovations Staff (PM-223)
           401 M  St., S.W.
        Washington. D.C. 20460

           James  E.  Hayes
           Project  Manager
             Prepared  by:

  Policy  Planning  &  Evaluation,  lac
    8521  Leesburg Pike,  Suite  540
          Vienna, VA  22182


         • ENSR  Corporatioa
    19782 MacArthur  Blvd, Suite 365
           Irvine, CA 92715

    This report has been prepared under contract No.  68-01-7252  for the
Regulatory Innovations Staff, Office of Policy Planning and Evaluation,
U.S.  Environmental Protection  Agency.    The  programs and  procedures
described in  this report were selected to provide  instructive examples
of  property  transfer environmental  assessment practices.   The  report
reflects the findings and conclusions of the authors and not necessarily
those  of EPA or  any other government entity;  any mention of  conpany
names, products or processes does not constitute EPA endorsement.   The
identity of certain corporate programs has been withheld upon request.
Neither the authors nor the participating companies make any warranty or
assume  any  liability with  respect  to  the  use  of  any  information
contained in  this report.   If specific compliance  advice or assistance
is required,  the services of a competent professional should be sought.

                                 np CONTENTS
                                                               PAGE NO.


I.   INTRODUCTION	       1-1

     A. BACKGROUND	       1-1


     A. INTRODUCTION	      II-l


     B. NEW JERSEY	     IH-1
     D. CALIFORNIA	     IH-9
        1.  Senate BUI 245 and Assembly Bill 924	     IH-10
        2.  Cortese List of Hazardous Substance Sites	     HI-11
        3.  Registration of Environmental Assessors	     III-ll
     B. CONNECTICUT	     ITI-12
     F. ILLINOIS	     IU-14


        1.  Policies and Procedures of a Connecticut
                  Financial Institution	      IV-2

                                                                PAGE HO.

        2.  Policies and Procedures of a California
                 Financial Institution	     IV-3
        3.  Policies and Procedures of a National
                 Real Estate Group	     iv-6

     B. POBLCC BcrrrivricNB	     rv-9

        1.  Federal National Mortgage Association	     IV-9
        2.  Federal Savings and loan Insurance Corp	     IV-10


     X. ****** COMPANY, IMC	      V-2

        1.  Background	      v-2
        2.  Areas of Environmental Concern	      V-3
        3.  The Sampling Plan	      V-4
        4.  Inferences	      V-6

     B. **** COMPANY, DC	      V-7
        1.  Background	      v-7
        2.  The Sampling Plan	      V-8
        3.  Cospany Actions	      V-8
        4.  Inferences 	      V-9

     C. ***, DC	      V-10

        1.  Background	      V-10
        2.  The Sanpling Plan and Owner's Actions	      V-ll
        3.  Inferences	      V-12

     D. ****** NAIXCMAL BANK	      V-13

        1.  Background	      V-13
        2.  Location	      V-13
        3.  Remediation	      V-15


        1.  Background	      V-17
        2.  Areas of Environmental Concern	      V-18
        3.  The Sanpling Plan	      V-18
        4.  Inferences	      V-20

     F. (RBKL EBDQE) ZMVttMMBIT OGKEMnf,  CMJIOmni .......      V-2Q.

        1.  Background	      V-20
        2.  Environmental Concerns	      V-21
        3.  Aqrwrimont 	      V-21
        4.  Characterization and Remediation	      V-22
        5.  Inferences	      V-23



This is  achieved by  sampling and  analyzing various madia  — surface
water, groundwater, soil, and  structures.  Exact locations for  sairples,
the types of  analyses  conducted,  and the types  of  chemicals tested  for
are site-specific decisions that vary fron one investigation to  another.

    Landowners who purchase,  rent,  or lease property, or who otherwise
have "care, custody, and  control" of a property  (such as in a trust  or
foreclosure)  can  incur  potentially significant liabilities  for the
remediation  of  contaminated  sites.    In  order to  address potential
inequities  in application of such liability, congress established the
"innocent   landowner   defense"   under  the   Superfund  Amendments  and
Reauthorization  Act  of 1986  (SARA), which limits the  liability of  a
landowner  who made  "all  appropriate inquiry"  into  the environmental
condition  of  the property before  purchasing it.   Tto  date  however,
neither  the  EPA  nor  the  courts   (via  case  law)   have   established
guidelines that define the requirements of "all appropriate  inquiry".

    Prospective  landowners, particularly those with  limited  resources,
are often uncertain of "the steps they need to take to ensure conpliance
with  the letter and  the  intent of the law, and  to prevent  possible
liability.  Without some guidance, however, they are likely  to conduct
inadequate environmental investigations of property they are considering
purchasing,  because  the  investigations are based  on a  limited and
sometimes  incorrect  understanding of the requirements.   Not only  does
this  subject  those landowners to  future liability  (if  contamination  is
later  found where none was  declared),   but it also  hinders  government
efforts  to identify  and  clean up  hazardous waste  sites  as early  as
possible.   Prospective  landowners who take adequate steps to conply with
the intent  of SARA will reduce  their liability while  helping to further
EPA's efforts in identifying and cleaning up hazardous waste sites.

    The  primary objective of this  report is to present the EPA  with
information on how institutions and individuals involved in  property
transfers minims* their  liability  under SARA.  This  information  will
enhance the Agency's decision-making process, and will enable the Agency
to assist and guide the regulated public.   In addition the report will
indicate to Federal agencies  a range of practices to enploy to attenpt

to  minimize liability  during purchase  or sale of  property;  and  will
provide  an  insight  to  other  prospective landowners  into approaches
currently in use to minimize liability during property transfers.

    This  study  involves  a  review of  the policies  and  practices of
various  agencies  and organizations  and  their efforts  to diligently
evaluate  their properties for  hazardous substance contamination.   The
study  focuses  on federal agency practices;  state laws and reocnnended
procedures  for  environmental investigations;  and public  and private
institution  policies  or procedures   for assessing  the  environmental
condition of property*

    Most  environmental investigations  are typically conducted in two
phases.   The  first  phase involves obtaining background  information on
the  site to   ascertain  the  possibility that   it  is,   or   may  be,
contaminated with hazardous substances.  This phase usually includes:

    •   a  property history  that  details  past and  present
        owners  and uses  of the  property;  all known waste
                 practices  at the property;  all contaminant
        releases, violations,  and environmental permits;  a
        description  of  types and  quantities of  hazardous
        substances; and details of their containment;
    •   a visual  inspection of the property  to  observe for
        signs  of  contamination,  including  discolored  or
        disturbed soil areas; areas of sparse, sick, or dead
        vegetation;   damaged   drums  or  storage   tanks;
        discolored  or  polluted  water;  «<«""yd  electrical
        equipment  such  as  transformers  and  capacitors;
        unusual odors; and waste disposal areas; and
    •   a  search of agency  data base  files and incident

    If  the results  of  the first phase  investigation suggest that the
site may  be contaminated by hazardous substances  then the second phase
is  iv M-i""!"1"*   This typically involves investigating  physical  site
characteristics and defining the source and extent of contamination.



    Recently  enacted  previsions  of  the  Superfund  Amendments   and
Reauthorization Act of 1986  (SARA) have  dramatically changed  certain
portions  of  the  previous  federal  "Superfund"  legislation  under  the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980  (CEBdA) in  the area of real  property  transactions.   Prudence now
suggests that most real estate transactions (especially  commercial and
industrial)  must  be assessed  for environmental  impairment  prior  to
consummation of the sale,  in order to evaluate the financial risk of the
transfer in  light of potential  environmental liabilities  resulting  from
an actual or threatened release of a hazardous substance.

    When hazardous substance releases have oomirred, the legal standards
of strict and joint and several liability have been consistently applied
in  several significant court rulings.   When two or more parties are
liable under CERdA, the defendant who seeks to limit liability by means
of   apportionment   bears  the   burden  of  proving  that   division.
Additionally, those  found liable  for the release may be charged with 1)
all  costs of removal  or  remedial  action  incurred by state or federal
agencies;  2)  any other necessary costs incurred by other persons;  3)
damages for  injury,  destruction or loss of  natural resources;  4} costs
of  conducting health assessments or effects studies; and 5)  costs for
governmental enforcement actions  (42 USC 9607).  These developments  have
exposed   lenders   and  other  transactional  parties  to   substantial
liabilities  for the cleanup of h*7*nv*'g materials from  real  property.
Furthermore,  lenders can lose more  than the  value of their  security, as
they can become liable for  the  acts and omissions of their  borrowers or
even prior owners or operators of the mortgaged property.

     However,  SARA  reoognized the  fact that  a  landowner who  had  no
connection with the release of hazardous substances at a property would
still be liable for such actions.  To remedy this problem SARA provided
an  inportant third  party  defense,  known as "the  innocent landowner
defense", which is contingent upon certain measures being taken at the
time the property is acquired (42 U.S.C. 9607 (b) (3) (a) and  (b)).


    SARA, like CQKZA,  iFTr"eo'e  liabilities upon the  "owner/operator" of
property at which hazarfl""«  waste contamination has  been  discovered,
regardless  of  fault.    However,  a provision called the "innocent
landowner  defense"  relieves  the defendant  of  liability  under  some

    •   at  the time  the defendant acquired the property he
        or she did not know, and had no  reason to know,  that
        hazardous  substances  had  been  dispireri of at the
    •   the defendant is a government entity  that  acquired
        the   facility  through   involuntary   transfer  or
        acquisition,   or  through  the  exercise of  eminent
               authority by purchase or condemnation; or
    •   the defendant acquired the property by  inheritance
        or bequest.

This defense is precluded if the defendant knew  of contamination at the
site when he  or she  owned the  property  and subsequently  transferred
ownership to another person without disclosing such knowledge.   In this
case, of course, the  defendant is really the seller (and after the sale
is no longer the property owner), and the  innocent landowner defense in
its strictest  sense should  not apply.   It i* interesting to note that
this defense  does not appear to cover off-site contingent  liabilities
that nay cone with the property.

    To  establish  that the defendant  had no  reason  to know of  the
contamination, SARA states that  "the defendant must have undertaken at
the  tine of  acquisition,  all  appropriate  inquiry  into the  previous


ownership and uses  of the property  consistent with good commercial or
customary practice  in an effort to minimize liability".  SARA  further
states that in construing the "all appropriate  inquiry" provision the
courts will take into account:

    •   any specialized knowledge  or experience on the part
        of the defendant;
    •   the relationship  of  the purchase price to the value
        of the property if contaminated;
    •   commonly    known   or  reasonably   ascertainable
        information about the  property;
    •   the obviousness  of the presence or likely presence
        of contamination at the property; and
    •   the   ability  to  detect   such  contamination  by
        appropriate inspection.

    A  number  of  ill-defined  and  unresolved  questions  surface  in
connection  with property transfer transactions.  Wiat  are  the  minimum
efforts  required to conduct  "all  appropriate inquiry"?  The  term "due
diligence"  as historically used in financial circles, and more recently
applied  to real estate environmental  activities, refers to obligations
laid  upon  buyers,  sellers,  and lenders involved  in  environmental
investigations   during  property  transfers.    A  diligent  review  of
information and issues directly relating to the environmental integrity
(with respect to hazardous waste contairination) of the subject property
is required.  However, nc guidance is  provided as to the type of inquiry
or investigation necessary to absolve  buyers of
    Two key  phrases  in  SARA  provide  clues  to  what may  constitute
"appropriate   inquiry":     "previous  ownership"  and  "uses   of  the
property'.    "Previous  ownership"  certainly refers  to past  property
title-holders.   It  may include previous  lessees or site  operators as
well.   It is important to note that no specified tine period is stated
or inferred,  necessitating a conservative assumption  that a chain-of-
title  search  (since recorded origin or  at least 30-40 years) should be
conducted  in lieu  of a  more  customary three-year title  search.   (An

inherent  limitation of such title Marches is that they do not nornally
indicate lessees or  site operators.)   "Uses of the property" denotes a
thorough historical  background and document search  into prior site or
land utilizations  and  site  operational characterizations.   Again, no
specified  tine  period  is discussed,  necessitating a  conservatively
thorough approach to acquiring the relevant information.

    Uiis  import  examines  the  current  practices  of   three  Federal
Agencies; relevant  State laws and regulations; and the neasures being
implemented by  corporations  and institutions,  both private and public,
to  minimize liabilities  under SAR&.   m  addition, case  studies are
included as examples of a range  of current practices for conducting
envircrnental investigations during real estate transactions.

       CMAWKk II

A.  mnooocxxQM

    Federal  agencies axe  liable  for cleanup  of hazardous  substance
contamination under  SARA in the sane way a* private  parties,  such as
individuals, corporations, and institutions.  However,  in an effort to
Bijiiariam  the  risk  of  agencies  unknowingly selling  or transferring
contaminated   properties,    SARA   includes   provisions   specifically
addressing  Federal  agencies.    Section  120 (h) (1)  of SARA  requires
agencies  entering into  contracts   for the  sale or  transfer of  U.S.
property on which hazardous wastes were stored  for a year or more, to
conduct a thorough search of agency files; and to provide details of the
hazardous waste  storage  in the contracts involving  the property under
consideration.   Section  120 (h) (3) (B)  requires  the  agency  to provide
covenants that all  nacessary remedial action has been conducted,  and
that any additional remedial action found  to  be necessary  after the
transfer  will  be  conducted by  the agency.    No   such contractual
requirements exist for private party sellers under SARA, although other
laws (particularly state laws) nay require the seller to make sane sort
of declaration to the buyer during a transact ion of property on which
hazardous substances have been stored.

    The provisions of Section 120(h)  apply  to agencies as sellers, and
as such do not have a direct bearing on the  issue of buyers' liabilities
and  the "innocent  landowner defense11.   Dowever, the provisions were
studied in  light of the  overall liability question,  and the steps that
agencies are taking to minimize linMHtles under SARA.  One important
requirement of Section 120(h)  is the  thorough  search of agency files.
EPA's January 13, 1988 Notice  of Proposed  Rulemaldng states that the
search "...shall consist of a thorough review...of files...that relate
to the yumcnt or past use(«) of the real property that is being sold or
transferred...with ptttir^jlw emphasis upon...  environmental oomplii

obligations of the owner of the realty."  Such a review can help uncover
the  existence,  if  any,  of  problems  created  by  storing  hazardous
substances at the site.

    Several  agencies have policies  addressing the issue of liability,
and are taking measures  to avoid liabilities under SARA.   Sane agencies
are  making their  own provisions (through  contractual means,  etc) to
transfer  part or all of any liability to the seller if the seller is
wholly or partially responsible  for the  contamination. Furthermore, to
minimize  liabilities  from  private  lawsuits,  agencies  such  as the
Department of Defense have instituted procedures to investigate property.
being bought or sold for possible hazardous  substance  contamination.
Briefly described here are some of those Federal agency programs.


    The  U.S. Army Toxic &  Hazard"« Materials  Agency  (USATHMA) has
developed a  document entitled "Environmental Baseline Survey For  Leased
land And  Facilities" (March  1988).   The purpose  of the  document is to
assist investigators in  defining the condition of soils,  groundwater,
surface water,  sediments, and structures in,  and immediately  adjacent
to,  the  property of concern.  A baseline is developed  by obtaining  a
site description,  sampling at strategic  locations, conducting  chemical
analyses to determine precise compositions of the  samples, and preparing
a summary report.

    The  information collected as part of a site description  includes
site topography, types of facilities and manufacturing processes if any,
actual and planned chemical Inventory, environmental control  facilities
and  their status,  existing  flora  and  fauna, and potential  areas of
concern.  Sampling is suggested  in four madia — soil, surface water and
sediments,  groundwater,  and  facilities.    Facilities  to  be  sampled
include structures,  equipment, and sumps and sewers.  Chemical  analysis
involves  defining  analytical parameters   and establishing detection
limits based on criteria and standards for contamination.  The  report

      nts field and laboratory methods and quality assurance; subsurface
soil conditions;  surface  water and sediment  quality;  groundwater  flow
and quality;  facility conditions; and conclusions  and recommendations
(including a monitoring plan as required).

    One purpose of the baseline survey is to determine the environmental
condition of the  property before  leasing from or to other parties.   In
the "»f"»  of property leased from other  parties  the survey establishes
the condition in which the property must  be maintained during the lease,
or at least the  final  condition  in which the property must be at  the
      of  terminating  the lease   (i.e.,   if  the  Army  contaminates  the
     rty, any remedial  actions must leave the property in at least the
      condition  as  it was in,  prior to leasing it).   In the case of
      ty leased to other parties,  the survey determines the condition in
which the leasing party nust return the property to the Army.

    In  either of the above  cases the survey is  intended to establish
whether or not the  property is contaminated by hazardous wastes.   As
such it helps us define how the Amy  is trying to prevent liability, and
contributes to the overall definition of "all appropriate inquiry11.  The
survey  does not seem to directly address SARA'S requirements, and it
does not even necessarily involve property transfers.   However, as far
as it helps us learn of the steps being taken by the regulated public to
prevent liabilities  (and thereby clarifying  the appropriate  inquiry
question) the survey is useful to this study.

    The Office of the Assistant Secretary of the Army for Installations
and logistics is currently developing baseline environmental studies for
use during real estate transactions.   The  studies are being developed in
cooperation with USABWA, and are expected to be parallel in scope to
the survey.

