PREPARED   WORKBOOK

Process for Risk Evaluation,
Property Analysis and Reuse Decisions
FOR LOCAL GOVERNMENTS CONSIDERING
THE REUSE OF CONTAMINATED PROPERTIES
&EPA

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                             Acknowledgements
EPA-Region 1 wishes to thank its contractors and the many individuals in the Region 1
office, EPA headquarters, and other regional offices that contributed to this workbook.
Contractor support was provided by the Office of Brownfields and Land Revitalization,
the Superfund Redevelopment Initiative, and the Conflict Prevention and Resolution
Center.  Technical contractors on the workbook were SRA International, Inc. and Vita
                                      r\
Nuova, LLC.  SKEO Solutions (formerly E , Inc.) provided support on initial project
scoping.  Adamant Accord, Inc. conducted stakeholder outreach.

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          Providing Comments on this Workbook	i
          A Guide to Using this Workbook	ii
          Disclaimers	vi
          Acronyms	vii

1         Introduction	1
   1.1    Purpose	1
   1.2    Background	2
   1.3    About Risk Management	2
   1.4    About Property Redevelopment	3
   1.5    Outline of the PREPARED Approach	4

2         Establishing Project Goals	6
   2.1    Overview	6
   2.2    Key Considerations	6
   2.3    Other General Considerations Related to Goals	7
   2.4    Specificity of the Project Goals	7
   2.5    Revisiting the Project Goals	8
   2.6    Preliminary Reuse Assessment	8

3         Property Recovery Actions	13
   3.1    Types of Property Recovery Actions	13
   3.1.1    Actions that Involve Taking Title to the Property	14
   3.1.2    Actions that Do Not Involve Taking Title to the Property	16
   3.2    Screening Property Recovery Actions Based on Project Goals	20

4         Conducting Due Diligence	23
   4.1    Overview of the Due Diligence Process	23
   4.2    Phase I Environmental Site Assessment	25
   4.3    Phase II Environmental Site Assessment	27
   4.4    Environmental Investigation and Cleanup Action	28
   4.5    Determining Regulatory Status	29
   4.6    Property Access	30
   4.7    Key Questions to Consider When Conducting Due Diligence	31
   4.7.1    All Appropriate Inquiries	31
   4.7.2    Property History	33
   4.7.3    Property Status	34
   4.7.4    Property Appraisal	37

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   4.7.5    Regulatory Status	38
   4.7.6    Environmental Conditions	41
   4.7.7    Environmental Restrictions	45

5         Redevelopment Obstacles	52
   5.1    General	52
   5.2    Identifying Redevelopment Obstacles	52

6         Assessing Project Risk	57
   6.1    General	57
   6.2    Environmental Liability	60
   6.3    Financial Risk	58
   6.4    Community Issues	58

7         Potential Liability under Federal and State Cleanup Statutes	60
   7.1    General 60
   7.2    CERCLA	
   7.2.1    Overview of CERCLA	61
   7.2.2    Liability under CERCLA	63
   7.2.3    CERCLA Liability Defenses, Exemptions, and Policies	64
   7.2.4    State Voluntary Cleanup Programs	72
   7.2.5    Other CERCLA Considerations	72
   7.3    RCRA74
   7.3.1    RCRA (Subtitle C) - Hazardous Waste	75
   7.3.2    RCRA (Subtitle D) - Solid Waste Management	81
   7.3.3    RCRA (Subtitle I) - Underground Storage Tanks	85
   7.4    TSCA (Title I) - PCB and PCB-Containing Wastes and Equipment	89
   7.5    Clean Air Act - NESHAP Requirements for Asbestos	93

8         Project Economics and Financial Analysis	96
   8.1    General	96
   8.2    Pro Forma	97
   8.3    Using the Pro Forma Worksheet	99

9         Community Issues	102
   9.1    General	102
   9.2    Some Key Principles of Community Engagement	104
   9.3    Meeting Community Needs through Sustainable Development	108