    Officials in the Dept. of the Air Force indicated that there may not
be any  written policy addressing  the issue of liabilities.  Apparently,
during  property  acquisitions,  the Air Force  enquires  into a history of

the   lard use and  performs  a  review  of permits,  but  no  physical

evaluations  (for  the specific purpose of uncovering contamination) are

conducted.   On the other hand, the Air Force does a much more rigorous

site evaluation while selling property.


    The  Ftorest Service publishes  a "land  Acquisition  Handbook"  (FSH

5409.13,  April 1987) that requires acquisitions staff to "identify the
potential  liability  to the Forest Service  for Hazardous Waste  Disposal

tinder  CTK3A".    If there  is  an  indication  of  hazardous substance

contamination  on the property the following steps are to be  taken:

    •   check   with   EPA,   and  state  and  local  agencies
        responsible  for water pollution control, solid waste
                , and mined land reclamation to determine if
        there  are any permits or proceedings involving the

    •   have tests conducted by Forest Service hydrologists,
        other   specialists,   or   contract  personnel   to
        determine if  there are  any releases  of hazardous
        substances on or from the land;

    •   consider including an exception to the exchange or
        option agreement that would allow the U.S. to reject
        the  land if hazardous substances are found prior to
        closing;  and

    •   consider including a provision in the agreement and
        any deed to  the U.S. that would warrant there are no
        hazardous substances  on the  land,  and that the
        proponent or donor will  indemnify the U.S. against
        any  expenses,  claims,  proceedings, or judgements
        arising  out  of the contamination issue.

The last  two points  above do not relieve the Forest Service of immediate

liabilities under SARA.  They siaply ensure that the Forest Service will
be reimbursed for the expenses  of the clean up, or that it can require

the "proponent or donor" to pay for the clean up in the first place.

         In addition to the previsions of the  Land Acquisition Handbook,
the  Forest Service is developing  a policy for sanitary  landfills that
peripherally aHHrpseaa property transfers,  the Forest Service does not
typically  acquire  property that nay nave  been a  hayardnus  waste site.
Therefore  no detailed  site  assessments  are  usually necessary,  and  a
sinple review of permits is sufficient.  However,  two potential problems
with this  approach are:  i) wastes that are illegally dumped at a site,
such as  a landfill; and  ii)  domestic wastes  (garbage, etc) containing
only  trace quantities  of hfi7rarrV«yi substances  that are  dumped  in  a
landfill,  but  the  concentrations  of  hazardous  substances  steadily
increase over tine.  To prevent liabilities under such circumstances the
Forest Service  is gradually phasing out its  acquisition  and management
of landfills.

    Mast of the Department of the Interior's  (DOI) property transactions
are exchanges rather than outright purchases.   However,  the provisions
of SARA still apply,  and officials  in the  agency  are concerned about
liabilities.   DOI's  Bureau  of Land Management is currently developing a
policy that addresses the liability issue.  In the interim the Bureau is
either  not acquiring  any property,  or if it  is,  the seller  is being
required to conduct site investigations  and to certify  the absence of
hazardous substances.  In most types  of transfers DOI requires the other
party to prove the absence of any  contamination.   However, if Congress
mandates the  transfer then the requirement cannot be enforced,  and DOI
could beoctpp  liable  if contamination  is found  after the  transfer is


                     HI.   BOOK MSB MPRBSDIMTOM
     Several states have  laws and  regulations dealing  with hazardous
. substance contamination,  and the  issue of  liability with  respect to
 property  transfers.    Some  states  also   have  what  are  known  as
 "superliens".    Superliens  give the  state  the authority  to place a
 priority  lien  on  a  pimjexty  that  is  found  to  be  significantly
 contaminated,  in those circumstances where the  state is forced to expend
 its own  monies to  remediate  the property.   Such  liens typically take
 priority  over  all  other  encumbrances,   including  first  mortgages
 (although tax liens are cometimes ^vntudart).  This  is motivating private
 institutions,  such  as  banks and other lenders of commercial mortgages,
 to require  borrowers to  conduct thorough assessments of  the property
 before any financial ccranitaents are made.  In  some states,  (for example
 Massachusetts)  these  institutions  form such a powerful interest group
 that the states have not felt the need to impose explicit environmental
 requirements during property transfers.

     This chapter focuses on state laws, regulations, and requirements of
 selected  state environmental  agencies  in. their  efforts to  identify
 contaminated sites, have them cleaned up, and make responsible parties
 pay  for  the  cleanup.    The  cases  of  New Jersey,  Massachusetts,
 California,  Connecticut, and Illinois  are briefly rtismssfrl here.


     New Jersey has enacted a law entitled tr« "Environmental Cleanup and
 Responsibility Act"  (ECRA)  that  imposes  preconditions  on the  sale,
 transfer, or  closure  of  "industrial establishments"  involved in  the
 generation,  manufacture, refining,  transportation,  treatment,  storage,
 handling, or rtlsnnml  of hazardous substances.  The preconditions are:

    •   the execution of an approved cleanup plan detailing
        the  measures  necessary  to detoxify  and  restore
        contaminated property;
    •   approval  by  the  New  Jersey   CEP  (Department  of
        Qivironmental Protection) of a  negative declaration
        that  there have  been  no discharges of  hazardous
        substances  on  the   property,  or  that  any  such
        discharges were  cleaned up to  the  satisfaction of
        CEP; or
    •   the  execution of  an  Administrative Consent Order
        (AGO) between the owner/operator and DEP,  allowing
        the  sale  to  be  consummated   prior to full ECRA
        ccnpliance.  The ADD  does not relieve the seller of
        full legal, financial, and other responsibilities to
        comply with the requirements of the law.

Only an outline of the process and highlights of the salient  features of
this innovative program are rilsnissed here.

    ECRA  jppogag the burden  of compliance  on  sellers,  rather than on
buyers, and is  therefore  slightly different fron SARA.   However, the
principles of assessing  contamination from hazardous substances are the
same, and therefore ECRA provides valuable insights into the issue of
appropriate inquiry.   Furthermore, ECRA directly arUrpsqps the issue of
contamination  assessment  ^.Tri^g property  transfers, and  as such is
directly  relevant to  the appropriate inquiry question, which applies at
the time of property purchases.

    Under ECRA  all industries that fall within certain SIC categories
are required to comply with the requirements of the law.   The DEP issues
Letters of Wen-Applicability  (IflA) to  those applicants who request it
and who are not under ECRA's purview.  These applicants may then proceed
with  their transactions without  following  the  steps required of
applicants  subject to BCRA.   IKAs are not a  statutory requirement;
rather they axe a service provided by the  CEP in response  to requests
fran mortgage bankers, attorneys, and purchasers %to axe concerned with
possible  BCRA violations, and who often require  sellers of properties or
businesses to demonstrate that pending transactions may  proceed without
ECRA's intervention.

     An  applicant who  is  subject to  ECRA nust  submit to  the CEP  an
initial notice of intention to sell property.  The CEP assigns the case
as one of low Environmental Concern (IEC) or one  of High Environmental
Concern  (HBC).  The applicant is then required to provide the CEP with  a
negative declaration that the property is free of contamination. In the
case of  HECs the applicant nust also perform environmental  aegnm^mmn g
at the site before subnitting a negative declaration.   The CEP provides
guidance  to  conduct such  environraental assessments  in their "Sanpling
Plan  Guide".    The  initial sanpling  plan  includes  an  evaluation of
potential  contaminants, and migration paths from  uncontained releases.
then significant levels of contamination are found during the initial
evaluation, a second sanpling plan nust be prepared to evaluate (through
further  sampling) the horizontal and vertical extent  of  contamination.
Sanpling plans nust be approved by the CEP before sanpling begins.

    The Sampling Plan Guide document provides details of  the aspects of
the  property that must be  investigated,  including the site  history,
soils,  topography/drainage,  hydrogeology,  and  geology.    It  suggests
nedia to be sampled, sanpling  frequencies  and  locations, and sanpling
depths,  and  provides  decision  criteria  for   various  choices.    It
describes  the sanpling methods  appropriate when underground  storage
tanks  (and other  storage  containers), drums,   suops, pits,  etc. are
present  on  the property.    It  also  disnreses methods to  use  when
equipment  and structures  are present,  such as  transformers  (which may
contain PCBs), and friable insulation (which nay contain asbestos).

    The KJEEP nay take  up to one year  to review and approve a sanpling
plan,   for this reason KJCEP allows applicants to  execute a sanpling
plan prior to KJEEP's approval.   However, the sanpling  nust be conducted
on an "at risk" or "at  peril" basis,  for which the following conditions

    e   the sanpling plan represents the minimus  anoint  of
        work required on  the site.   The State nay request
        additional  sanpling once they have reviewed the
        sanpling plan and the analytical results;

        the type of sampling proposed at  the site most be
                  with  the KJEEP  rag* manager or an ECRA
        representative; and
    •   the KJEEP most be given the analytical results upon

    If the HEC site is clean the applicant files a negative declaration,
and nay proceed with the transaction.   (This  is the same point that the
applicant at an IEC site reaches after a preliminary site assessment.)
If the  site is not clean then the HBC applicant oust submit a cleanup
plan, which after  DEP approval,  nay be implemented.   Once the site has
been cleaned up to the standards  in  the cleanup plan,  and the CEP has
certified compliance,  the applicant  nay  proceed with the transaction.
Applicants may be  required  to monitor the cleanup sites even after the
sale of the property.   (There is  an  alternative  available, whereby the
transaction is  allowed to  proceed before cleanup.   This requires the
seller to enter into a consent decree, and post an appropriate financial
assurance guarantee.

    "Certification" by the  DEP does not relieve owners/operators of the
property of liabilities  for cleanup of  contamination  found after the
transfer, even if the contamination occurred before the  transfer and was
not detected during sampling.  In other words, compliance  with ECRA does
not  relieve the owner/operator of any cleanup responsibilities.   BCRA
merely reduces  the chances of contamination going undetected and  being
passed on to prospective buyers.
    In  1988,  the  Massachusetts  legislature  proposed  to  amend  the
Massachusetts  "Superlien"  law  (the  Massachusetts  Oil  and  Hazardous
Material  Release Prevention and Response Act —  Chapter 21 (E) of  the
Annotated Laws of Massachusetts).   That  law makes  owners of property
contaminated by  oil or haCTTtk^tfr materials liable  for the State's  costs
for  cleaning  up the  property,  upto  the value of  the property  after
cleanup.   Owners are  liable «v» if tb«y can prove  their property  was

             by Bnmmne else.  Die only recourse for owners is to pursue
in court other parties who share the liability jointly and severally.

    The amendments to Chapter 21 (E) were proposed in the  "Act Providing
for  Certain Protections for Innocent  landowners Relative to Hazardous
Waste".   Although it has yet  to be passed into law many of the Act's
provisions are relevant to this study, and are djgr»e.cart  here.  The Act
explicitly defines "reasonable inquiry".  Presented  here is the verbatim
definition:   "a  reasonable inquiry shall  mean, with respect to all
properties,  visually inspecting  the site  for  unusual appearances of
vegetation,  surface soil  or water, as well as for obvious  signs of
hazardous  material  di'qTnsal,  and inquiring  of  the  department   (the
Department  of  Environmental  Quality   Engineering   — DEQE)  and  the
          waste coordinator (if  any),  Fire Department, Board of Health
and Building Department of the city or town in which the site is located
to  ascertain whether  their  respective  records  indicate that oil or
F^y-wJlTig material had been present at or released at the  site".

    In the  event that the visual  inspection  or inquiries indicate the
use of oil or haainkms material  for industrial,  connercial, or landfill
purposes  where  oil or  hazardous  material was likely  to have been
released, the Act further defines reasonable inquiry:  "... a reasonable
inquiry  shall also include  the following further  assessments  to be
performed by or under  the supervision of a  registered professional
engineer, hydrogeologist, or  other qualified  scientist with experience
in such matters:   (i) Subsurface eogdoration and sampling in number and
location adequate  in (their)  professional  opinion to reasonably  screen
for the yuBsenaB of oil or hazardous material  in soil and  groundwater on
the site  in the area from the land surface to and  including the water
table of the  typ»m"rt  aquifer or drilling refusal, whichever shall be
    intend first  and (ii)  qualitative screening analysis for volatile
organic  comjumids and  such other hazardous  •Bterials as  in  (their)
professional opinion are likely to have been released at the site.  Ihe
results  of  such further  anumnHMit  shall be  compiled  in  a report
prepared  by  (the professional)  who shall  include therein  copies of

boring logs ani other data developed during the course of performing the
assessment".   (Parenthesis in the preceding text have been added by the
authors of this report to facilitate readability.)

    The Massachusetts CBQE prepared a Guidance Policy (Revised Policy-7,
June 22, 1987) for DBQE staff to identify imminent hazards as quickly as
possible and  to  use short-term measures to eliminate, reduce, or  avoid
them.   The contents of the  Policy were formalized in Subpart E of the
Massachusetts Contingency Plan of October 1988.  Relevant steps in the
process are a Preliminary Assessment, a Phase I Site Investigation, and
a Phase II Full Evaluation.

    A  preliminary  Assessment  is  a study  used  to  make  an  initial
determination of the  environmental  condition of a site suspected  of
being contaminated, and to determine the course of future action.   It is
performed when DBQE is notified of a release or threat of release of oil
or  hazardous materials,  and includes:   obtaining  specific  physical  and
historical  details  about  the location;  reviewing  local,   state,  and
federal  documentation such  as permits, past environmental violations,
and complaints  about the types  of materials used  at the location;
consulting  with ccnnunity officials  and residents;  visually inspecting
the site; and identifying potential human  and environmental receptors.

    If  there is a possibility of contamination, but the results of the
Preliminary Assessment  are unclear,  a Phase I Site  Investigation  is
conducted.    Such an  investigation serves to confirm the  presence  or
absence of contamination.  Although it  is  not intended to provide a
     rehersive assessment of a site's environmental condition it involves
 collecting important information,  including:

     •   a property  history  that  details  past and present
         owners  and  uses  of  the  location;  description of
         types and quantities  of hazardous  substances and
         details cf  their  containment;  the  history of all
         waste digrxyvQ practices at the property; a history
         of   all   release   incidents,    violations,   and
         environmental permits;  and a brief description of
         past and present land use on adjacent properties;

        a   location   description    that   outlines   the
        topographic,  geologic, hydrologic, and hydrogeologic
        conditions at and surzounding the site; location and
        information on  structures and  conduits  associated
        with the  presence  of ha ??"*•"« materials; evidence
        of environmental contamination; and the presence of
        subsurface Hiepneai systems;  and
    e   locating  and  characterizing   the  sources   and
        quantities of contamination  through sampling and
        screening.  The  type of  field  testing  required is
        determined by conditions at the location, and other
        criteria ptirH ****** elsewhere in the Policy; in sane
        situations,  steps  in  the  Phase H  study may be
        needed.    Typically,  however,  the  Phase  I  study
        includes  at   least field  sampling  and  laboratory
        analysis   of  various  media,   and   geophysical

    If the Phase I study confirms the presence of contamination a Phase
n — Full Evaluation 'MifMi""p.  This is a more  thorough investigation
of the site, and its  scope is determined by the results of the Phase I
study.   A sampling plan is required,  which includes a comprehensive
hydrogeologic  investigation,   as  well   as   sampling   in  other  media.
However, if any medium is omitted  from the sampling  plan the reasons for
omission must be justified.   Further,  as specific information becomes
available at the site ffd^lti"^^ Phase H study nay  become necessary.
    Phase  n  studies typically  include  investigating  physical  site
characteristics, and  defining  the source and extent of  contamination.
Physical  site  characteristics include topography,  surface drainage
characteristics, and vegetation characteristics;  surface water locations
and  flooding potential;  types of overburden material and thicknesses;
soil classification and permeability;  types of bedrock  and depths to
bedrock;   grcunowater  elevations,   flow  direction  and  rates,  and
piezcmetric surfaces and gradients;  and predominant wind direction.

    Defining the source and extent of contamination involves determining
the exact location, source, concentration, volume,  and type of container
(if  any);  existing  or potential  migration  pathways,  including all
potential soil,  groundwater, surface water,  air, vapor, and  food chain

pathways;  any plumes of oil  or *»*»rrinvi materials in groundwater; and

the spatial area and concentrations in all other media.

    Although Massachusetts'  Guidance Policy  is  written for DBQE  staff

rather than the general public,  although  it is not written  specifically

for property  transfer situations, and although  its scope is far  wider
than that of this study, the Policy is useful to this study.  One of the
objectives of the Policy is  to determine  the presence of contamination,
and its  nature and extent.   The objective of "appropriate  inquiry" is

essentially the  sane.  Therefore,  whoever the  Policy  is written for,

whether  it be  DEQE  staff  or  others,  and  whether  it  is written for

property transfers  or not,   such a document provides insights into the
measures necessary to conduct a comprehensive environmental assessment.

    In 1987 the Massachusetts  Association of Realtors,  with the  support

of a  coalition of industry groups, submitted House Bill 606.  The Bill
proposed several amendments to Chapter 21 (E).  Although the Bill  was not

enacted, several provisions are relevant to this study:

    •   continued liability  for owners who contaminate their
        own  land.    This  liability  includes the  cost of
        cleaning up contamination belonging to the owner; or
        contamination that was brought onto the land under a
        contractual  agreement with the  owner or  with the
        owner's permission;

    •   continued  liability for owners of  property (other
        than  one-to-four  family homes,  condominiums,  or
        cooperatives) who  knew or  had  reason to knew their
        property was contaminated when they bought it;

    •   an automatic  "safe  harbor" exemption  from liability
        under  Chapter 21 (E)  for one-to-four family hones,
        condominiums, and cooperatives;

    •   creation  of  means  for existing  and  prospective
        property  owners to  achieve "safe harbor" exemption
        from  future  liability  toy  establishing through a
        reasonable  inquiry  that  they did not know or hire
        reason  to  Vrr** « on
        their  property at  to*  tin*  of inquiry.    Innocent
        owners  who  failed  to  go through  the process of
        reasonable  inquiry  and whose property was found to
        be contaminated would continue to be  liable; and

        protection of lenders who became owners or operators
        of property through foreclosures, taking possession,
        or   other  measures   to  protect   their  security
        interests.   Lenders are relieved of liability only
        if they did not know,  and had no reason to know, of
        contamination on  the property as of the date they
        became  owners  or  operators.    Furthermore,  this
        protection would not apply if lenders participate in
        the   management   of  a   site  in   a   manner  that
        contributes to the release of contaminants.
    California has not, to date,  passed legislation  that specifically
requires  a  property assessment,  although  such  legislation  has  been
proposed and defeated in the past.   Because California's environmental
policies  are often viewed  as  precedent  examples  for  state-level
regulations, a discussion regarding what has and has not been instituted
in California is appropriate.

    In  1986,  both a  state senate bill and  an assembly bill that  were
introduced  in an attempt to  ease  the complexity of  the  liability
language in O5HCLA and SARA did  not achieve final passage.  Senate Bil3
2375  (Torres) contained  language similar  to  the innocent  landowner
provisions of the SARA  statute,  while Assembly Bill  870  (Sher) would
have authorized State authorities to place liens on property subject to
Superfund cleanups.  Although neither bill achieved final passage before
adjournment, AB  870 would have bean a relatively moderate  approach to
the lien question as compared to the laws that have been passed in other
states  (e.g., Arkansas, Massachusetts, and Hew Jersey).

    Although  no  specific  regulations have been ImjiriMri in California
requiring environmental  minemtment* for real property transactions,  or
legislation concerning  1)  notification of hazardous substance releases
prior to the sale of property,  2) consolidation  of  various lists  of
contaminated sites in the state,  and 3) registration of environmental

     1.  Senate Bill 245 and Assembly Bin 924

        Effective September,  1987,  any owner of  a nonresidential real
property interest in California who knows or has reason to believe that
a hazardous substance is located on or beneath the property, is required
to notify,  in writing,  each buyer  °* the property of  the condition,
prior to the sale of the property.   The new law  (SB 245 and its amending
bill AB 924) changed the California Superfund lam as outlined in Section
25359.7  of the  California  Health and  Safety Code,  and  imposed new
disclosure obligations on sellers of nonresidential real property and on
lessees of  both residential and nonresidential real property.  Failure
to give the notice can subject  the seller to liability for damages and,
if  an  owner  has actual  knowledge  of  the presence  of  a  hazardous
substance and knowingly and willfully fails to give notice, then a  civil
penalty of up to $5,000 nay be levied by the state for each violation,
in addition to any other legal remedies each buyer may have.  As part of
the  California Superfund law,  it  is administered by the Departanent of
Health Services  (EHS).

        The  EHS still  needs to provide guidance  to clarify the law.
However,  until  such clarification  is provided,  there  is  a  reporting
obligation  during   transactions  involving  a  transfer,  contract  to
transfer, or title to nonresidential  real property.  When  transferring
real property,  a disclosure is required when the presence of hazardous
substances   on  the  property   is  suspected.  This  requirenent  thus
indirectly  imposes  the  burden  of   investigation  on  the  owner,  if
contamination is suspected.  lastly,  the  lessees of real property have
an ongoing responsibility to at least minimally investigate the presence
of hazanfrms  substances  on the property as the  result of a release,
which  must then be  immediately •M*^™***  to the  owner of the property.
Each of these  requirements provides incentives to both, real property
owners and lessees,  to conduct  environmental property assessments.

     2.  Oortase List of Hazardous Waste and Substances Sites

        AB 3750 (Oortese),  enacted  in 1986, requires the compilation of
 several  lists  of information  concerning various  hazardous waste  and
 substance  sites.   Applicants for a  development project must consult the
 list and submit a signed statement  indicating if the project is located
 on a listed site,  furthermore, the Office of Planning and Research oust
 consolidate and distribute the list, ooooonly known as the Oortese list,
 which  is  actually  compiled by three separate agencies and  updated
 annually.   Die portion of the list compiled by the State Department of
 Health  Services  contains   all  hazardous  waste  facilities subject  to
   rective action, all  land designated as hazardous waste property or
border  zone property,  all hazardous waste disposal on public  land,  all
sites in the Abandoned Site Asspsanpnt Program, and a list of all public
drinking water wells with detectable levels of organic contaminants.

        Next, the State  Hater  Resources control  Board nust compile  a
list to include all underground storage tanks for which an unauthorized
release report is filed,  all solid waste disposal  facilities fron which
there is  a migration of  hazardous waste,  all canse and desist orders,
and all cleanup and abatement orders issued related to the discharge of
wastes  that are  hazardous materials.    lastly,  the  California Waste
Management  Board must compile  a  list of  all  solid  waste  disposal
facilities from which there is known migration of hazardous waste.

    3.  Registration of Environmental Assessors

        The  California  Bivironmantal  Affairs   Agency  has   adapted
regulations  providing  for the voluntary  registration of environmental
ftnprmp-m',   Although the  focus  of *h*g legislation  is to promote  the
EE&'s  policy  statement  endorsing  environmental  auditing  (which  is
intended to assure the safe handling  of toxics), to  aid industry in
complying with  environmental  laws and  regulations, and  inspire public
confidence in hazardous materials management, the  registration has  the
potential to become  a valuable luimuioe in standardizing environmental

assessor qualifications.   These environmental assessors are expected to
be able  to provide  a qualitative, or  where feasible, a  quantitative,
review of the risk resulting from occupational, public, or environmental
exposure  to hazardous substances.   Assessors make  reccnraendations  for
minimizing the  risks,  including any potential liability associated with
regulated  and  unregulated  t"««»Tri""e substances.    As such,  this sane
group of  assessors will typically be  qualified to conduct due diligence
assessments during property transfers, providing the individual can also
identify  potential  liability  nsnori«1-«1 with  properly ownership.   It
should be noted however, that the law was not intended to provide a list
of  assessors qualified to  conduct  real  estate  property assessments.
Currently,  the  registration is  voluntary  for candidates meeting  the
mim'Titim criteria established for assessors by the Environmental Affairs
Agency, but a standardized test nay be administered  in the future.


    Connecticut's Industrial Transfer Law  (amended  in 1987)  deals with
the  issue of cleaning up sites  contaminated by  hazardous wastes.   It
requires  anyone  transferring  ownership in  certain  businesses handling
hazardous wastes to give a written  statement to  the purchaser and  the
Connecticut Department of Environmental  Protection (CEP).  The statement
must  certify that any wastes  on the site  are being properly managed.
Alternatively,  the person nay certify to the CEP that the waste will be
cleaned up in accordance with a EEP-approved schedule.

    The  law states  that prior to  transferring an "establishment",  the
transferor  must submit  to  the  transferee  a  "negative declaration"
(similar  in principle to New Jersey's ECRA) regarding on-site hazardous
waste releases  and current hazardous  waste management practices.  A copy
of  this declaration and accompanying attachments must be submitted to
the CEP within  15 days after the transfer.

    An  "establishment11 is defined as a business  or other concern that
generates more  than  100 kilograms of  haTur*"**? waste per month, or which

recycles,  reclaims,  reuses,  stores,  handles,  treats,  transports,  or
disposes of  hazardous wastes  generated by another  concern,  including
individuals,   businesses,   and  aunicipalities.     Additionally,   the
requirements apply to all dry cleaners,  auto body  repair shops, painting
shops, and furniture stripping facilities operating after May 1967.

    A "transfer" is defined as a transaction or proceeding involving a
change  of  ownership.   This includes sale of  stock in the  form  of a
statutory merger or consolidation, sale of the controlling share of the
assets, the conveyance of real property, change of corporate identity or
financial reorganization.   It  does not  include corporate reorganization
that does not substantially affect the ownership of the establishment.

    "Negative declarations" are written declarations  that state either:
    e   no  spill,  discharge,  uncontrolled  loss,
        infiltration of hazanVnis substances has mxuiTed on
        the property; or
    •   if  a spill or  other contamination has  occurred it
        has either  been  cleaned  up  in  accordance  with
        procedures  approved  by the  CEP;  or the EEP  has
        determined that it poses no threat to human health
        or  safety, or  the  environment  that would  warrant
        containment, removal, or other mitigation measures.

 to addition the declaration  sust state  that any hazardous wastes  that
 renain on site are being managed in accordance with the appropriate laws
 and regulations.

    If a  "negative  declaration"  cannot  be  made  because  unnanaged
        *  wastes  are  present on  the  property, the transferor  must
 complete a form that declares the reasons for not submitting a negative
 declaration (usually because contamination has not been satisfactorily
 cleaned up).    In addition,  the transferee  or another  party to  the
 transfer must certify to the DEP that the property will be cleaned up to
 the extant necessary to IP^™"» or mitigate any threat to human health
 or the  environment;  and that cleanup  activities will be  conducted in
     rdance with HP-approved procedures and tine schedules.   This form

must be  submitted to the DEP prior to the transfer.

    The 1987  amendments to the Act eliminated the state's authority to
place  a  priority  lien  (superlien)  against  real  estate  cleaned  of
          material  using state  funds when it has  been transferred in
accordance  with the state's industrial transfer  lav.   Thus,  in such
cases  the state's lien  would no longer have priority over previously
recorded  deeds, mortgages,  and other transfers.   The amendments also
exempt gasoline service  stations  from the  state's statutory lien for
hazardous materials cleanup expenditures if the stations comply with DEP
requirements   concerning   design,   instruction,   installation,   and
maintenance of underground storage tanks; and they comply with the  other
negative declaration requirements.   Furthermore, the Act makes it  clear
that the state's lien  is on the real estate on which the spill occurred
or  from which it emanated,  rather than against any real estate of the
person causing the spill.

    The Hazardous   Haste  Division  of   Connecticut's  Department   of
Environmental Protection enforces the provisions of the law.  However,
the State publishes no criteria for determining when  a site assessment
is  required,  nor does the State provide guidance  for conducting  them.
On  the other hand, private groups such as banks and other lenders,  title
insurers,  and real estate developers, motivated by the State's superlien
policy, have  been  at  the  forefront  of  requiring site  assessments.
Parties  to  real  estate  transactions   (particularly borrowers) are
required  to conduct site assessments to ensure the properties are free
of  hazardous waste contamination.  This aspect is disarewd in detail  in
a later cf-spter.


    Illinois  recently  promulgated  The  Illinois  Responsible Property
Transfer Act of 1988",  which requires that, for  all  transfers  of real
property  covered by  the  Act,  the  transferor mist provide  to the
transferee and  lender  an environmental Disclosure Document.   (The Act

takes effect  in Noventoer  1990.)   Also,  the Disclosure  Document must
berecorded with the county recorder and a  copy  oust be filed with the
Illinois Environmental Protection Agency.

    teal property,  for the  purposes of the Act,  is defined as property
in Illinois that:

    •   contains  a  facility  that  either  manufactures,
        ixports, or uses hazardous chemicals,  and has  such
        chemicals on-site in  an amount above  a statutory
        threshold  limit.    (These  conditions subject the
        facility  to  reporting under  Section  312  of the
        Federal Bnergency Planning and Ocnunity Right-to-
        Know Act of 1986) ; or
    •   contains an underground storage tank that requires
        registration with the State Fire Marshall.

The Disclosure Document is a pre-printed questionnaire that requires the
transferor to answer, to the best of his knowledge,  several  "yes or no"
type of questions.   These questions deal with the handling of hazardous
or  spo^iM wastes  or  substances  on  the  puberty; the  existence  of
governmental permits;  previous enforcement actions; and whether or  not
any reportable releases of oil or hazardous substances have occurred on
the  property; and whether  or not  the release  has cone into direct
contact  with the  ground  at this  site.   If the  response to the last
question is "yes", several  other  questions oust be answered  regarding
response and cleanup  actions.   Additional questions pertain  to events
that nay have uuuutuJ during the prior ownership of the property.   The
Disclosure  Document also notifies the transferee that property owners
may  be   held liable for   costs  related to releases  of  hazardous

    The  Act  allows any  of  the transaction participants  to void  any
d>ligat<«»  to accept or finance a  transfer not yet finalized,  under
either  of  two  circumstances:     the Disclosure Du».xuiimit  uncovers
previously  unknown environmental problems  at  the property;  or  the
transferor   *«<"»«   to   comply   with  the  disclosure   requirements.
Participants «ust void the transaction within 10  days after demand for


or  receipt of the  Disclosure  Document.

    The  Act   is  somewhat  different  from  New  Jersey's  ECRA,  and
Connecticut's  Industrial  Transfer  Law:    it  only requires disclosure
regarding  the  environmental  condition of  the property, and  does not
require  that   cleanup  occur  before  the  property  is  transferred.
Furthermore,  unlike  New  Jersey's  ECRA,  which  allows buyers  to void
transfers  even after transfers are  closed,  the  Illinois  Act permits
parties  to void  the  transaction  only if  it has not been  closed or
finalized.   Also,  in New Jersey  the State  government nay  void the
transaction, whereas  in Illinois only the "parties to the real property
transfer" nay do so.

    Another  difference is  that the  Illinois Act does  not explicitly
require  site  environmental  investigations during property transfers.
Moreover, any investigation performed does not require prior approval by
the State government,  as  is the case  in New Jersey.  Furthermore, there
is a  potentially wider range of properties covered by the Illinios Act
than  either  the New Jersey  or Connecticut  laws.   This  is because
Illinois' regulations are triggered in part by SARA Title III and OSKA
Hazardous Ccmnunication Standards.

                       UUP1XK IV

     IV.  fnt.rr^fs AND H»CTIfTM or pgrVMB MP HIRT.TC IM3Tj.wrj.ONB
    One of the emerging concerns  among lending institutions is that of
financial liability  for cleaning  up property contaminated by hazardous
substances.   Borrowers from these institutions (such as banks, savings
and loan associations, thrifts,  and mortgage companies)  often offer real
estate as collateral against their loans,  and most loans for real estate
automatically involve using the  real estate  as collateral.   In such
cases the lender holds a lien against the property,  and in the event the
borrower defaults on the loan (because of bankruptcy or other inability
to pay the loan off)  the  lender  can foreclose on the property and is
free to dispose of those assets as it sees fit.   When lenders foreclose
on contaminated property they become liable for the cleanup  costs.

    Sometimes borioners default on their loan because they become liable
for  the costs of  cleaning up  contamination from  hazardous substances
discovered  on their property.    They may not be able  to afford the
cleanup costs, or  may declare  bankruptcy and lose the property rather
than pay  for the cleanup.   The lender then forecloses on  the  property
and  effectively  becomes its  "owner/operator*.    Conversely, a  borrower
may default on the loan for other reasons,  the lender forecloses on the
property  and take ownership,  and  contamination  is  found before the
lender can dispose  of the  property.   In either  situation the  lender
        potentially liable for the costs of contamination cleanup.
    Several  lending  institutions have  policies  addressing issues  of
liability  arising tarn  contaminated property, and provide  guidance to
their lending  officer*  and underwriter*  on  property aumwjmiit*  to
ensure the property is free of enviremantal contamination.   Bie nature
of these policies  and  guidance  duuuBants varies  from state  to state
because  of differing environmental, and other, laws.   However, for the
purposes of  illustrating yrff of the practices prevalent in the banking

industry, riiernegad here are the policies and procedures followed by one

bank in  Connecticut and are  in California.  In addition,  this section

contains a discussion of the policies of a major real estate group.

    1.  Policies and Procedures of a Connecticut Financial Institution

        In  Connecticut,  as has been  described in an  earlier section,

lending  institutions are acutely  conscious of the  issues  of financial
liability  for envirorsnental  contamination.  Thus,  several  banks have

comprehensive policies addressing  those issues.  He were able to obtain
information on the policies of one such bank in Connecticut.  This bank

(which has  advert  that information on its program be used in confidence)

also specifies procedures to  be used for all individual transactions of

$250,000 or more,  in which real estate is being taken as security.  Ihe
purpose  of the  assessment "is to attempt to quantify and  reduce the

risks  involved in  real  estate transactions given the  current state of

legislation as  it relates  to  the Superlien".   Site  assessments are

conducted at  two  levels  —  Preliminary,  and Formal.