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10        Managing Project Risk	Ill
   10.1   General	Ill
   10.2   Risk Management Tools and Approaches	112
   10.2.1  Types of Tools and Approaches	112
   10.2.2  Selected Risk Management Tools for Property Activities	117
   10.2.2.1    Property Activities	117
   10.2.2.1.1    Meeting with Federal and State Regulators	117
   10.2.2.1.2    Due Diligence and All Appropriate Inquiries	117
   10.2.2.1.3    Environmental Investigation	117
   10.2.2.1.4    Cleanup Action Planning	118
   10.2.2.1.5    Reasonable Worse Case Scenario Planning	118
   10.2.2.1.6    Engaging Stakeholders	118
   10.2.2.1.7    Financial Analysis	118
   10.2.2.1.8    Timing Municipal  Involvement	119
   10.2.2.1.9    Interim Cleanup Action	119
   10.2.2.1.10   Cleanup Action	120
   10.2.2.1.11   Voluntary Corrective Action	121
   10.2.2.1.12   Maintenance and Monitoring of Remedial Systems	121
   10.2.2.1.13   Institutional Controls	122
   10.2.2.1.14   Oversight of the Environmental Contractors	122
   10.2.2.1.15   Following Accepted, Good Commercial Practices	122
   10.2.2.2    Statutory/Regulatory Protections	123
   10.2.2.2.1     Statutory Exemptions and Defenses	123
   10.2.2.2.2     Prospective Purchaser Agreements	123
   10.2.2.2.3     No Action/ No Further Action Letters and Comfort Letters	124
   10.2.2.2.4     Other Determinations of Completion	126
   10.2.2.3    Transactional Activities	126
   10.2.2.3.1     Escrow Accounts	126
   10.2.2.3.2     Purchase Price Adjustments	126
   10.2.2.3.3     Grants	126
   10.2.2.3.4     Tax Benefits and Credits	126
   10.2.2.3.5     Private Investors	127
   10.2.2.3.6     Specialized Loans	127
   10.2.2.3.7     Redevelopment Authorities	127
   10.2.2.3.8     Land Banks	128
   10.2.2.3.9     Contractual Provisions	128
   10.2.2.3.9.1     Indemnification	131
   10.2.2.3.9.2     Representations and Warranties	131
   10.2.2.3.9.3     "As is" Provisions	132
   10.2.2.3.9.4     Environmental Covenants	132
   10.2.2.3.9.5     Assumption, Retention,  and Release Provisions	132
   10.2.2.3.9.6     Schedule of Included or Excluded Liabilities	132
   10.2.2.3.9.7     Post-Signing and  Pre-Closing Conditions	133
   10.2.2.3.9.8     Fixed Price or Performance-Based Contracts  	131

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    10.2.2.4    Insurance	131
    10.2.2.4.1    Comprehensive General Liability Insurance	131
    10.2.2.4.2    Pollution Liability Insurance	131
    10.2.2.4.3    Errors and Omissions Insurance	132
    10.2.2.4.4    Cost Cap Insurance	132
    10.2.2.4.5    Secured Lender Insurance	132
    10.2.2.4.6    Finite Risk Insurance	132
    10.2.2.4.7    Institutional Controls and Post Remedial Care Insurance	133
    10.3   Cooperating  vs. Non-Cooperating or Defunct Owners - Some Risk
          Management Considerations	133

11        Selecting a Property Recovery Action	137
    11.1   General	137
    11.2   Evaluating Redevelopment Obstacles	137
    11.2.1.1  Worksheet #5: Identification and Prioritization of Redevelopment
            Obstacles associated with a Property Recovery Action	138
    11.2.1.2  Worksheet #6: Identification of Potential Risks and Actions to Resolve
            Information Gaps	139
    11.2.1.3  Worksheet#7: Identification of Risk Management Tools	139
    11.3   Factoring in the Financial Analysis	139
    11.4   Project Summary	139

Appendix A	145

Pro Forma Worksheet	145

Appendix B	149

Example Sources-and-Uses Chart	149

Appendix C	151

Examples of Completed Worksheets  #5, 6 &1	151

Appendix D	160

Assessing Regulatory Liability: Key Questions	160

Appendix E	190

Additional Resources	190

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                  Providing Comments on this Workbook

This Workbook is designed primarily for municipalities, but tribes, county and
state governments, and economic redevelopment entities may also find it useful.
It was developed in conjunction with EPA contractors having considerable
expertise with both private-sector and public-sector redevelopment projects
involving contaminated properties.

EPA-Region 1 fully expects that in the course of utilizing this Workbook,
municipal officials and other users will be able to offer suggestions for improving
the document and worksheets. We welcome that feedback and have created a link
at the following Web site where comments can be submitted anonymously:
www.epa,gov/regionl/brownfields/prepared.

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                         A Guide to Using this Workbook

  Who is this Workbook for?

  The target audience is municipal officials interested in facilitating the cleanup and
  redevelopment of contaminated properties. The information in this Workbook may also
  be useful to tribes, county and state governments, and quasi-governmental entities such as
  economic development corporations.

  What is PREPARED?

  Property acquisition is among the actions that local governments might take to bring
  about a desired reuse.  This could involve retaining the property for some long-term
  public use, or assuming temporary ownership in order to clear title or otherwise prepare
  the property for transfer to private developers. Other non-acquisition options — such as
  leasing, transferring tax liens, or providing incentives — might also be used to facilitate
  redevelopment.  Each of these actions, referred to in this Workbook as property recovery
  actions, carries its own set of risks and issues that must be considered. PREPARED
  (Process for Risk Evaluation, Property Analysis and Reuse Decisions) is a risk
  management based approach to help municipalities evaluate potential property recovery
  actions for specific properties. This evaluation process involves answering the following
  core questions:
      •  Will the selected property recovery action achieve the project goals?
      •  Is the project financially viable and realistic?
      •  Are the necessary resources available?
      •  Are the risks acceptable?