         Preliminary assessments consist of five main tasks:

    e    Site  Inspection —  The  site  and  structures are
         observed for indications of possible contamination,
         including discolored  water or soil, dead vegetation,
         land  fills,  carelessly handled  drums,  buried oil
         tanks,  and the presence of asbestos or transformers
         using PCB coolant oils.

    •    Review of 10K and 8K Reports — If the borrower is  a
         public   company,   the  Securities   and   Exchange
         Commission (SEC) requires that these reports contain
         ar, environmental liability statement.

    •   Property   History  Check  —  Representations  are
         obtained   from  the  borrower  and seller  of the
         property regarding the prior and anticipated use of
         the  property.   In addition, this task includes  a
         survey of public  records,  title  searches,  and  a
         review of prior businesses utilizing the property.

    •   Department  of Envirormental Protection Check —  A
        letter of  inquiry regarding the property is sent to
        the CEP, which checks for hazardous waste,  air,  and
        water resources compliance.  In particular,  checks
        are  made   for  current  toxic  waste   sites,   and
        properties  with contaminated wells,  for which  the
        DEP has lists.
    •   Negative Declaration  Review —  Connecticut  requires
        certain  types  of  businesses  to  submit  "negative
        declarations"  before  transferring property.   These
        documents are reviewed to learn about the nature of
        any spills at the site, and cleanup actions.

The bank provides  a comprehensive "Property Research Checklist" to help
lending officers to  conduct  preliminary assessments.   There  are also
questionnaires to be completed by the borrower that provide supplemental
information on the site, and on the possible presence of asbestos.

        Formal assessments  consist mainly of subsurface  exploration.   A
hydrogeological consultant  determines,  and if  possible  quantifies,  the
extent of the problem, and recomoends remedial action.  Some recommended
tasks include installing monitoring wells,  pressure testing underground
tanks, and excavating test pits  for subsequent laboratory  analysis of
soil and groundwater.  After the formal  site assessment,  the results are
sent  to  the  bank's  engineering  consultant  for  interpretation  and
evaluation.    The  bank requires   forma]   site assessments  for  all
transactions  involving  gas  stations,   dry  cleaning,  electroplating/
anodizing  operations, chemical or petroleum manufacturing/prooessingy
storage, photo  processing,  hat manufacturing,  tobacco  land,  and fruit
    2*  Policies ***** Tn H tilirrtff ot a C^l * fo**1 •* • Financial
        A major national banking corporation in California has developed
guidelines  for environmental gmaomnatifem  of crmnryrrial and industrial
properties on which the bank issues loans.   It i* the policy of the bank
to require a Hazardous Waste and Toxic Material Investigation Report for
all real estate transactions.  The' policy requinc that the report be

prepared  by  a qualified  environmental engineering firm  that has been
approved by the Bank.

        The  assessment   for  hfisarrtcnis  mntprials  consists  of  seven
parts:  An offsite review;  a review of present and proposed uses of the
site  and  surrounding land;  a review  of the past  use  of the  site and
surrounding  land;  a walking inspection of the site; a study  of water
sources; a soil and subsurface investigation; and other observations.

        The first part of the offsite review consists of determining if,
within a two-mile radius of the site, there exists:  A superfund site;  a
suspected contaminated site; operating landfills;  inactive landfills or
dumps;  hazardous  waste  facilities;   or   industrial   or  wastewaster
discharges to surface water that run through or  near  the site.   The
second  part  involves  contacting  federal,  state,  county,  or  local
agencies   to  obtain   the   latest   information   concerning   possible
contamination within a two-mile radius of the site.

        The  review of the present  and proposed uses  of the  site and
surrounding   land   starts   with  examining  aerial  photographs,   and
indicating the present use of the site  and surrounding land within 1/4
mile  of the  site.   Seme of the  uses indicated in the guidance document
are:  farming, residential, gasoline stations, underground tank storage,
oil or petrochemical operations, manufacturing, mining,  vacant  land, and
timber land.   The  next step is to identify any land within 1/4 mile of
the site that is proposed for a permitted  land fill or hazardous waste
facility.  If such exists or is planned, details are obtained  as to the
potenti?.] of such facilities creating an adverse environmental  impact on
the subject site.

        The  review  of  past uses  of  the  site and surrounding  land
includes obtaining information from  local government officials or long-
time  residents  about  the  past  uses  of  the  site  and  surrounding
properties within I/A mile.  Potential information sources include local
agency personnel and officials familiar  with  the locale and its history

(title  officer,  registrar of deeds, township clerks, etc).  The  review
also includes providing a history (Chain of Title)  of the property  since
January  1,  1940  and establishing a consensus of  information  on past
uses,  particularly  to  identify  any  former  use  involving storage,
treatment, and disposal of hazardous substances or toxic materials.

        Other  steps in the review  of past uses  include checking  and
comparing past and present aerial photographs to  identify development
and past uses; and determining  if the site or surrounding land within
1/4 mile of the  site  had been used for one of the following purposes:
vacant  land;  agriculture  (pesticides or herbicides  used  are to  be
noted);  pasture/range  land; tank, drum, or equipment storage;  industry
or  manufacturing (the  type  of  facility  is to  be  noted);   mining,
quarries,  or  sand  and gravel  extraction;  oil  and gas  exploration;
chemical,   petroleum,   or   waste   storage/processing/injection  wells;
military installations  including bases,  armories,  arsenals,  or  test
ranges;  or fill areas.  In particular this review must identify if there
are or have been  any liquid fuel storage tanks on the site, determine if
they  were used   for heating  fuel,  vehicle fuel  or process fuel,  and
establish whether they were above or below ground, the age and number of
tanks, and their  capacity.   The review must also determine if there have
been any known leaks or spills associated  with the tanks.

         The  walking   inspection  of the  site  involves observing  for
discolored  or disturbed  soil areas; areas  of sparse,  sick,   or dead
vegetation; drums or storage tanks  (the type must be noted); discolored
or  polluted  water; unusual or  noxious  odors; groundwater monitoring
wells;  road or two-tracts  with no apparent outlet or purpose;  asbestos
 (existing buildings  or  structures);  and PCBs (existing  buildings or
structures).   If any  of those  conditions are observed,  the  guidance
document recommends further investigation and testing to determine the
extent  of  any soil  and  groundwater contamination.   To  document the
analysis of the  samples  tested a laboratory  report is required.   This
report  fr»yri>~s any tests nade and indicates the chemicals tested for,
the reasons for  testing these chanicals, the concentration found, and

the  allowable  limits  of  concentration within  applicable  standards.
Finally, the reviewer is required to provide ocnnents regarding the test
results, conclusions and reccnraandations pertaining to any remediation
that nay.be required, and best estimate of costs for any remediation.

        Assessing  water  sources involves  identifying  the  bodies  or
streams  of surface water that are  present on the  site such as ponds,
lakes, wetlands,  or swamps,  rivers, creeks or streams; and determining
the proposed method of  supplying drinking water to the site,  such as
private  wells,  conrasiity or subdivision wells,  or public water supply.
If the  drinking water is to be supplied by ccnmunity or private wells,
the  quality  of water  provided must  be determined.   This  part also
includes developing  a  current  groundwater contour  map  locating the
project  site  on  that map,  which  should  also  show  the approximate
direction of groundwater flow.

         lhe  soil  and  subsurface investigation  includes  a  review of
boring  logs of the site and observing for the  following conditions:
discolored  soils  or groundwater; fill  material or a typical material;
wide variations in  soil characteristics between borings; and unusual
odors in soils or groundwater.   If any of these items are  indicated,
additional   testing  is  required  to  determine  the  extent  of  any
contamination of the soil or groundwater.   The detection limit, result,
and action levels  for all constituents tested must be provided.

         Other observations  include  any unique environmental  factors or
aspects  of the  site history that would justify further investigation.
    3.  VolieiM and Procedure* of a national AM! Estat* Group

        The  focus of the environmental policy of a national real estate
group is captured  in their  statement:    the "best policy  in managing
environmental  problems  i* to be  socially  responsible,  activated  to
iaprove the  corporation's peifoimanoe while maintaining compliance with
both  legal  requirements and the  corporation's policy".   Ohe policy

recognizes that "one of the major  issues of  hazardous substances on the
property is the question of  future liability and indemnities".  This is
reflected  in  the way they A>aT with  the issues of contamination, and
"appropriate inquiry" during site assessments.   The policy reads:  "All
enployees dealing with hazardous substance problems should be guided by
the  reasonable  person's  standard.    This  standard  involves placing
yourself in the position of  a  reasonable person and determining what he
or she would do under the  circumstances.  This cxauuun sense approach is
necessary in order to reduce liability to third parties".

        The Policy  Statement and Checklist provides detailed procedures
for evaluating the  risk of  contamination on property  owned,  leased, or
managed by the real estate group.  Particularly when a loan is involved,
one of  the first steps  in the process  is to review the nature  of the
debtors  business to  estimate the  relative probability that  hazardous
substances have been  used  on the premises.  The Checklist consists of a
General  Hazardous   Waste -Survey,  an   Asbestos  Survey,   and  a  PCB
contamination  Survey.
        The General  Ha7^r^"°  Waste  Survey has four  main parts  —
assessing the potential  of a hazardous  waste problem; determining the
prior use  of  the  property and  the  neighboring  properties;  using
specified  techniques to  obtain  more  information when  a  problem  is
suspected; and applying a second phase of  investigation if a problem is
         To  aec^gg  the potential  of a  hazardous  waste  problem the
 Checklist recommends observing for chemical or waste drums onsite;  above
 or urderground tanks;  disturbed soil or new dirt fill onsite; evidence
 of drilling  (holes opened  or  closed vith  concrete,  or  capped)  or
 monitoring wells?  ponds,  sumps,  drain covers,  catch basins, or  pits;
 discolored ground,  dead vegetation,  odors, or rubbish heaps; and  soils
 producing radon gas.

         To  determine  the prior  use  of  the  subject  and  neighboring
properties the Checklist enumerates the types of activities that usually
involve  hazardous  substances.    Some  of  the  activities listed  are:
recycling of materials; treatment or storage of hazardous waste,  fuel
storage  tanks, and underground  sunps; dry cleaners,  jewelers, painters,
furniture makers and carpet makers (formaldehyde); petroleum businesses,
gasoline stations,  oil fields,  and  refineries;  chemical manufacturers,
users,  and  storers;  mining or refining operations,  metals  or  can
manufacturing, and businesses that clean,  treat,  or  coat metals; onsite
water  treatment  of waste  streams;  sewer inputs or .outfalls; defective
sewage treatment  facilities; medical or  dental buildings,  hospitals,
pharmacies,  and  drug  manufacture;  manufacture  of   electronics  or
coqpcnents   (solvents);  agriculture  (pesticide  contamination,   crop
dusting,  and  fuel leaks);  prior  landfills  or local  rubbish  dunps;
abandoned piping and other pipelines;  and stains on floors and pipes
(indicates leaks).

        If a problem is suspected the Checklist reccnmends the following
techniques  to get more  information:   speak  with  the occupants  and
neighbors, and rtisniss with local police,  building, fire, health,  and
planning  department  officials   the   prior use  of  the  site  and  any
violations;  obtain a  record   identifying the previous owners   and
occupants, including  a deed chain; review  state and local records  for
permits  and enforcement  actions;  check  the records  for underground
storage tank registrations,  required regulatory permits,  and hazardous
waste  manifests;  verify that the sits is not on any state  or federal
•uparfund list; check with the  Regional Mater Quality Board  about  site
use; check  with  the local  sanitation district  about sewer discharge
violations;  check local  court  indexes  for pending toxic tort  suits;
inspect Public Rignt-to-Khow filings listing hazardous materials onsite
(Fire Department and County Agency); Verify existence of EE& and state
hazarrtom waste nunfcers, if applicable; obtain prior aerial photographs;
and  check  the   local  newspapers   and  staff  reporters   who cover
environmental Batters.

         If there  is evidence of  hazardous jiatwiaie^ an  environmental
consultant is hired to conduct detailed onsite investigations as part of
the second  phase of the  assessment.   Regardless of the outcome of  the
General Hazardous Waste Survey the site is assessed for PCB and ashpstof>
contamination.  Electrical transformers and capacitors are inspected for
leaks, particularly if they contain PCBs; other electrical equipment are
also  inspected to determine if  they contain PCBs.  While  checking  for
          the Checklist recommends  careful inspection of all buildings
built before 1980.   The checklist points cut that "the  likelihood of
asbestos  varies with  the nature  of  the  property and  is particularly
great in  high-rise or coranercial  buildings,  and less likely in single
family residences where  asbestos may  be limited to furnace, piping,  and
sprayed-on ceilings and tiles".  Special emphasis is placed on "friable"
        , which contains more than 1  percent by weight of asbestos,  and
which crumbles and powders easily.

B.  PUBLIC INb'lTllfl'lOMS

    1.  Federal National Mortgage Association

        The Federal National Mortgage Association  (Fannie Mae) publishes
a document entitled "Eiwironroental Hazards Management Procedures for the
Delegated Underwriting and Servicing Product  Line".  It is a part of the
Delegated Servicing and Underwriting Guide, and specifically pertains to
the  environmental reviews  necessary for multifamily  housing products.
The document describes the procedures that lenders must follow to assess
and  maintain  the  environmental  condition  of  properties pledged  as
security for milt if ""^y loans.
        Fannie Mae assigns  to lenders the primary responsibilities of
conducting environmental  assessments of  properties before  Fannie Mae
will  provide an underwriting commitanent;  and confirming, on an ongoing
basis,  that after purchase  the borrower  is maintaining the property in
an environmentally sound manner.   Fannie Mae does not endorse or approve
environmental consultants; rather, lenders are responsible for selecting

environmental consultants,  and oust  take appropriate  steps to ensure
that a consultant  is qualified to perform the required work.  Also,  the
lender will be solely accountable for the performance of consultants.

        Assessments  are to  be conducted  in two phases.   The  Rjase  I
           is mainly a screening exercise, and it focuses on a review of
available  documents;  interviews with people aware of  site operations;
and an inspection of the site.  Ihe purpose of the Riase I assessment is
to quickly determine if information currently exists to clearly evaluate
a  property's environmental status.   This includes a description of the
property based on, among others, aerial photographs,  site surveys, title
history,  zoning and  land  use maps, and interviews with local  fire,
health, land use, and environmental enforcement officials.  Among hazard
sources  investigated  are  asbestos,  PCBs,   radon,  underground  storage
tanks,  and  waste  sites.   Fannie Mae's guidance document includes  a
fairly detailed checklist for Riase I assessments.  Terriers are expected
to gather  enough information to document each assessment decision.   If
the  results  of  the Phase I  assessment are inconclusive,  a Riase  II
assessment is required.

        Riase H assessments generally involve a more detailed review of
the  site  than  Riase  I  assessments, and include specialized  physical
sampling.   The  Riase  H  asuesrauent oust be performed by a  qualified
environmental consultant on the lender's behalf.  If the property is not
acceptable as measured  by either of the assfisarents  the property  is
considered ineligible and must not receive an underwriting ccntnitnent.

    2.  Fader*! Savings and X0an T">" "••""• Corporation

        Ihe  Federal Savings and loan Insurance  Corporation (FSLTC)  acts
as a trustee or  fiduciary for failed savings and loan associations.  It
does not buy or sell property or assets directly for its own purposes,
but when  insured financial  institutions fail it has no choice  but  to
        srcperties on their behalf .  Therefore the FSLEC assumes

potential liability  associated with hazardous waste/materials  releases
en properties it acquires through bankruptcy proceedings.

    The  PSLIC  has  no environmental  department,   and assessments  are
conducted  by  staff  ranging from asset  managers to  field supervisors,
along with their other duties.   These assessments are  conducted on an
"as-needed" basis.   There  is  no formal policy addressing the issue of
potential liabilities for cleanup of contamination  (although a policy is
currently being drafted).   However,  hazardous waste contamination is an
important  concern,  and  the  need  for  environmental assessments  and
cleanups  (if necessary)  is  well recognized in  the FSIJC.   This  is
particularly  true if  the FSLIC is  to get  a good price  while selling
property contaminated by hazardous substances.

    According to  the deputy director in California, FSLTC currently has
no formal protocol for assessing the presence of hazardous substances on
acquired properties.   Instead, relevant information regarding the land
use history on potentially contaminated properties  is  investigated by
corporate  and  outside  environmental  attorneys,   title  officers,  and
professional  property  appraisers.     If  further  environmental  site
assessment  is  deemed  necessary based on  the information  reviewed by
these professionals, contaminant investigations and remedial operations
are performed by  environmental attorneys and environmental consulting
and  engineering  firms  contracted  by  FSLIC.    Site  remediation  is
performed  to  a  level  that meets the requirements of  the appropriate
local,   state,   and/or   federal  regulatory  agency  responsible  for
contamination abatement.


    A review of case histories reveals diverse and unusual circumstances
under  which  site assessments  are  conducted,  and  highlights  certain
general principles for conducting them.  Moreover, when site assessments
are  well documented  we can  learn  of the reasons  why the  assessment
proceeded in a particular way, why certain steps  in the assessment were
included, and why certain steps may have been emitted.   These reasons
are  important because ultimately the "appropriateness" of a defendant's
inquiry may be judged in a  court of law; and judgement will probably be
based on the  acceptability (or lack of  it) of the defendant's actions,
and the reasons, or justification,  for them.

    Many  site   assessments  associated  with  property  transfers  are
conducted with the express  purpose of limiting the liability of parties
to  the  transaction.    Therefore,  a review of such cases  is directly
relevant to the  issue of liability reduction under SARA.  The objective
of  such  a review is to identify  the efforts currently  being taken by
participants  in  property  transfers  to  limit  their  liability.    In
particular, the  review  must highlight the elements of the environmental
assessment, the  decision process used to make certain the assessment is
comprehensive, and the reasons behind the steps in the assessment.

    Sens  states, such  as New Jersey, require site assessments during
transfers  of  certain  types of  property,  and  provide  the necessary
guidance  for  conducting them.   New Jersey,  in particular,  publishes a
detailed guidance document and is  involved throughout  the assessment
process,   including   reviewing  and  approving  assessment  plans,  and
suggesting alternative  steps  in the assessment.   Although in New Jersey
the participants perform site assessments because the  state requires it,
rather than as  a voluntary effort  to limit  liability, those cases can
provide  insights into the "appropriate inquiry" issue.

      New  Jersey's  objectives  are  similar  to  those  of  the  Federal
 government — to clean up sites contaminated by hazardous waste as soon
 as  possible  and make  the  responsible party  pay  for  cleanup.   In
 addition,  New  Jersey  explicitly  requires  site  assessments   during
 property transfers so that the seller of the property does not pass the
 burden of contamination onto the buyer; and so  that any contamination
 will be identified early.  Therefore,  the  State's program is geared to
 ensuring  that if  contamination  exists it  will be found.   This  is
 reflected in  the guidance provided during assessments,  and the  review
 process.   A review of site assessment cases in New. Jersey will provide
 an insight of the decision-making processes by regulated parties as well
 as regulating agencies  in their  efforts to ascertain the  presence of
 contamination.   This,  after all,  is  the  core of the  "appropriate
 inquiry"  issue.

 A.  ****** COMPANY, INC.

     1.  Background

        The  ******  Oarpany  at   the  Elizabeth,  New Jersey,  site  was
 engaged in the manufacture of sewing machines  from the  1890s through
 1982, when they ceased operations and triggered ECRA review.   Among the
 processes  conducted at  the  plant were aluminum and zinc  diecasting,
 molding of plastics and fiberglass, machine tooling,  electroplating,  and
 painting.   One  other operation  existed on the  property,  namely  the
 Central  Railroad  of  New  Jersey, involving  laying  railroad  tracks.
 Railroad operations ceased at the property in 1976.

        The wastes  generated at  the  site were strictly by-products  of
 metal working and finishing operations,  as the plant  was  not engaged in
 producing chemical products.  Elf-product hazardous substances and wastes
were generated, stored,  and treated on the property — by-product waste-
cutting, lubricating,  and hydraulic  oils were generated from various
machining and metal working operations.  Other h^^T**1"8 wastes produced
en-site were  foundry  sand,  spent degreasing solvents,  spent plating

solutions, and sludge from wastewater treatment.   Above and below ground
storage tanks were used, but there were no surface impoundments or waste
landfills located on the property.   Several  transformers and  capacitors
with PCB-cooled oils were installed  on the property, and the  insulation
on many  of the pipes contained  asbestos.   However, in the early 1980s
several  PCB-contaminated transformers and capacitors were removed  from
the site and djqpnRpri of.
    2.  Areas of Environmental Concern

        In 1978 the USEPA Region II  alleged that ****** had violated an
NPDES  permit for the Elizabeth plant.   ****** proposed to the EPA  a
wastewater  treatment  program that  would  involve discharging  treated
wastes to a  publicly owned treatment works  (FOTW) and thus obviate the
need for the NPDES permit.   After  constructing the treatment system and
obtaining permission  from  a FOIW to discharge treated wastewater to
their system, the company filed with EPA an Affidavit of Exemption from
the NFDES permit.  The affidavit attested that no pollutants were being
discharged  into  public waters or  land.    The  EPA took  no  further
enforcement action on this matter.

        In 1981  a release of PCB-contaminated waste  oil  was discovered
at the site.  Ihe release was associated with the storage of waste oils
in a  series of  ten underground storage tanks located adjacent  to the
powerhouse (where some transformers and capacitors were installed) .  Ihe
tanks and surrounding contaminated soil were removed and disposed.

        In 1982 the USEPA alleged that ****** had violated Sections 6(e)
and 15 of TSCA at the Elizabeth plant.   Ihe EPA cited a failure to have
annual documents for 1978-1980; failure to maintain  records of regular
inspections  of   PCB-cantaining  transformers;  and  failure  to  test
hydraulic systems prior  to  November 1979.   Ihe penalty  imposed was
$60,000.  Thereafter,  ****** entered into a  settlement  agreement with
EBW  and a  Consent Agreement  and Final  Order (CAPO)  was  issued that
reduced the penalty to $20,000.

         In the  sane year  the New  Jersey Department  of Environmental
Protection alleged violations  at the Elizabeth  plant.    The Notice of
Prosecution claimed that a storage tank and feed line were constructed,
installed, or altered without  ****** first obtaining a  permit from the
NJDEP.  ****** settled the matter by paying the penalty of $200.

    3.  The sapling Plan

        The first  step in the assessment was to  conduct a literature
search.  This would define the manufacturing activities conducted at the
site, their location and historical  tine frame,  the chemical oorpounds
and  wastes generated by these  activities,   and  the   fate of  these
chemicals.  Sources  included texts on foundry practice,  electroplating,
metal preparation and finishing, and  metallurgy;  reports prepared by the
New Jersey Economic Development Authority; files from  the New Jersey
Department  of Environmental  Protection  and  the  USEPA; and  site and
process specific information provided by ******.

        Sampling locations were determined in the field  prior to sample
collection but  were chosen to be representative of areas of  concern.
Tar example, soils surrounding PCB-containing transformers were  selected
based  on  proximity to  runoff  from the concrete  pads on  which the
transformers were  mounted,  soils immediately adjacent  to the pad, and
soils a few feet  away.  In this way an  overall composite  of soil was
obtained  to establish KB content.   Areas that clearly appeared oil-
laden were not necessarily  sampled,  but were noted  for  future  cleanup.
Soil samples were  gathered  from various locations around the site to be
analyzed for KB, toxic metals, and total extractable hydrocarbons  (1EH).

        The  majority  of  the  tanks  on-site were  reported  to  have
contained  fuel  oils.  These  tanks were  analyzed for PCS  and TEH.   A
lead-lined wood  tank was analyzed for  all the 128  priority pollutants
bacwg» tha report of its contents was uncertain.   Liquids in existing
tanks were  sampled and analyzed for the  presence of various chemicals.
In addition, dust  bins that contained granular,  pawJer-like substances,

one   light grey  the  other  dark grey,  were  sampled and  testnrt  for
volatiles and extractables.

        Originally three  on-site  wells were to be used for groundwater
sampling.  However, one well had  been  destroyed, and the  other two were
unsuitable because clear water could not be obtained.  Therefore, a test
pit was  dug to obtain a  water sanple for priority  pollutant  analysis.
Another  test  pit was  excavated for  soil sanple  priority  pollutant
analysis  to determine background conditions for  subsurface  soils.   A
third test pit was excavated  in  the area of the.leach pit, into which
effluents  from  the  plant  had   been  discharged.     A fourth  pit  was
excavated  in  the  vicinity  of   the  7000-foot  system  of underground
discharge pipes and sewers,  where possible accumulation of residues such
as KB  was suspected.  At  these last two pits sanples were  taken  for
priority pollutant and toxics analysis.

        Sanpling  within  buildings   included  scraping  residues   fron
floors, walls, vent pipes,  and air ducts.  Sanples were tested for KB,
•HH,  toxic metals, volatiles, and  extractables.    Liquid sanples were
were also taken where possible.   Sanpling locations were chosen based on
knowledge  that certain processes were being conducted in those areas,
and  their appearance.   For exanple,  the aluminum  and  zinc  diecasting
area,  the  location  of  the  fiberglass  chemical  storage  tanks,  the
electroplating tank pads, and waste  disposal trenches were all chosen as
sanpling  locations.  In addition  several  other areas were chosen because
their appearance  indicated  a problem.  For instance,  soils in some areas
appeared  to have concentrations  of  red and green oxidized metals that
had  bonded or were  in  slag form;  sanples of the plating  tank pads
included residue having an acid-metallic waste appearance; dust samples
were brown on the easterly  side of  the beams and ventilators  in the
electrical and ventilator area in the center of the manufacturing area
of the building,  but were grey on the westerly side;  and  there were
piles of  black  residue  at  the  site.   All of  these were  signs that
sampling was  necessary in those areas.

      4.   infi
         This  f^co  highlights  several  interesting  aspects  of  site
 assessments.   First,  the investigation involved a  detailed  literature
 search that drew upon a number of diverse sources.   The purpose of this
 activity  was  ultimately  to  identify areas  of  potential  or  actual
 environmental concern.   For example,  knowing the  types of  activities
 conducted at the  site tells  the asspBBnr of  the possible types  of
 substances  required  (and  perhaps stored  on-site), and  the  possible
 wastes that could be generated.  Obis knowledge nay. be used to identify
 areas that  require ispydal  attention.  Die sampling  locations at  the
 zinc  and diecasting  area,  the location  of  the  fiberglass  chemical
 storage tanks, the plating tank pads,  and waste disposal trenches were
 tylfiftgd for ^j*8 reason.
        Theoretical  knowledge about the  manufacturing processes, when
 combined   with   site  and   process-specific   information  gained  by
 interviewing the  facility staff, allows the assessor to confirm areas of
 environmental  concern,  and perhaps to identify new ones.  For example,
 knowledge  of  the exact method and physical route  used to transport,
 store,  and  treat or rfirpnnn wastes is  invaluable in determining if
 samples are  necessary for  those wastes, where they should be taken,  how
 many  samples  there  should be,  and what  to test  for.  Additionally,
 reviewing  enforcement  actions  and  previous  environmental   accidents
 focuses the assessors attention on potential problem areas (such  as  the
 PCD-containing transformers in this case) .  This discussion illustrates
 the importance of one of the steps in a comprehensive site assessment —
 a review of the historical background of the site and its use.
        Another  feature  of the sit* asraaiagnpnt was how widespread the,
sampling was.   Because of the diversity of the ptrrfft^uu, the scale of
the operations,  the nature of fftmiinnl substances used and stared, and
the  nature of the wastes them  was a  potential for  extensive, yet
unknown, contamination.   Furthermore, the operations at the site had
originated and continued since the last century, during the most part of

which  there were  few recognized environmental concerns.    Therefore,
accidental spills or discharges, storage or disposal of wastes on-site,
and  other   environmentally  damaging  activities  nay  not  have  been
recorded, and nay have  remained  unknown.   So  even if  there were  no
obvious  signs of contamination  a ocnprehensive  site assessment  would
have been desirable.   This example highlights the iaportance of making a
decision based on what might be considered "reasonable"  suspicion.

        Other noteworthy  aspects  of  the  site  assessment  were  the
decisions to sample at  locations based  on their  appearance; and  the
thoroughness  with which  it was  conducted.   Discolored soils,  areas of
dark residue, and acid-metallic looking residues in the plating tank pad
were all  sanpled;  sampling the  dust on the beans and  ventilators,  and
the granular  substance in the dust bins showed thoroughness.   Visual and
other sensory indicators  are extremely important in  identifying sample
locations, particularly discoloration, signs of rusting or decay, leaks,
dead or dying vegetation,  unusual smells, etc. and must  be followed-up
on.  Likewise, thoroughness  involves following up on  even the slightest
sign of contamination.

B.  **** COMPANY, INC.

    1.  Background

        ****  CD.,  Inc.  had  been manufacturing nuts  and bolts since
1945.   Ihey ceased operations  in 1987,  triggering BCRA  even though no
sale was  anticipated.  The facility in which ****  had their operations
was cou-tructed  in the early 1900s,  and was occupied by a seamstress
operation, where materials were  sewn into finished products.   It ceased
operations in 1945, after %Aiich **** moved into the premises.  No other
businesses have operated at the facility.

        Upon  ceasing operations **** initiated a preliminary inspection
and  sampling at  the  facility,  and an "at-peril"  cleanup was begun.
("At-peril"  cleanups are  those  that have not been approved  by the New

Jersey  Department of Dwironmental  Protection,  and are performed with
the  risk — peril  — that they may have to be redone if the Department
does not approve then later.)  The inspection revealed two main areas of
concern:  An underground fuel oil storage tank, and an  oil-stained area
of soil  that encompassed nearly the entire back yard of  the  property.

     2.   Th» Sampling Plan

         ****'s  plan combined  sampling and  cleanup activities.    They
proposed to  clean,  excavate, and remove the under-ground storage  tank.
The  soil around the tank was  to be excavated until visibly clean soil
was  encountered.   Post-excavation soil samples would then  be obtained,
one  from each  side of the tank excavation, and one for every five feet
of tank  length along the tank's central axis.  A total of  five sanples
would be obtained and analyzed for TEH and base neutral  compounds.

        The  plan proposed to  excavate the  complete  oil-stained  area.
The  stains  were believed  to  be  either lubricating  oil,  which was
occasionally drained from  the machinery, or oil that was  used  as a
coating on steel bars  (to prevent rusting) that were stored at the back
of the building.   Surface oil that was visually contaminated was  to  be
excavated  and  renewed,  and excavation was  to continue until  visibly
clean soil  was encountered.   Post-excavation soil samples were to  be
obtained,  one  every five  feet along  the excavation's central  axis.
Samples were to be analyzed for TEH, volatile organics,  and  base neutral
compounds.   The plan document  did not  discuss  groundwater sampling,
perhaps because **** did not suspect groundwater contamination.

    3.  Ouepauy Actions

        The  oil  tank was removed,  and it showed  no  signs of leakage.
The on-stained area, which was overlying the tank location  as well as a
majority of  the  rear lot,  was excavated to a depth of  about five  feet,
where the zone of groundwater saturation was  encountered. At this  point
excavation was halted and post-excavation soil samples were  analyzed for

total petroleum hydrocarbons (TEH).  Mast of these sanples were found to
have TEH levels above the standard action level.   For any chemical this
is   the  concentration  level   that  makes   it  a   contaminant,   and
concentrations at or beyond this level necessitate cleanup action.

        As soil had been excavated down  to the zone  of  saturation and
was not found to be "clean", it appeared that the groundwater system was
impacted.  As  a preliminary investigation, and by way of confirmation,
two test  borings  were conpleted,  each at six,  eight, ten,  and twelve
feet depths.   Data from borings  showed that contamination  levels were
below standard action levels in sanples taken at twelve feet, indicating
a floating product layer that had not permeated to or below twelve feet.

        Two monitoring wells were installed, one  at the center of the
nest highly  contaminated area  and the other  at the  furthest feasible
location.  A third well was considered desirable at another location but
was infeasible because of restricted  physical access.   Groundwater from
these two wells was analyzed for TEX, polyeyclic  aromatic hydrocarbons
(PAH), and volatile organic confounds.  Results showed only TEH to be at
elevated levels, and only at the  well at the center of the contaminated
area.   The  other  well  showed no  groundwater contamination  at  all.
Visual  observations  during well sanpling  showed  a  product  layer
approximately 9.5  inches thick in the contaminated well.

        The cleanup strategy suggested was to punp out the groundwater,
treat it to remove the contaminants, and then discharge it to a publicly
owned treatment works (POTW).  Meanwhile groundwater being punped out
would continuously  be sanpled and analyzed for contaminant  levels, and
the punping and treatment would continue until the sanples were "clean".

    4.  Znf<
        This  case  allows us  to  draw  sane  inferences regarding  the
definition of appropriate inquiry.   In this case  it was clear that the
property was  contaminated.  Therefore,  the site  assessment  was geared

 more towards determining the extant of contamination rather than merely
 its preseno*.  Regardless of its obviousness, ****'s strategy  points to
 an important principle of site assessments;   Identify areas of  actual or
 potential environmental concern, and investigate them.   (Had there  been
 no visible  signs of contamination,  such as the  oil-stained area,  the
 next  logical point  of  investigation  would have been  the  soil,   and
 perhaps the grounduater,  around and below the underground tank.)

         The original sampling  and cleanup plan did  not anticipate  the
 need for groundwater sampling.   However, it was adapted to include  this
 activity upon suspicion  that the  grounduater had fr**""^  contaminated.
 This points to another principle  of  site assessments; Site assessments
 are not  meant to  be  rigid procedures that are conducted by blindly
 following a checklist.   They must  be flexible,  and allow  for judgement
 on the part  of the assessor.   Admittedly, in this case it was obvious
 that the  groundwater needed  testing,  and  not  to have done  so would
 clearly have been considered inappropriate inquiry.  However, the lesson
 is that  a  "complete"  site assessment  (or  what would be considered
 "appropriate inquiry*1) must  incorporate those activities necessitated by
 reasonable suspicion, even if they were not originally planned.

 c.  ***, nc.
    1.  Bad
        The property is privately owned by an individual, and is leased
out to ***,  Inc.   The individual acquired the property from the Oondit
Trucking Co., whose primary business was  moving  and storing furniture.
*** had occupied  a part of the premises sine* then.   One property was
resold  to  other individuals in April  1984 and ***  remained as tenants
under the new owners.  *** is a machine shop, and stored on the premises
a  55-gallon  steel  drum  of transmission oil  for lubricating  their
••chines, and a 30-gallon  steel drum of mixed solvents for cleaning and
preparing certain metals for

         There had been no known spills or discharges from these or other
containers, and  ***  did not have any underground storage tanks.  Thus,
when the owner submitted the ECRA, initial notice a  negative declaration
was  requested.   The New Jersey Department of Environmental  Protection
subsequently  inspected the  site and noted  rusty drums  on an asphalt
platform outside the  building,  leaking  oil.   The  NJEEP declined  the
request for a negative declaration.  Further, they required the property
owner to remove  the drums, clean the oil from the  asphalt,  and provide
documentation of proper disposal.  In addition the owner was required to
submit a sampling plan to determine the extent of contamination.