  The PREPARED approach is outlined below:
                                                     Step 4
Stepl
 Step 2
Step 3
Establish
 Project
 Goals
 Screen
Property
Recovery
 Actions
Conduct
 Due
Diligence
                                    Evaluate Property Recovery Actions against
                                                  Project Goals
                                         Identify
                                      Redevelopment
                                        Obstacles
Step 6
 Select
Property
Recovery
 Action
                                                      Identify
                                                     Information
                                                      Gaps

                                                      StepS
                                                                        11

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How is this Workbook organized?

This Workbook is organized to mirror the PREPARED approach shown above.  The
following briefly describes each step and indicates where it is discussed in the Workbook.
Worksheets are also provided to help document and guide the evaluation process. Blank
worksheets are available for download at: www.epa.gov/regionl/brownfields/prepared.
Web links to additional sources of information are included throughout the Workbook.
                         Step 1:  Establish Project Goals
               See Chapter 2:  Establishing Project Goals (pages 6-9)

This chapter describes some key considerations in establishing project goals and
discusses the purpose and preparation of a preliminary reuse assessment.  A preliminary
reuse assessment is an analysis of a property's reuse potential that is based on key
findings from available studies and other information sources.

  •  Worksheet #1:  Establishing Project Goals (page 10)
     This worksheet can be used to help establish reasonable and achievable project
     goals

  •  Worksheet #2:  Reuse Assessment (page 11)
     This worksheet can be used to summarize key information regarding the reuse
     potential of a property.
                    Step 2:  Screen Property Recovery Actions
             See Chapter 3: Property Recovery Actions (pages 13-20)

This chapter describes some commonly available property recovery actions and discusses
the pre-screening of those actions.

  •  Worksheet #3:  Preliminary Screening of Property Recovery Actions (page 21)
     This worksheet can be used to document the basis for retaining a property recovery
     action for further consideration or eliminating it.
                         Step 3: Conduct Due Diligence
              See Chapter 4:  Conducting Due Diligence (pages 23-47)

This chapter describes the due diligence process and discusses some key questions to
consider relating to the environmental conditions.

  •  Worksheet #4: Due Diligence (page 48)
     This worksheet can be used to summarize key information collected during the due
     diligence process.
                                                                              in

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       Step 4: Evaluate Property Recovery Actions Against the Project Goals
               See Chapters 5-10 and Appendix D (pages noted below)

 Step 4 is an iterative process that consists of identifying potential redevelopment
 obstacles (Chapter 5), assessing potential project risks (Chapters 6, 7, 8, 9, and
 Appendix D), and evaluating potential risk management tools and approaches
 (Chapter 10).

 Chapter 5: Redevelopment Obstacles (pages 52-54) discusses the identification of
 potential redevelopment obstacles using the information gathered from the due diligence
 process.
  •  Worksheet #5: Identification and Prioritization of Redevelopment Obstacles
     Associated with a Property Recovery Action (page 55)
     This worksheet can be used to identify, prioritize, and summarize the redevelopment
     obstacles for a given property recovery action.

 Chapter 6: Assessing Project Risk (pages 57-59) briefly describes the three sources of
 project risks considered in this Workbook:  environmental liability, financial risk, and
 community issues.

 Chapter 7: Potential Liability under Federal and State Cleanup Statutes (pages 60-
 95) describes and discusses  some key environmental statutes that are commonly
 associated with the cleanup  of contaminated properties and provisions for avoiding or
 limiting potential liability:

  •  Comprehensive Environmental Response, Compensation and Liability Act of 1980
     (CERCLA), commonly known as "Superfund" (pages 61-73)

  •  Resource Conservation and Recovery Act (RCRA) — covers hazardous waste,
     solid  waste, and underground storage tanks (pages 74-88)

  •  Toxic Substance Control Act (TSCA) — Provisions relating to PCBs (pages 89-92)

  •  Clean Air Act (CAA) — Provisions relating to asbestos (pages 93-95).

 Appendix D (pages 161-189) responds to some specific questions a municipality may
 have regarding potential liability under each of these federal statutes.

 Chapter 8: Project Economics and Financial Analysis (pages 96-101) briefly
 discusses potential project costs, revenues and other financial considerations.  Apro
forma worksheet (Appendix A) is also provided that can be used as a rough estimating
 tool by municipalities to assess  the financial viability of various redevelopment concepts.

 Chapter 9: Community Issues (pages 102-110) discusses the link between local
 community issues and project risk, and outlines important principles for conducting
 community engagement.  It  also describes area-wide planning and sustainable
 development practices.

 Chapter 10: Managing Project Risk (pages 111-136) explains basic risk management
 principles and describes some potential risk management tools and approaches.

                                                                               iv

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                      Step 5:  Identify Information Gaps
This step recognizes the iterative nature of the information gathering and property
recovery action evaluation processes.  As the evaluation process in Step 4 proceeds,
information gaps are identified, prioritized, and, where appropriate, resolved through
additional information gathering. The existence of information gaps will also be a critical
consideration in the selection of property recovery actions that takes place in Step 6.
                   Step 6:  Select a Property Recovery Action
       See Chapter 11: Selecting a Property Recovery Action (pages 137-140)

Chapter 11 further explains the process for evaluating and selecting property recovery
actions utilizing the information obtained through Steps 1-5. Worksheets #6 and #7 are
provided to help guide and document the evaluation process.

  •  Worksheet #6: Identification of Potential Risks and Actions to Resolve
     Information Gaps (page 141)
     This worksheet is used to identify potential risks associated with each
     redevelopment obstacle and identify actions that might be needed to resolve
     information gaps in order to better understand or minimize these potential risks.

  •  Worksheet #7: Identification of Risk Management Tools (page. 143)
     Worksheet # 7 is used after a decision is made that further information gathering
     efforts to resolve information gaps or better define risks are not necessary,
     practical, or justified.  The worksheet is used to document the remaining risks and
     identify any risk management tools and approaches that could be utilized to address
     them.
                                                                                v

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                                  Disclaimers
General Disclaimer: This document describes a general approach that can be used to
evaluate information and guide decisions regarding potential options for facilitating reuse
of properties. It does not address all information, factors, or considerations that may be
relevant. The word "should" and other similar terms used in this document are intended
as general recommendations or suggestions that might be generally applicable or
appropriate and should not be taken as providing legal, technical, financial, or other
advice regarding a specific situation or set of circumstances. EPA does not offer any
guarantees or warranties for or relating to the acquisition of or other involvement in a
contaminated or formerly contaminated property.
This document may be revised at any time without public notice.
Disclaimer Regarding Statutory Provisions and Regulations: This document
describes and summarizes statutory provisions, regulatory requirements, and policies.
The document does not substitute for these provisions, regulations, or policies, nor is it a
regulation itself.  In the event of a conflict between the discussion in this document and
any statute, regulation or policy,  this document would not be controlling and cannot be
relied upon to contradict or argue against any EPA position taken administratively or in
court. It does not impose legally binding requirements on EPA or the regulated
community, and might not apply to a particular situation based upon the specific
circumstances. This document does not modify or supersede any existing EPA guidance
document or affect the Agency's enforcement discretion in any way.
Web site or Product Endorsement Disclaimer: References in this document to any
non-federal product, service,  or enterprise do not constitute an endorsement or
recommendation by EPA. This document also provides links to non-EPA Web sites and
documents which contain additional information that may be useful or interesting and are
consistent with the general purpose of this document.  References in these Web sites and
documents, or to any specific commercial product, process, service, manufacturer, or
company, do not constitute an endorsement or recommendation  by EPA.  EPA is not
responsible for the content of these non-EPA Web sites or documents, and cannot attest
to the accuracy of these Web sites or documents.
                                                                              VI

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                                              Acronyms
AAI      All Appropriate Inquiries

BFPP     Bona Fide Prospective Purchaser

CAA      Clean Air Act

C& D     Construction & Demolition

CERCLA  Comprehensive Environmental Response,
          Compensation and Liability Act of 1980

CFR      Code of Federal Regulations

CWA     Clean Water Act

DBEDC   Dorchester Bay Economic Development
          Corporation

DSI      Dudley Street Initiative

ECHO    Enforcement and Compliance History
          Online

EPA      United States Environmental Protection
          Agency

ESA      Environmental Site Assessment

ICs       Institutional Controls

LEED     Leadership in Energy and Environmental
          Design

LUST     Leaking Underground Storage Tank

MOA     Memorandum of Agreement

MOU     Memorandum of Understanding

MSWLF   Municipal Solid Waste Landfill
NCP          National Oil and Hazardous Substances
              Pollution Contingency Plan

NEPA         National Environmental Policy Act

NESHAP      National Emissions Standards for
              Hazardous Air Pollutants

NPL          National Priorities List

NHPA         National Historic Preservation Act

PCBs         Polychlorinated Biphenyl

PREPARED    Process for Risk Evaluation, Property
              Analysis and Reuse Decisions

PRP          Potentially Responsible Party

RACM        Regulated Asbestos-Containing
              Materials
RAP          Remedial Action Plan