    2.  The Sampling Plan and Owner's Actions

        The area  in question was  located on the northwest side  of  the
property, adjacent to the corner of the building.  *** used this area to
store waste oil  in a drum for  its removal by an "oil  scavenger11.   ***
also used  the area to  store metal shavings in drums for removal.   The
area was generally sloping in an easterly direction,  and was covered in
asphalt.  There  was natural ground cover a  few  feet upslope from where
the drums were stored on the asphalt.

        The sampling plan  proposed collecting soil  samples  at the point
where natural ground cover adjoined the asphalt,  and testing the samples
for  petroleum hydrocarbons  (TEH).    A  total  of  four  samples were
proposed, the  locations of which  were to be determined  at the time of
actual sampling.   Two  locations would be selected and two samples would
be taken at each location, the first  being at the surface, and  the
second being one foot below the surface.

        The NJEEP rejected this sampling plan, and  required a detailed
scale site map showing areas of environmental concern and locations  for
sampling.  In addition the NJEEP required samples to be analyzed for not
only PHC but  priority pollutants as well.  Subsequently, the applicant
submitted the materials required by the NJEEP and the plan was approved.

         Two locations  were chosen and five soil samples were taken, one
each at  the surface and at a  depth of one  foot for each location.  A
fifth sample was taken at  a depth of one foot at one of the  locations,
as a duplicate sample.   The samples were analyzed and were found to be
contaminated with oil, with concentrations decreasing with depth.  The
cleanup plan was to excavate the soil,  conduct further sampling and  soil
analysis, and if necessary further excavation until the soil was clean.

    3.  Inferences

        The sampling plan involved soil sampling at the point where the
natural ground cover adjoined the asphalt,  even though it was  upslope of
the drums, and there were no visible signs of contamination.   This is an
example  of  when an area of potential environmental  concern has  been
identified and the  site  assessment extends beyond the normal  sphere of
contaminant influence.   One would expect  that,  as the on leaked  only
onto the asphalt,  and the asphalt was sloping downwards away from the
uncovered soil, no  oil would have contacted the open soil.   Therefore,
sinply cleaning  up the  asphalt would seemingly be  sufficient to  take
care of the obvious environmental concern.

        The leaking on,  however, could have spilled on the open soil  in
a number of other,  not-so-obvious,  ways —  the drums could  have  been
accidentally moved to the edge of the  asphalt,  or even onto the natural
ground,  even though their normal storage location was on the asphalt a
few  feet away  from the edge;  oil  could have been accidentally, and
unknowingly, spilled on the  ground while moving  the drums to their
storage  location;  or leaking  oil could have seeped through  any small
cracks in the asphalt into the aoil below, and eventually spread through
capillary action in the soil, own upslope of the leaking oil. Thus,  if
during a site t**^*****"- an area of environmental concern is  identified
then a thorough investigation  of the surrounding area would  seem to  be
justified,  even though there  does not seem to be an obvious route for
tn^fi C3OntflBm.n8tAOI^ ^DO fiDOHBAQ*

     ****** NNTXCmX. BMK

    1.  ffti'^K' j I ' * "^
            ****** Bank was  assigned trust to the subject property and
had held it for a number  of years.  Approximately  one year ago, they
became  worried  about potential  problems  with  certain tanks  on the
property  and  had an  initial site investigation  done on the property.
This  initial  investigation, while  only  consisting of:  a  literature
search of the bank, a search of local regulatory agency and owner files,
a  site  walk,  and interviews  with  local  land owners,  revealed the
necessity for  further site investigation.   This  original work was part
of a program that the bank's trust department was performing to identify
potential problems that could lead to liabilities on their part due  to
their involvement  in the trust properties.   This involvement sometimes
included having their name as the listed owners of the property.

        The  first phase  of  the  project  was performed for relatively
little cost by a consultant.  The reocmnended second phase for this site
was estimated to  cost a  considerable  amount  of money.   The  property
aires were against spending this amount of money to potentially discover
more problems and thus incur more costs, and they refused to approve the
expenditure  of  funds for the second  phase of  work on the property.
Subsequently, the  bank trust department went to court  and got approval
to ccnroit the funds to perform this project.

    2.  Location

        The site is  located within 10 miles of the Pacific Ocean, in a
rural setting, near roads and very close to a tributary of a major water
course.   Sixty acres  of  orange groves and a few farm houses presently
occupy  the area surrounding the site.   Ventura County,  California  is
very  conservative from  a regulatory point of view and has been very
aggressive about site cleanup requirements in the past.

         A 40,000 gallon above-ground oil storage tank was located on the
 site.  According to ranch  foremen, the tank stared oil for use in smudge
 pots for approximately 45 years.  Ifiaks were observed in a seam of the
 tank,  approximately eight  feet above the base, and on the south side of
 the tank where access plugs are located.  Soil below the plugs were also
 visibly  stained  with oil.   Oil of all types  had been leaking from this
 tank for approximately 25 years.

         Based  on discussions  with  the Santa Paula Water  Works,  local
 well log data, and  field observations, it was believed that this shallow
 groundwater  is actually a perched  aquifer.    Information obtained from
 the Ventura County of Public Works Agency  indicated that the  actual
 depth  to  groundwater  is  approximately  eighty  (80)  feet  below  grade.
 Groundwater  flow direction, as reported by the Santa Paula Water Works,
 was to the  south  (toward  the Santa  Clara River).   Well data obtained
 from the Ventura County Public Works Agency indicates that potable water
 in  this  area is  obtained from aquifers starting at 350 feet below grade.

         An investigation was  performed on  November  17, 1987 using a
backhoe  to excavate a test pit adjacent to the storage tank.   The test
pit was  located  on  the north side of the tank where discolored soil was
observed.   Four soil samples  were  collected during the excavation and
placed in glass jars.   Each  jar was properly labeled, sealed with a
Teflon-lined lid,  placed  on  ice in a cooler,  and transported with a
chain-of-custody document to a state-certified laboratory.

        The  soil in the  test pit consisted of the  following materials:
black  clay extending from the surface to a depth  of two  feet,  brown
cilty clay with black Bottling from two to seven feet,  and a light brown
clay was observed front seven  to eight feet.   What was believed to be
perched groundwater was encountered at eight feet below grade.   Based on
local well-log data,  actual groundwater was estimated  to be about 80
feet below grade.   There was a significant petroleum odor to a depth of
approximately five feet.

          All four  samples were analyzed for total  petroleum hydrocarbons
  (TPH)  using EPA method  418.1.    Two  samples  (38  and  45)  were also
 analyzed for PCBs  using EPA method 8080.  Soil sample 45 indicated 7100
 parts  per million (pom)  TFH  at five  feet.    Soil  sajiples  38 and 28
 indicated total  petroleum hydrocarbons  ranging from trace levels to 63
 ppro at 8 feet.  Ho PCBs were detected in either sample analyzed.

         Results  of  this  preliminary   investigation  indicate  that
 significant petroleum hydrocarbon (JHC)  contamination extends  up to five
 feet below ground  surface at the location of the  test pit.   laboratory
 analyses indicate that trace to 63 ppm TEH are present ei<#it  feet below
 ground surface.   The geological  log of the test  pit indicates a clay
 layer at seven feet below grade and shallow groundwater was encountered
 at eight  feet  below grade.   The extent  of  contamination  extending
 laterally beneath the tank  was not  investigated,  nor was the integrity
 of the tank bottom Known.

        Based  on the  above conclusions it was recommended that during
 tank  removal,  all visibly  contaminated soil  beneath the  tank (which
 extends to approximately  five  feet in  the area of  the  investigation)
 should  be excavated and properly disposed.  Eue to shallow groundwater
 conditions  and  the concentrations of FHC  in the saturated soil, it was
 reconsnended that during  excavation,  a grab sample of the groundwater at
 8  feet be collected and analyzed in the laboratory  for TPH.

    3.  Remediation

        Tank removal cumfcamaJ on April 27, 1988.  This  involved the
unbolting of  the steel panels that  emprise the tank roof and lifting
the roof  off with  a crane.   At the  time  the tank vas disassembled  it
contained approximately 500  gallons of oily sludge.  Concrete  was added
to the  sludge,  mixed,  and placed into an e«HJump  truck.   The sides  of
the tank were then unbolted and removed, and the oil-laden steel floor
was similarly dismantled and ^qypofl of in the end-dump truck along
with the concrete/oil mixture.  The floor and  concrete/oil mixture was

trucked to a Class I «^i«ynB»i  facility in Utah.  All other parts of the
steel tank were sent to a metal salvage operation.

        Contaminated soil removal cminenced on the next day.   Previous
sampling and field observations  confirmed that contaminated soil was
characterized by a  medium gray color and a significant petroleum odor.
All soil exhibiting these features was removed and trucked to a Class I
H-jcpoeVi facility in Utah.  The resulting pit was subcircular in shape,
approximately twenty-eight feet in diameter, and seven to  eight feet  in
depth.    Contamination  appeared to  concentrate   in  the  sandy  fill
surrounding Irrigation Lines "A"  and "B".   Because of the abundance  of
contamination underneath Irrigation Line "A", a  twelve  inch,  privately-
owned concrete line,  it was necessary to remove the  irrigation line  in
order  to  access the  oily soil.    Once  excavation  activities  were
completed, the line was replaced with PVC pipe.

        All  soil  and water samples were  analyzed  for total petroleum
hydrocarbons  (TIH) using ERA method 418.1.  All samples were collected
at the  conclusion of the excavation  of contaminated soil,  in order  to
evaluate background concentrations of TFH remaining onsite.  Soil sample
concentrations ranged fron 131  ppm to  598 ppm, whereas  water sample
concentrations were 7.1 mg/1,  32.1 ng/1,  and  35.0 mg/1.   According  to
the Leaking Underground Fuel Tank (IZJFT) Field Manual, published by the
California  State  Water  Resources Control  Board,  soils exhibiting TFH
values  under 1,000 ppm  are not considered  a  hazardous waste.   Action
levels  for TFH in groundwater are established on a  site-by-site basis.

        Soil samples  from the  perimeter and floor of the  pit contained
TFH concentrations within acceptable levels, ranging from 131 ppm to 501
ppm.  These samples were collected after all visibly contaminated soil
had been removed (except for the seam dlsnisaert above).   Although sample
concentrations were well below 1,000 ppm, their sonewhat elevated nature
suggests a  high background  level of TEH may exist because of heavy oil
use in  smudge pots in the surrounding orange groves (most smudge pots in
the groves have oil-stained soil patches underneath the pots).

         As  Hicniggad,  groundwater  onsite was five  feet below grade
during field activities.  Whereas elevated levels of TEH  in groundwater
are indicated by the three water samples collected  (i.e.,  7.1 rog/1, 32.1
mg/1, and 35.0 ng/1), several mitigating factors apply in  this case:

    1.  The groundwater at  five feet below grade represents
        a perched  aquifer,  based on  anple  evidence  from the
        Santa  Paula  Water  Works  and  the  Ventura  County
        Department of Public Works.
    2.  Water  from this perched aquifer is  not a potable
        water  source,  according  to the  Santa  Paula  Water
        Works  and  the Ventura  County  Department of  Public
    3.  Potable water in the area begins at approxijnately
        350  feet  below grade,  based on well-log data from
        the Olivelands Well 11.
    4.  Approximately  160  feet of  clay  lies  beneath the
        perched aquifer and  above the first  potable water
        source, according to the Olivelands  Well Number One

Additionally, of primary  importance is the fact that the source of  the
contamination  (i.e.,  the  oil storage tank) has been  cotpletely removed
from the site.  It should also be noted that Union Oil supplied the oil
stored  in  the tank,  which indicates that the  oil is relatively pure.
Ihis was further confinnad by laboratory analyses,  which determined that
no detectable concentrations  of PCBs were present in the on.


    1.  Background

        A  Colorado-based  oil eqploraticn  and production  firm purchased
about three acres of existing oil production properly in a residential
zone  of Huntington Beach, California to  redevelop  the onsite crude oil
production and storage facilities and enhance the property's production
capability.   The  land  use on the subject property was exclusively oil
production since  the 1920's.   Oil production operations in  the site
vicinity through the 1950's had typically included disposal of drilling


 fluids and cuttings in open-pit sumps.  Therefore, it was suspected that
 the site  could contain potentially  hazardous drilling and associated
 wastes.   These  suspected  wastes  included  old drilling  raid,  which
 commonly contained  arsenic, barium, cadmium, and lead; aromatic volatile
 organic compounds;   and  halogenated volatile organic  ocnpounds derived
 from cleaning solvents and/or petroleum fuel products.

         The proposed remodeling and  redevelopment of the existing oil
 production facility to increase the production capability was considered
 an extremely sensitive issue.  The project site was  surrounded on all
 sides  by residential  properties,  and although an environmental inpact
 study  of the project required by the local planning department concluded
 that the project would not have significant negative impacts on the site
 vicinity,  the sentiment  of the local residents was  strongly opposed to
 the project's success.

     2.   Areas of Environmental Oonoarn

         A hagairfr'ng waste investigation was doomed necessary in order to
 comply with California's regulations regarding hazardous waste releases
 and disposal  practices.    The two primary  regulations of concern were
 Title  22 of  the  California Code  of Regulation and  Division 2  of the
 California Water Code.   Because these regulations were enforced locally
 by the Orange County Health Care Agency,  Hazardous Materials Management
 Division,   this  agency  was  consulted   to  prepare   an   appropriate
 investigation and sampling plan.

    3.  The Sampling nan

        A  Riase  I   environmental  property  ntMVinairiTt  and  soil  vapor
 survey were performed to determine if oil production waste disposal had
     cred on the property.  The primary objectives of the investigations
were to 1) identify the potential preaenoe  of subsurface contamination,
2) evaluate the potential for offsite migration of contamination in soil
and  groundwater,  3)  evaluate the  potential  for  onsite migration  of

 contamination  from an offsite source,  and 4) determine  the  location of
 contaminant plume sources.

         The scope of the Fhase I investigation included the following:

     •   a  visual  inspection of  the  property,  including
         onsite waste disposal evidence, waste storage areas,
         production equipment and tanks,  adjacent land use,
         and geologic,  water and vegetation features;
     •   interviews with  selected  individuals knowledgeable
         about the site to develop an understanding of past
         and present site  usage and history; and
     •   a  review of  records  and  reports   that nay  have
         indicated the  potential for hazardous waste problems
         arising out  of  uses of the site and  surrounding

         The results of the  HVISP  I  investigation indicated  that drill
 cuttings containing petroleum hydrocarbons (FHC) were  disposed onsite.
 The  lateral extent of FHC in the subsurface  soils was determined based
 on  the  results  of the  soil  vapor  survey.   A  Fhase  II  investigation
 consisting  of  subsurface soil  sampling  and laboratory   analysis  was
 performed to determine the  total depth of soils  containing FHC,  and to
 evaluate whether or  not these soils were hazardous  according to  the
 appropriate state  regulations   (Title  22  of the   California  code  of
 Regulation  and Division 2 of the California Water Code).

        The soil  samples collected  in  the Fhase H investigation were
 analyzed for  total petroleum  hydrocarbon concentrations,  halogenated
volatile organic compounds,  aromatic volatile  organic compounds,  and
toxic  metals.   The conclusion based on the  results of  the Fhase  II
 investigation was  that the  soils fliT0*"** in drilling  fluid  sumps were
nonhazardous according to the appropriate State regulations.   Further,
 it was concluded  that groundwater beneath the site was not potentially
impacted  by the substances  rti«ynaa^  in mud  sumps on the property.   No
further investigative or remedial activities were required.

     4.   inf

        This easy study provides a simplistic,  yet informative example
of  the  phased  environmental assessment  of  a  property suspected  of
containing  hazardous wastes  generated as a  result of  oil  production
operations.   The suspicion that the previous  oil production operations
included  onsite  ^epncai  of drill cuttings  were  confirmed based  on
interviews with operations personnel and  reviews of existing documents
including a soils  investigation report  performed  during  a Biase  I
assessment.   Next,  the physical properties of the cuttings such as the
lateral and  vertical extent, the chemical composition, and concentration
were  determined in a  ftiase H fos*******'*'-  -The Fhase I and Riase II
    rts resulting from the above-referenced investigations provided the
petroleum  corporation with solid documentation that the drilling wastes
Hjepocofi  on  the  property  are  nonhazardous  according to  applicable
regulations, and do not pose a threat to the local water resources.