RCRA         Resource Conservation and Recovery
              Act

SHPO/THPO   State/Tribal Historic Preservation
              Officer

TAB          Technical Assistance to Brownfields

TAGs         Technical Assistance Grants

TIP           Tax Increment Financing

TSCA         Toxic Substance Control Act

TSD          Treatment, Storage or Disposal

UST          Underground Storage Tanks
                                                                                               vn

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      Introduction
1.1    Purpose
This workbook is designed to provide information that should be useful to local
governments interested in facilitating the cleanup and revitalization of contaminated
properties not currently owned by the local governmental entity. Although local
governments are the primary audience, the information in this document should also be
useful to tribes, county and state governments, and quasi-governmental development
entities.  Throughout the document the terms local government and municipality are used
interchangeably.
This workbook:
   (1) Describes a. Process for Risk Evaluation, Property Analysis and Reuse
       Decisions (PREPARED) - a potential risk management framework for evaluating
       various actions that municipalities might take to bring about the cleanup and
       redevelopment of contaminated properties.
   (2) Discusses some key questions and other factors that should generally be
       considered in implementing PREPARED.
   (3) Summarizes some relevant background information and provides references to
       other sources of information.
   (4) Provides worksheets that can help guide and document the process for a specific
       project.
The focus of this workbook is on properties that are difficult to redevelop due to concerns
regarding the environmental conditions.  These properties sometimes require that the
municipality involve itself in some manner so as to bring about a desired reuse. The
potential actions generally available to municipalities are referred to in this workbook as
                                property recovery actions  Property recovery
                                actions may include acquisition  approaches and non-
                                acquisition approaches (e.g., transferring tax liens).
                                The property recovery actions discussed throughout
                                this workbook are described in Chapter 3.
       Usage of the Term
   "Contaminated Property"
This workbook uses the term
"contaminated property" to refer to
properties where contamination is
suspected, is known to exist, or where
cleanup is complete but residual
contamination remains as part of the
cleanup strategy (e.g., long-term
management of contamination within a
protective cover system or "cap").
                                The risk management framework that is outlined in
                                this workbook provides a general process for
                                evaluating property recovery actions.  This framework
                                was developed in conjunction with EPA contractors
                                having expertise in both private-sector and public-
                                sector redevelopment projects involving contaminated
                                properties.  It represents one potential methodology
that might be used. Municipal officials utilizing this framework should apply their own
judgment in deciding if it is appropriate for their specific needs and purposes. Further,
while much of the emphasis in this workbook will be on issues stemming from a
property's environmental conditions, there are other factors commonly associated with
real estate development projects that will also need to be taken into account. Please refer

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to page vi for other important limitations and disclaimers that apply to the use of this
workbook.
                                                  Key Companion Documents
                                          This workbook will frequently refer the reader to two
                                          EPA documents for expanded discussion of certain
                                          topics:
                                          •   Revitalizing Contaminated Sites: Assessing
                                             Liability Concerns (April 2011) ("Revitalization
                                             Handbook")
                                             www.epa.gov/compliance/resources/publications/
                                             cleanup/brownfields/handbook/index.html
                                          •   State Brownfields and Voluntary Response
                                             Programs: An Update from the States
                                             (November 2009) ("State Program Summary")
                                             www.epa.gov/brownfields/state tribal/pubs.htm
1.2    Background

In an effort to ensure community vitality,
a strong tax base, and the health and
safety of its citizens, municipalities often
face the prospect of acquiring
contaminated properties or taking other
actions to facilitate reuse.  In cases where
contamination complicates the reuse of a
property, local governments can play a
pivotal role in transforming these
properties from liabilities to community
assets. This often becomes more
important when economic slowdowns put
downward pressure on real estate
markets. In many communities across
the country, contaminated properties
representing every stage in the cleanup process are being successfully reused as the result
of municipal involvement.  This includes Superfund sites and other properties with
serious environmental issues.
Despite a more supportive regulatory climate and a greater willingness by the financial
and development communities to work with contaminated properties, many municipal
officials report that they are not comfortable dealing with potential legal liability and
other complications associated with a property's environmental conditions. This is
                                        particularly true of smaller cities and towns
                                        that often operate with limited in-house staff
                                        and budgets.  Outside legal counsel and
                                        specialized consultants can provide essential
                                        expertise, but generally serve only in an
                                        advisory capacity. Ultimately, the burden of
                                        deciding on a course of action usually rests
                                        with municipal officials.
                                        This workbook will not make anyone an
                                        expert or avoid the need to obtain competent
                                        legal, financial, or technical advice. Having a
better understanding of the key questions to ask will, however, help municipal officials
identify where expert assistance might be needed,  improve communication with those
experts, and provide a solid foundation for making decisions.

1.3    About Risk Management
A decision-making process generally involves an evaluation of risk.  A basic premise of
this workbook is that project risks involving contaminated properties, like most risks,
cannot be entirely eliminated — only managed. Managing risks requires a fundamental
understanding of the risks that may exist, the likelihood of those risks occurring, and the
This workbook will not make anyone an
expert or avoid the need to obtain
competent legal, financial, or technical
advice.  Having a better understanding
of the key questions to ask will,
however, help municipal officials identify
where expert assistance might be
needed, improve communication with
those experts, and provide a solid
foundation for making decisions.

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potential consequences if those risks are realized.  It also involves prioritizing those risks
and taking steps to contain the most significant risks within acceptable limits. What is
deemed "acceptable" will depend on a number of factors, such as a municipality's basic
goals for the contaminated property and its general sensitivity to risk.  This is a
determination that must be made by municipal officials based on the needs of the local
community.
The discussion of risk in this workbook includes financial risk, civil/environmental
liability, and community issues. Generally, these risk categories are interrelated and
should be considered together in evaluating a property recovery action. Risk
management is typically conducted in an iterative, staged manner.  Once risks are
identified, potential ways to manage these risks are considered and the risks are
reassessed. Risk management for contaminated properties can involve traditional tools
such as insurance products and indemnification agreements, or other approaches that
might include additional data gathering, delaying acquisition until further cleanup is
completed, or using a different method of property acquisition.

1.4    About Property Redevelopment
Redevelopment projects can vary greatly in their complexity and scope; however, the
commercial redevelopment process can generally be simplified into four general
components:

   •   Predevelopment - Predevelopment activities could involve, for example,
       identifying and assessing potential reuses, conducting due diligence, obtaining
       access to the property to conduct environmental studies and  other assessments of
       the property, and identifying potential costs and sources of funding.

   •   Securing the Deal - The deal is secured after the predevelopment  activities have
       yielded a decision to purchase or take control of the property and continue with
       the project. This typically includes contract negotiations, obtaining financing,
       establishing cleanup action plans, and acquiring the property.

   •   Property Preparation and Development - This occurs  after the planning
       processes have been completed and approvals are obtained.  It may include
       obtaining construction and environmental approvals;  coordinating cleanup and
       construction activities; securing tenants; and completing the redevelopment
       signified by the property's sale or lease.

   •   Property Management - This involves a number of tasks involving the long-
       term management of the property and usually continues after redevelopment
       activities have been completed. These tasks may include managing the financial
       aspects, commercial operations, tenant issues, community relations, and any long-
       term environmental issues, such as operation and maintenance of any cleanup
       systems and components associated with the property.
Early in the process of evaluating whether to proceed with plans for the redevelopment of
a property,  a developer will typically attempt to weed out a project with poor or marginal
investment potential and identify "deal breakers" that could eliminate the project from
further consideration if not addressed.  These deal breakers often result from significant
data gaps and uncertainties that introduce unacceptable risk into  the project.  The
developer then goes through the process of determining whether the proj ect justifies

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   A successful evaluation
   process is one that leads to
   a sound decision even if
   that means that the project
   is ultimately abandoned.
spending the additional resources to resolve these risks and to further refine the
evaluation.  Oftentimes, the answer will be "no," which can be an acceptable outcome.  A
successful evaluation process is one that leads to a sound decision even if that means that
the project is ultimately abandoned.
A similar approach is applied to the evaluation of potential property recovery actions.
There are, however, some fundamental differences in how private developers and
                            municipalities might conduct this evaluation process.  For
                            example, municipalities may have a variety of property
                            recovery actions available (see Chapter 3), while
                            developers are most often focused on property acquisition
                            scenarios.  As a result, municipalities may need to perform
                            a comparative analysis of the costs, risks, and benefits of
multiple property recovery actions.  Also, unlike private development projects  that can be
evaluated based on clear, quantifiable metrics (e.g., the return on investment), a
municipality's project goals may also be based on more subjective considerations — such
as public safety or the need to make the surrounding area more "livable."

1.5    Outline of the PREPARED Approach
For most municipalities, the decision of whether or not to  employ a property recovery
action will to a significant degree be based on answers to the  following core questions:

   •   Will the selected property recovery action(s) achieve the project goals?

   •   Is the project financially viable and realistic?

   •   Are the necessary resources available?