     1.  Background

        A  real  estate investment company purchased a shopping center in
the  city of  Rancho Palos  Verdes,  Carlifornia  for development  into a
regional  mall.    They purchased separately  the site  of a  former gas
station located on the corner of the shopping center site.  The shopping
center was built in 1957 and included a chain hardware store and several
smaller shops.

        The  gas station  site has  been  purchased from the major on
company.   The  underground  fuel tanks  at the  site had been  removed.
Subsurface contamination had occurred,  apparently from leakage from the
.tanks before their removal, and remediation of the contaminated soil was
being performel under the  direction of the oil  company.   The remedial
activities  involved the  in-situ process of vapor extraction.   This
process withdraws  soil, gas and vapor  contaminants through extraction

wells and  treats the  contamination  on the surface.   Ey this method,
subsurface   contamination   lite   gasoline   eventually   volatilizes
underground, is  renewed from the ground through the extraction wells,
and destroyed in a catalytic converter on the surface.
    2.  Environmental Oonoarns
        Ihe  shopping   center  itself  presented  little  concern   for
environmental  liability.    Air permits  were  necessary  for  the  dry
cleaning establishment  operating there.   Ko other potential  sources of
emissions were noted in the site  inspection or  further investigation.
The   main  source   of   environmental  concern   was  from   the   known
contamination underlying the gas station site and from the procedures to
remediate this contamination.   This situation  was somewhat unique in
that   reportedly,  no   contamination  was  detected  at  the  time  the
underground tanks were  removed from the site.   Since the contamination
was   detected  at  a  later, date,   and  because   the site  geology  and
hydrogeolcgy  essentially prevented any  impact of  the contamination on
local  groundwater,   there  were   no  specific   regulatory  reporting
requirements  for the  discovery of the contamination.   Therefore,  the
site  remediation was initiated without regulatory review.
     3.   Assessment
         No  potential  environmental  liabilities  were  identified  in
 relation to the shopping center site.  Ihe remedial equipment being used
 on  the gas station  site  has been  appropriately  permitted  and  the
 remediation results showed that progress  was being Bade in the renewal
 of contamination.   Although the assessment indicated that no  specific
 reporting of  the contamination was necessary, the  lack of regulatory
 concurrence  with  the   remedial  effort   was  considered  a  potential
 liability.  The remedial effort .would  undoubtadly leave some  level of
 remaining contaminant in the ground, and  without  regulatory approval of
 the  cleanup level,  there would  remain  some potential for  additional
 cleanup being required in the future.


                      VI.  SUMMARY MO CONCLDSION3
    The  Superfund Amendments and  Reauthorization Act  of  1986  (SARA)
provides  relief  to  buyers  of reed,  property  who  did not  cause  or
contribute  to hazardous waste contamination  found on  their  property.
This  relief  is  found  in a legal  clause,  popularly termed  as  the
"innocent landowner  defense".  However, SARA.  iinTogps conditions  on the
use of  this defense.   One of the  important conditions is  that  at the
time  of acquiring the property the defendant  mist have conducted  an
"appropriate  inquiry"  into the environmental  condition of the property
to ensure that  it was free of hazardous substance contamination.  SARA
provides little guidance as to how the  term "appropriate inquiry" will
be interpreted.

    Of  obvious  concern then,  is what exactly constitutes  "appropriate
inquiry"?   Certainly missing from  the statute is an explicit procedure
for assessing present environmental integrity.  However, it would appear
that a  thorough onsite inspection  of the  subject property is necessary
to a
inaccurately,  a "Property Audit".   The purpose of most property transfer
assessments is  to:   1)  protect   involved  parties under  the innocent
landowners defense; 2)  provide that measure of due diligence  necessary
to assist buyers,  sellers or lenders in assessing their purchase or loan
risks; 3) comply with CSBCXA's requirements; and 4) allocate  liability
anong  the  appropriate  parties.    Onus,  most property  assessments
represent a "reasonable1* effort to provide a professional opinion of the
associated environmental  liabilities concerning a  subject real estate
transaction.   Few truly quantify, test, and confirm legal or regulatory
    Environmental assessments are  diverse,  and seme-times raise  ccnplex
problems of  investigation,  sampling,  and analysis.  However, our  study
indicates  that  there  are  distinct  and  cannon  elements  to  most
assessments.  These  elements provide a  reasonable assurance that if  a
site is contaminated with hazardous substances the contamination  will be
detected, and its nature and extent win be determined.  As this is the
crux of  the "appropriate inquiry" issue, these elements may provide  a
joey to  interpreting the  requirements of the  law.   A typical property
  sessment scope of work could include:
        an historical  records investigation, to the  extent
        necessary to establish the history of the site  and
        nearby surrounding properties, and the potential  for
        hazardous waste  problems arising out of prior site
        interviews with  selected  individuals  knowledgeable
        about the  site to develop an understanding of past
        and  present site  uses  and  history  (e.g.  facility
        manager,   site   developer,    car   local  planning
        department officials) ;

        a  review of available permit and  license  xuourds,
        and  a review of enforcement  actions brought against
        past and previous owners or operators of the site;
        a visual inspection of the property, including uhere
        present  and accessible:   buildings and structures,
        equipment  that  could  reasonably  be  expected  to
        contain  PCB's,   chemicaVfoel/drum  unloading  and
        storage  areas,  underground  storage tanks,  jxtcoess

        tanks   and  equipment,   catch   basins,   stressed
        vegetation, water features,  geologic features,  waste
        disposal areas, hazardous waste  spill evidence,  and
        adjacent land use; and
        a written report,  including documentation of:   site
        ownership,  location, description,  and environmental
        characterization;  site  history  and description  of
        surrounding     land    uses;     description     of
        environmentally  sensitive  receptors  in  the  site
        vicinity; a  summary of relevant  compliance issues,
        references  used,   sumnary  findings  and  opinions
        regarding the  potential presence of a  significant
        hazardous waste/petroleum  hydrocarbon problem,  and
               inflations (if any).
    The question of  the degree of  detail  necessary to ensure  that the
property transfer assessment is sufficiently thorough is difficult,  The
thoroughness  of  an  investigation  can be affected  by  a  number  of
practical factors, including: 1) the quantity and quality of information
required by the involved parties in establishing their respective risks;
2)  the  relative costs associated  with  conducting  an assessment  in
relation to  the size,  complexity or diversity of the subject  property
and its operations; and 3) the overall monetary value of the transaction
coupled  with  the  time  constraints placed upon  the  assessments  in
relation to  the closure of escrow,  precluding lengthy assessment and/or
laboratory protocols; 4) time (closing schedule) and budget limitations;
and 5) risk profile and marketing objectives of the lender.

    The merits  of surface or subsurface drilling and sampling has often
been  fHen.tea«3  in conjunction with  property transfer assessments.  One
need  to spend  larger  suns of  money to  procure information  on soil,
surfaot water,  groundwater, and facility sampling results is typically a
function of  the degree of detail rtlsnresort above,  and varies according
to  the perceived needs  and level  of  sophistication required  by the
concerned  parties.     As a  matter of practice,  most  environmental
consulting  firms conducting  property transfer assessments  offer a two
phased approach to this issue.   (As this study shows, this is also the
approach recommended by various  corporations,  institutions, and  states
for their  assessment procedures.)   A "Riase I" assessment provides the

basic background and document research, and site visitation required to
adequately assess  the property.   The  Phase  I can  also be used  as a
screening method to suggest or  rmximiMid  that further site sampling be
          as a result of the site findings.  Should further site work be
             including,  for example, surface  or subsurface analytical
sampling,  a Phase H  assessment  plan can  be  developed along  site
specific lines.

    No uniform protocol  or procedure has  been provided by governmental
agencies  as   to  the  rrf *"«•«»  attributes  of  a  property  transfer
assessment.   However,  currently accepted  industry  standards provide
useful reference.  Ihe literature review provided in Appendix l includes
some references that ^1°"*°* the property  assessment process.

               APPENDIX 1

Alexander,  Beverly Z.
CERCLA 1980:1985: A research guide.
Ecology Law Quarterly.  Vol. 13 (20) p. 311-360. 1986.
     A guide to published documents and other information designed to
     help researchers  understand the body of law that developed
     during the first  five years of CERCLA.  In addition to
     annotating and classifying commentarlee relating to the act,  the
     guide provides users with descriptive information about
     looseleaf services, newsletters, organizations, associations  and
                                                             no. 042
Anderson,  Jonathan.
Trends in environmental regulation of real property.
Barrister. Vol.  15 (1) P. 53-56. Spring, 1988.
     Purchasers,  sellers and lenders involved in real estate
     transactions require knowledgeable and practical advice to guide
     them through this complicated area of the law.
                                                             no. 021

Los Angeles Times.
Hazardous waste liability problem in real estate.
Los Angeles Times. Sec VII, p.l col 1, November 10, 1985.
     Discusses state and national trade groups' concerns with real
     estate liability problems.  Second in series concentrating on
     hazardous wastes as they relate to real estate.
                                                             no. 060
Atkeson,  Timothy; Goldberg, Seth.
Annotated legislative history of the superfund amendments and
reauthorization act of 1986 (SARA).
Environmental Law Reporter, Vol. 16 (12) p. 10360-10420. December,
     A comprehensive guide to understanding the development of the
     new Law and interpreting the significance of its provisions.
     The paper is cross-referenced both to SARA and to detailed
     comments on over forty topics .
                                                             no. 044
Atkineon, Steve.
Toxic hazards can be dangerous to a development's health.
Real Estate Review. Vol.16  (2).  Summer 1986.
     Developers must balance the cost cf expensive tests for
     contamination and the  possibility of delays and expensive
     clean-up costs.  Two examples of new development rieke that
     occurred in San Francisco are described.
                                PAGE 1                       n°-

Baker, Don.
Environmental investigations and cleanup solutions preceding real
estate transfers.
Industrial Development. Vol. 156 p. 12-15. Sept-Oct, 1987.
                                                             no. 065

Baker, Don H.
Contemporary issues in real estate transactions involving
environmental concerns.
Industrial Development. Vol. 155 p.2-4. March-April, 1986.
                                                             no. 070

Baldwin, Malcolm F.
Hazardous waste problems: implications for developers.
Urban Land, Vol. 44 p. 17-21. October 1985.
     Guidelines for minimizing potential liability of developers for
     harm caused by hazardous wastes on their property.
                                                             no. 048

Barnee,  David.
Enforcing property rights: Extending property rights theory to
congestible and environmental goods.
Boston College Environmental Affairs Law Review. Vol. 10  (3) p.
583-638. December - January, 1983.
     The model presented focuses on the private ownership dichotomy
     as a foundation upon which to build a more comprehensive
     analysis of property rights.  The property rights model is used
     to explore the institutional milieu in which the regulators and
     the regulated interact.
                                                             no. 003

Bentz,  James W.
Creditor's rights when federal bankruptcy lavs conflict with state
environmental agency enforcement powers after Hidlantic National
University of Pittsburgh Law Review. Vol. 48 (3) p.879-903. Spring,
     This paper examines three cases which purport to rest on the
     technical application of provisions of the Bankruptcy Code.
     Read as a group,  these cases lead to the conclusion that
     environmental orders which prevent future harm to the
     environment should be enforced as prohibitory police actions
     over the claims of other business creditors. However, where the
     environmental damage has already been done, subordinating the
     claims of business creditors to a clean-up claim of the state is
     an improper use of police power.
                                PAGE 2                       no. 015

Berz,  David R; Spracker, Stanley M.
The inpact of Superfund on real estate transactions.
Probate and Property. Vol. 2 (2) p.  49-53. March-April, 1988.
     The "innocent landowner" amendment will significantly burden
     parties contemplating real estate transactions by requiring
     development and implementation of remedial work at a site prior
     to closing.  Purchasers and sellers increasingly will find
     negotiations over proposed transactions focused on allocating
     the very environmental risks from which this amendment seeks to
     shield them.                                                „,-
                                                             no. 019

Bleicher, Samuel A ; Stonelake, Benjamin G.
Caveat e«ptor: the impact of superfund and related laws on real
estate transactions.                         „„«„„„,.   -,
Environmental Law Reporter. Vol. 14  (1) P. 10017-10024. January,

1984'                                                             1984
     The desire to avoid  hidden liabilites has made hazardous waste
     law required reading for prospective purchasers  and security
     holders of commerical real estate.   The authors  outline the
     sources of landowner liability  for hazardous waste pollution and
     suggest steps that will help commerical real estate purchasers
     avoid hazardous waste liability.
                                                             no.  018
Bourdeau, Karl S.                                            «.4,.-_
Minimizing hazardous waste  liabilitca in real estate transactions.

Construction Lawyer. Vol. 6 (4)  p.  1-16. August,  1986.

     This article  focuses on transactions involving developed or
     undeveloped real  property which is not engaged in substantial
     hazardous waste generation  of disposal activities at the time  of
     the transaction but nonetheless may be the source of significant
     environmental problems. The principles discussed in this
     article are relevant to corporate a<=*ul6itlon* irivo1^*? **;**
     or etock purchases or  mergers of companies with manufacturing
     operations that  involve hazardous substances or generate or
     otherwise handle  chemical wastes.
                                 PAGE 3

Brenner, Lynn.
Law  firm predicts all banks will review environmental ricks.
American Banker. Vol. 153  (201) p.  16-. Oct.  13, 1988.
     An environmental review should be part of the bank's general
     operating policy, because these potential liabilities exist in
     all types of loans.   Cole A Dietz has created a task force of
     litigation, real estate, and environmental lawyers to advise
     client banks on protecting themselves from hidden liabilities
     when extending loans.
                                                             no. 036

California Seal Estate Indicators.
Toxic wastes in real estate.
California Real Estate Indicators.  Summer 1987.
     The commmercial real  estate market is abuzz with discussion and
     concern over toxic wastes.  Brief review of the laws, their
     implications and proper responses.
                                                             770. 005

Cronin, Philip M; Fieldsteel, John  W.
When does environmental regulation  of private property become a
taking and require compensation.
Massachusetts Law Review.  Vol. 70 (2) p. 72-81. June, 1985.
     The general rule is that while property may be regulated to a
     certain extent, if regulation  goes too far it will be recognized
     as a taking. The general trend so far has been to uphold
     environmental laws and regulations against challenges that they
     were unconstitutional takings.  In upholding them, neither the
     Supreme Judicial Court, nor the Appeals Court has formulated
     definitive standards  to determine the validity of environmental
                                                             no. 020
Dybdahl, David; Runes, Thomas P
Limiting the liability; risk managers learn to curb possible
environmental risks.
Business Insurance. Vol. 17 p. 23-25. Sept. 12, 1983.
                                                             no.  071
                                PAGE 4

Evans, William D.
Superfund: Locating the liability land Bines.
Tenneesee Bar Journal. pl3-18. March-April 1988.
     This article outlines the baeic liability scheme of CEBCLA.
     After briefly discussing the statutory scheme, it focuses on
     three major liability themes: (1) strict liability, (2) .joint
     and several liability, and (3) contribution.  Relevant Tennessee
     cases are noted.
                                                             no.  032

Fitzgerald, Kate.
Superfund can pose super liabilities for lenders: minimizing the
risks of toxic waste is the best defense.
Savings Institutions. Vol. 108 (7). July, 1987.
                                                             no.  049

Fitzsimmons, Mark P; Sherwood, Jeffrey K.
Real estate lawyer's primer (and more) to Superfund: the
environmental hazards of real estate transactions.
Real Property, Probate and  Trust Journal. Vol. 22 (4) p.765-790.
Winter, 1987.
     Superfund liability can be visited on an unsuspecting owner of
     property on which wastes have been dumped or toxins have been
     released, even if the owner was totally innocent of wrongdoing
     and derived no benefit from prior, improper use of the property.
     This article explores the issues a purchaser should consider
     before consummating a transaction and protective measures and
     appropriate responses if contamination is discovered.
                                                             no.  014

Fleischaker, Marc; Mitchell, Donald.
Insecurities of security interests in hazardous waste cases.
National Law Journal. Vol. 9  (1) p. 18-21. September 15, 1986.
     The issue of lender liability brought to bear in U.S. v.
     Maryland Bank and Trust  is discussed. The case exposes banks and
     other real estate lenders to significant liabilities beyond the
     value of the loan or the security property.
                                                             no. 045
                                PAGE 5

Forde,  John .
Survey finds banks lax on environ»ental policy.
American Banker.  Vol.  153 (105) P.17. May 31, 1988.
     Moot commercial lenders have not set a lira policy on assessing
     the environmental risk of a loan while making credit decisions,
     according to a recently released survey sponsored by Robert
     Morris Associates, Philadelphia.  Of those responding banks that
     have already suffered loan losses for environmental reasons, 69X
     do not now require environmental audits on loans.
                                                             no. 037
Forte, Joseph Phillip.
A lender's guide to environmental liability risk management.
Mortgage Banking.  Vol. 47 (8)  May 1987 .