   •   Are the risks acceptable?
The overall process described in this workbook for addressing these questions  and
evaluating property recovery actions is depicted in Figure 1.1.
  Establish
   Project
   Goals
           Screen
          Property
          Recovery
           Actions
Conduct
 Due
Diligence
                                      Evaluate Property Recovery Actions against
                                                    Project Goals
                                           Identify
                                        Redevelopment
                                          Obstacles
 Select
Property
Recovery
 Action
Figure 1.1- Schematic of PREPARED

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Following is a brief summary of these steps:
    1)  Establish realistic and achievable project goals and key parameters for the
       project (e.g., budgetary constraints, timeframes). This may include conducting a
       "preliminary reuse assessment" to assess whether the property attributes and
       underlying economic conditions generally support those goals (see Chapter 2).
    2)  Screen-out property recovery actions that are not likely to achieve the project
       goals (see Chapter 3).
    3)  Conduct due diligence to obtain relevant property-specific information regarding
       environmental conditions, regulatory status, condition of buildings and structures,
       title status, and other key considerations and to qualify for certain liability
       protections under the federal Superfund statute (see Chapter 4).
    4)  Evaluate property recovery actions through an iterative approach comprised of
       the following components:
          a.   Identify potential redevelopment obstacles (see Chapter 5).
          b.   Assess project risks (see Chapters 6, 7, 8, 9 and Appendix D).
          c.   Assess the project's financial viability and other financial considerations
              (see Chapter 8).
          d.   Identify risk management tools and approaches (see Chapter 10).
    5)  Identify information gaps to focus and prioritize additional information
       gathering efforts.
    6)  Select a property recovery action (see Chapter 11) based on the municipality's
       sensitivity to the potential risks identified through the evaluation process and on
       other relevant factors.
In addition, worksheets are provided to help the municipality apply the concepts
discussed in this workbook to a specific project (see Chapters 2, 3, 4, 5 and 11), estimate
cash flow (see Appendix B), and evaluate sources and uses of funds (see Appendix C).
Additional discussion of regulatory liability issues (see Appendix D), other sources of
information (see Appendix E), and useful EPA contacts (see Appendix F) are also
provided.

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      Establishing Project Goals
2.1    Overview

Having a clear understanding of project goals is essential.
The goals will directly impact all aspects of the project
strategy, including which property recovery actions and
risk management tools and approaches are most
appropriate. Spending the time initially to carefully frame
the goals will also focus the evaluation process and help
ensure that resources are used effectively and efficiently
(e.g., by identifying critical information needs). The goal-
setting process should not be a perfunctory, hastily-
considered step.
   This Chapter:
Describes some key
considerations in
establishing project goals

Discusses the purpose and
preparation of a preliminary
reuse assessment
Worksheet #1 is provided to help municipalities in
establishing project specific goals. Worksheet #2 can assist in developing and
documenting a preliminary reuse assessment, which is a document that is often
prepared to summarize key issues relating to the future use of a contaminated property.
These worksheets are located at the end of this chapter (available for download at
www.epa.gov/region 1/brownfields/prepared).

2.2    Key Considerations

At a minimum,  project goals should include consideration of the following questions:

   •   What is  the desired outcome of the redevelopment?

   •   How important is the redevelopment?

   •   How time critical is the redevelopment?

Taken together, these questions will help establish the basic parameters for the project.

What is the desired outcome of the redevelopment?
This question helps clarify the reasons for the municipality taking action and ensures that
the stakeholders are operating with a common understanding of the expected endpoint.
Vetting the desired outcomes through a local property reuse planning exercise or some
other public process is often very beneficial (See discussion of reuse planning in Section
2.6).

Some examples of desired outcomes include:

   •   Obtaining use of a property for some permanent or longer-term public purpose
       (e.g., to  build or expand public buildings, to create recreation areas)

   •   Securing access and control for demolishing unsafe or unsightly buildings,
       improving public infrastructure (e.g., road expansions) or making other
       improvements

   •   Facilitating beneficial reuse by a third party

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    •   Influencing the timing and nature of the cleanup and property reuse

    •   Addressing a threat to public health and the environment

How important is the redevelopment?
The importance of a project will greatly influence the willingness of the municipality to
assume project risks and expend resources in order to meet the project goals. For some
projects, the municipality may decide that redevelopment is desirable, but not necessary.
In others, the project may be a high priority and it becomes more a question of how best
to make it happen. Projects that are competing with other local redevelopment projects
for resources may also require that the relative priority of these projects be determined.

How time critical is the redevelopment?
The project's urgency should be established at an early stage. Is funding available now
that may not be later?  Is there a redevelopment opportunity that may be lost if the
municipality does not move forward immediately? Is it necessary to control or influence
an ongoing cleanup process to ensure that specific health and safety considerations are
incorporated?
Other factors impacting the urgency are: What are the risks of not moving forward? Will
neighbors be at risk for potential exposure to contaminants? Is  there a fire or other health
and safety risk? Will the neighborhood continue to decline without municipal
involvement?
Considering questions such as these will help ensure that the proper priority is placed on
the project and begin to define the timeframes for making decisions.

2.3   Other General  Considerations Related to Goals

    •   Be prescriptive when constraints are real and known (e.g., a budgetary cap on funding).

    •   Even though not all goals and project expectations can be quantified, include a
       general statement of intent to keep these criteria up front and help guide the
       evaluation process.

    •   Identify pre-existing biases that could rule out certain property recovery actions
       prematurely. Allow the evaluation process to play out in order to have a solid
       basis for choosing and eliminating property recovery actions.