     Real estate professionals-developers,  owners and lenders alike
     have suddenly become aware of their potential exposure to
     liability for toxic waste.  It is apparent that the risk to the
     lender is greater than the mere impairment of loan collateral
     occasioned by the non-compliance with ordinary land use
     statutes.  Establishing a staged due diligence program will
     cause delays in underwriting and cancellations of closing for
     transactions.  But as lenders in the marketplace adopt similar
     programs, borrowers will have no alternative but to accept the
     developing environmental audit procedure as a cost of doing
     business.                                                    „_,_
                                                             no.  002
Freed, Martin J.
Superliens: mortgage banker's new headache.
American Banker. Vol. 151  (215) p. 4. October 30, 1986.
     The appearance of the superlien is a clear signal: As
     environmental regulation intensifies, considerations of whether
     or not a site is free of toxic substances and free of conditions
     which might lead to toxic contamination increasingly will have
     to be taken into account in real estate development.  The
     liability for the release of toxic substances under Superfund
     statutes can be so substantial and, if accompanied by a
     superlien provision,  so unavoidable- that developers can no
     longer afford to ignore its impact on their business.
                                                             no.  040
                                 PAGE  6

Froet,  Edmund B..
Strict liability as an incentive for cleanup of contaminated
Houeton Law Review. Vol. 25 (4) p. 951-962. July, 1988.
     Experience is proving that strict liability under CERCLA and
     RCRA provides a strong incentive for owners and operators to
     clean up their industrial facilities.  However, the
     effectiveness of this incentive is curtailed by the inclination
     of owners to overlook hazardous-substance issues when there ie
     no apparent danger of an enforcement action or litigation and by
     their inability to undertake voluntary cleanup when there are no
     available standards or guidelines to indicate what cleanup
     actions should be taken.
                                                             no. 026
Glass,  Elizabeth Ann.
The aodern snake in tbe grass: An examination of real estate &
commercial liability under Superfund & Sara and suggested guidelines
for the practitioner.
Boston College Environmental Affairs Law Review. 14 (3) Spring, 1987

     This article begins with an overview of CERCLA.  Following this
     overview, the discussion focuses on the twin problems of
     purchaser and seller liability under both CERCLA and the
     Superfund Amendments and Reauthorizatlon Act of 1986 (SARA).
     Suggestions are made for counseling and representing the client
     who is involved in a real estate or commerial transaction and
     wishes to avoid Superfund liability.  The article concludes that
     in searching for deep pockets to cover the cost of the cleanup
     program, courts have interpreted liability under the Act to an
     extreme not evidenced in the legislative history of the Act.
                                                             no. 010

Hingerty, Michael B.
Property Owner Liability for environ»ental contamination in
University of San Francisco Law Review.  Vol. 22 (1) P. 31-87. Fall,
     This article provides a survey of the laws applicable to real
     property owner liability for environmental contamination in
     California and examines in particular detail the statutory
     provisions that may furnish the property owner with come
     opportunities for relief from this liability.
                                                             no. 028
                                PAGE  7

Hooper, Carl.
Business and property owners' complain of increased liability from
hazardous materials.
Houston Post. Sec E, p.l col 3. April 26, 1967.
                                                             no. 059
Hoskins, Janes C.
Environmental considerations in the disposal or acquisition of
corporate real estate.
Industrial Development. Vol. 156 p. 1-7. Nov-Dec. 1987.
                                                             no. 064
Houlehan, Donald A; Parish, Gary E.
Hazardous waste regulation: Issues for the real estate
Colorado Lawyer  13 (1) p. 48-52  Jan. 1984.
     The general or real estate practitioner is the lawyer who may
     first receive the inquiries or see the symptoms of an
     environmental law problem.  This article provides some
     background for recognizing these symptoms.
                                                             no. 013
Howard, Jeffrey H; Benfield, Linda E.
Innocent land -ownership.
Real estate Today. Vol. 21  (6). Aug. 1988.
                                                             no. 053
Jones, Stephen C.
Toxic contamination and liability: precautionary action and
post-discovery alternatives.
Industrial Development. Vol. 156 p. 4-8. July-August, 1987.
                                                             no. 066
Kaplan, Lawrence E.
Site Selection Handbook.
Site Selection Handbook. Vol.. 23 p. 111-119- Feb. 1988.
     A compendium of hazardous substance laws and issues involving
     real estate amendments to environmental laws  have expanded the
     pool of parties which can be pursued for costs of damages and
     cleanup to include the property owner, seller, broker, mortgage
     holder, tenants and contractors.
                                                             no. 047
                                PAGE 8

Impact of state "superlien"  statutes on real estate transactions .
Virginia Journal Natural Resources Law. Vol. 5  (2) p. 297-323.
Spring, 19B6.                                                1986

     The impact of state super lien statutes on  real estate
     transactions is discussed.  Cases interpreting these laws are
     surveyed and implications are considered for real estate
     purchasers, title insurers and lenders.
                                  transaction:  a practical and
                     the technical «™^'«^^* ;«
business person, investor or anyone invoved in buying and selling

EPA^anagment of Uncontrolled Hazardous Waste Sites  National
Symposium,  November 29, 1982. p.  474-478. 1982.
     Sources of  liability are identified, role of the environmental
     professional  is discussed.   Several case histories are
     summarized  representing orders of magnitude difference in
     liability value of transaction and cost of investigation.^
 Levitas, Elliott H;  Hughes, John V.
 Hazardous waste issues  in real estate             iq87
 Mercer Law Review.  Vol.  38  (2) p. 581-641.  Winter 1987.
     This article focuses on hazardous waste, because
     ssaraSti-'S :l:s.rTSSi?ss2 ss :
     sssss sjas^ss - - ="^S
     practitioners may use  to identify, address, and resolve
     environmental problems.  Finally, the author Provides a
     practical context for  the ensuing discussion of hazardous waste
     issues in real estate  transactions.
 Madden,  Heal.
 Environmental law dictates due in*"1^;        y  .  4 (2) Mar_Apr
 Outlook  of  the Federal Home Loan Bank Systems.  Vol. 4 (Z) nar Apr.
 1988.                                                         1988
      Potential for losses from litigation        tr
      substances adde another layer  of COBpJe"^r^m^^1
      ownership and financing.   Ignorance of environmental
      consideration is no defense.
                                PAGE  9

Malamut, John.
Compromise development: bridging the gap between development and
Urban Land. Vol. 46 (3). Karch, 1987.
                                                             no. 054

Marcotte, Paul.
Real Property
American Bar Aeeociation Journal. Vol. 73 p. 66-70. Nov. 1987.
     The Superfund law will pose increasing problems for property
     owners in the years ahead.  Hazardous waste has become as much a
     concern in a real estate deal as who has proper title. A final
     question is whether there will be stricter standards in the
     years ahead
                                                             no. 031
Merklein, Ernest.
The hidden liabilities of industrial park developers from
environmental claims.
Development. Vol. 18, (4) Dec. 1987.
     Hidden liabilities may be in store for industrial park
     developers, managers and partners as the result of industial
     park users' past and current operations.  Several claims filed
     serve as warnings for industrial park developers to become 'risk
                                                             no. 006
Moore,  Teresa.
State Environmental Law Preempts Bankruptcy Code?
Rutgers Law Journal   38 (4) 843-865  Summer, 1986 .
     Quanta signals a shift on the Court since its decision in Ohio v
     Kovacs a year earlier toward increased recognition of the
     importance of effective regulation of the hazardous waste
     industry.   Whether the court will apply Quanta and future
     statutory enactments to uphold efforts to impose liability on
     those who cause environmental damage remains to be seen.  This
     decision begins to recognize, however imperfectly, the enormous
     consequences of the build up of improperly handled hazardous
     wastes and uphold valid environmental protection interest at the
     expense of restricting, in part, long established federal
                                                             no. 008
                                PAGE 10

Morrie, Jennele M.
CoBt of ignorance:  assessing liability for potential environmental
hazards in real estate transactions.
Arizona Bar Journal. Vol. 24 (1) p. 12-18. June-July, 1988.
     A seminar was  co-sponsored by the Environmental and Natural
     Resources Law  Section and the Continuing Legal Education
     Division of the State Bar on March 11, 1988.  For those unable
     to attend, this article provides a brief overview of some the
     major environmental laws affecting real estate transactions.
                                                             no. 027

Moscowitz, Joel S;  Hoyt, Scott R.
Enforcement of CERCLA against innocent owners of property.
(Symposium: Environmental Litigation and Enforcement)
Loyola of LOB Angeles Law Review. Vol. 19  (4)  p.1171-1188.   June
     It is the thesis of this Article that expressions of judicial
     symphathy with the public need and good motivation have
     stretched the  hazy language of CERCLA paet the breaking point.
     In the process, the courts have disregarded traditional notions
     of fairness in forcing those admittedly innocent of any
     polluting activites to pay for extravagant cleanup costs.
                                                             no. 017

Moskowitz, Joel.
Hazardous waste and real estate transactions.
Los Angeles Lawyer. Vol. 9  (10). Jan. 1987.
     Today, environmental law has not only evolved and matured  into a
     specialty as distinct  and as arcane as taxation, it has sent
     tendrils into neighboring fields.  Real estates  litigation  is
     now dominated by issues stemming from the growing development of
     historically industrial lands  for new residential and  industrial
     uses.  In this fast-changing field, if the substantive
     principles outlined here are obsolete tomorrow,  at least those
     structuring real estate transactions may have a  feel for when
     they should turn to practitioners of  this newest of specialties.
                                                             no. Oil
Moskowitz, Joel S.
Environmental liability and  real  property transactions:  law  and
Wiley. ISBN 0-471-61390-8, 1989.
                                                              no.  062
                                 PAGE  11

Newman,  Joseph.
Bank Groups want cleanup bill altered.
American Banker. Vol. 152 (223) p. 28. November 13, 1987.
     Pennsylvania's bank and thrift trade groups are lobbying
     legislators to eliminate a "superlien" provision from Gov.
     Robert Casey's proposed hazardous waste cleanup bill.
     Connerical banking and thrift groups also worry that financial
     institutions could be "deemed" responsible for hazardous site
     cleanup costs merely by virture of the close financial
     relationship they have with their business borrowers."
                                                             no. 038
Newman, Joseph.
Be realistic about risk in industrial lending: environmental lawyer
advises banks on deals involving hazardous materials.
American Banker. Vol. 151 (255) P. 16. December 30, 1986.
     David G. Mandelbaum is one of a growing number of "environmental
     lawyers" who deal with banks and others worried about costly
     suite for cleanup funds when they foreclose on a contaminated
     property.  Mr.  Mandelbaum summed up hie advice this way: Lenders
     should avoid the temptation of maximizing environmental risks
     and instead should optimize protection against them.
                                                             no. 039
Nucclarone,  A.  Patrick.
Impact of environmental regulations on business transactions, 1987:
real property transfers and mergers and acquisitions, (book)
Practising Law Institute. ISBN 0-317-60062-1.
                                                             no. 061
O'Connell, T.
Checking out hidden hazards to land uses.
California Builder. Vol. 56 (2). April-May, 1988.
                                                             no.  055
O'Connell, T.
Saving projects from contamination scourge.
California Builder.  Vol. 56 (1). Feb-«arch, 1988.
                                                             no.  056
                                PAGE 12

O'Shaughnessy,  Michael L.
Bankruptcy trustee's abandonment of burdensome estate property and
state environmental protection laws: Midlantic National Bank v. Hen
Jersey Department of Environmental Protection.
University of-Cincinnati Law Review. Vol. 55 (3) p. 853-871. Winter,
     The narrowing of the Court's rule to protect the public health
     and safety avoids giving too much discretion to the lower courts
     in considering a bankruptcy trustee's desire to abandon
     burdensome property.  The Court's lack of specificity as to Just
     what conditions such lower courts can impose on abandonment
     suggest the need for a more deliberate consideration of the
     issue by Congress.
                                                             no. 016
Olin, Harold B.
Hazards ahead: lenders are running in CERCLA's over the potential
liabilities of hazardous waste.
Secondary Mortgage Markets. Vol. 4 (2). Summer, 1987.
                                                             no. 050
Perry, Charles.
Superfund amendments- a new beginning.
Industrial Development. Vol. 156 p. 4-8. Jan-Feb, 1987,
                                                             770. 067
Pilko, George; Green, Fred.
Avoiding hazardous waste pitfalls in real estate transactions.
Industrial Development. Vol. 156 p. 7-10. Nov-Dec. 1987.
                                                             DO. 063
Portelli, David J.
SARA slam* the door: the effect of Superfund amendments on
foreclosing mortagees.
Wayne Law Review. Vol. 34 p. 223-244. Fall, 1987.
     CERCLA's approach gave foreclosing mortagees a legitimate
     defense to liability by exempting persons holding security
     interests if they met several rigorous conditions.  SARA
     effectively eliminates that defense by harshly and overbroadly
     defining "contractual relationship."  As a result, SARA will
     breed litigation.  Moreover, SARA virtually abandons the
     principle that the hazardous waste polluter should pay for  his
     misdeeds.                                                    ___
                                                             no.  030
                                PAGE  13

Purviance, Ken.
The hazardous waste abatement liability of innocent landowners: A
constitutional analysis.
Pacific Law Journal. Vol. 17 (1)  p. 185-211. Oct. 1985.
     The author contends that charging innocent landowners with
     hazardous waste abatement cost also runs counter to provisions
     of the Dnited States Constitution, which provide that private
     property cannot be taken for a public use without just
     compensation, and that no one nay be deprived of property
     without due process of the law.  This author will examine the
     extent to which cost can be imposed upon individuals under the
     police powers of the state to act in furtherance of public
     health, safety, of welfare.
                                                             no. 009

Quentel, Patricia L.
Liability of financial institutions for hazardous waste cleanup
costs under CERCLA.
Wisconsin Law Review, p. 139-185. 1988.
     This comment examinee the expansion of CERCLA liability to
     include lenders that take security interest in property as
     collateral for loans and it makes some general predictions about
     lender liability in the future.  It suggests some precautions
     that lenders can take to protect themselves from liability for
     hazadous waste cleanup costs.
                                                             no. 029
Rashby, Carolyn.
Lender liability under CERCLA: United States v. Maryland Bank and
Trust Co.
Ecology Law Journal. Vol. 14  p. 569-592.  1987.
     The district court's decision in Maryland Bank & Trust opens up
     a new area of liability under CERCLA - mortgagee that foreclose
     on and purchase contaminated sites probably will be held liable
     as owners under CERCLA for cost of cleaning the sites.
                                                             no. 033
Rawlings, John T.
Bankrupt's obligation to remove toxic waste constitutes a "claim":
Ohio v. William Lee Kovacs Enterprises.
Washington University Journal of Urban and Contemporary Law. Vol.
32. 1987.
                                                             no.  051
                                PAGE 14

Shanker, Morris G.
A bankruptcy Superfund for some super creditors; fro» Ohio to
Midlantic and beyond.
American Bankruptcy Law Journal. Vol 61 p. 185-194. Spring, 1987.
     The Midlantic and Kovacs decisions raise the narrow policy
     question on how the cost of eliminating environmental hazards
     are handled in bankruptcy.
                                                             no.  034

Slutsky, David.
Lenders' strategies for environmental liability
Mortgage Banking. Vol 47 (10) p65 - 72. July 1987.
     As lenders recognize the value of pre-screening loans prior to
     funding and prior to foreclosure, they will also develop
     effective strategies for the continuous monitoring of sites,
     thus keeping up the pressure on the  polluters.  This cooperation
     between public sector regulation and private  sector enforcement
     will hopefully be embraced by the lending community in the
     coming years as perhaps the best solution to  a serious problem.
                                                             no.  001
Stokes, James.                                                   .
Legal aspects of real estate  transactions involving  environmental

Industrial Development. Vol.  155  p.  10-15.  Sept-Oct,  1986.
                                                              770.  069
Tasher, Steven; Dean,  John;  Oster,  Steve.
Environmental Laws  and Real Estate  Handbook.
Government  Institutes,  Inc.  Rockville,  MD ISBN 0-86598-729-7.

     This handbook  reviews  all the  major federal environmental laws.
     It also includes  a national survey of pending state
     environmental  legislation that affects real estate transactions.
 Creditorsrare leery of liability for toxic waste cleanup costs.
 American   Banker.  Vol.  152 (179) p.  9. September 14, 1987.

      Banks are leery about taking titles to properties containing
      hazardous wastes because they may be liable for clcanup °0**8.. ft
      under federal law.   Even federal bank regulators are feeling the

      threat-                                                  no. 041
                                 PAGE 15

Van Lieshout, John M.
Breaking the bank.
Real Estate Review. Vol. 16 P 51-56. Fall, 1986.
                                                             no. 068

Vollman, Alan P.
Double Jeopardy: lender liability under Superfund
Real Eetate Law Journal.  Vol.16 p.3-19. Sunmer 1987.
     Real estate lender liability for the cost of cleaning up
     hazardous waste on the property are described. Article analyzes
     recent anendnents to CERCLA and liability under state
     environnental laws.
                                                             no. 035

Nail Street Journal.
Cleanup for toxic wastes falling on firus.
Wall Street Journal, p.29 col. 1, March 9, 1988.
     More and more, states are thrusting cleanup responsibilites for
     toxic wastes on firms that own, buy or sell industrial property
     and the laws are slowing the closing of some deals.  Hew Jersey
     was the first state to crack down on companies.
                                                             no. 058
                                PAGE 16