    •   Identify "deal breaker" issues that can indicate the need for more focused
       evaluation or a reconsideration of project goals.

2.4   Specificity of the Project Goals
Determining the appropriate level of specificity should be part of the goal-setting process.
Generally, greater specificity allows for a more directed evaluation process.  This may
also make it easier for a municipality to get a handle on the potential benefits that could
be derived from the project and therefore how much cost or risk it may be willing to
incur.  Some project goals, however, may be easier to define at  the outset than others.
For example, in some cases the municipality may have a very specific use and property in
mind.  In others, there may be a general desire to move a property or multiple properties

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toward redevelopment, but the type of redevelopment has not yet been determined.  In
this situation placing early focus on conducting a preliminary reuse assessment (see
section 2.6) may help to narrow down the range of potential reuse options.

2.5    Revisiting the Project Goals
It may become apparent that none of the property recovery actions being considered will
satisfactorily meet the project goals, or that the costs and risks are unacceptable. In these
situations, it may be worthwhile to revisit project goals to consider whether they can be
revised to achieve some other beneficial outcome. For example, if the original goal was
to acquire a property as the site of a public building — which the evaluation process
proved to be impractical — perhaps locating a recreational area there or facilitating
private development could be achievable.  The goal-setting process should be fluid
enough to allow for reconsideration or refinement based on new information or a better
understanding of the property's constraints and possibilities.

2.6    Preliminary Reuse Assessment
A preliminary reuse assessment is an analysis of a property's reuse potential that
summarizes key findings from available studies and other information sources. Factoring
in this information will help ensure a realistic view of the property and create a better
opportunity for  achieving a successful redevelopment.  Depending on the in-house
capability of the municipality, outside expertise may be needed  to conduct or interpret the
studies.  The preliminary reuse assessment can also identify information gaps, which can
help inform the  due diligence process. Further, it can be  important in establishing what is
likely to be the highest and best use of the property from  both the developers' and the
municipality's perspectives  and in determining its market value. A preliminary reuse
assessment can  be prepared at any time in the planning process  and updated as new
information becomes available. Worksheet #2 can be used to document the results of the
preliminary reuse assessment. Potential information sources include:

   •   Opportunities and Constraints Analysis
       This involves an evaluation of the property attributes that positively and
       negatively impact potential redevelopment. These attributes may include
       infrastructure, buildings on the property, environmental  conditions, zoning,
       easements or restrictions, traffic, and so forth. The buildings and infrastructure
       analysis  may sometimes need to consider opportunities to reuse these structures in
       ways that were not originally intended.

   •   Environmental Conditions Impact Analysis
       In an environmental conditions impact analysis, the environmental planner
       considers how the environmental conditions (including natural features such as
       wetland  areas) could impact or be impacted by redevelopment.  The goal is to
       create synergy by integrating the redevelopment and cleanup to optimize the use
       of the  property and to minimize costs and unacceptable project risks.

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•  Market Analysis and Feasibility Study
   A market analysis is generally needed to evaluate the economic viability of
   potential redevelopment options. This will also help the municipality determine if
   the current zoning has become outdated for the market.

•  Community Needs Assessment
   Idle or underutilized properties may provide an opportunity to improve the
   neighborhood through uses that reflect neighborhood concerns and needs.
   Community needs assessments help identify property uses that can best serve the
   broader social and economic interests of the surrounding community. In addition,
   uses not identified in the market analysis often become apparent through dialogue
   with the community.

•  Preliminary Financial Analysis
   A preliminary financial analysis of potential property uses can help assess the
   financial viability of various reuse scenarios. Chapter 8 describes a screening tool
   for developing a "back of the envelope" estimate that can be used for this purpose.

•  Reuse Planning
   Reuse planning is a process that utilizes the types of information described above
   to build a realistic vision for the property.  The process typically looks at a range
   of desired redevelopment scenarios. A public planning process that provides for
   meaningful community engagement will help identify potential community issues
   and build public support for the proposed project. See Chapter 9 for a discussion
   of the role and potential benefits of community engagement.
   Consistent with existing guidance, EPA considers the reasonably anticipated
   future land use of a site throughout the Superfund remedy selection process to
   help ensure that the final cleanup is protective  of human health and the
   environment. EPA guidance also recommends that, where practical and
   appropriate, a Superfund cleanup should avoid unnecessary obstacles to reuse.
   See, for example, EPA's Memorandum, Considering Reasonably Anticipated
   Future Land Use and Reducing Barriers to Reuse at EPA-lead Superfund
   Remedial Sites (March 17, 2010) available at:
   www.epa.gov/superfund/programs/recycle/pdf/reusedirective.pdf.
   Additional EPA resources are available under the federal Superfund program to
   help identify the reasonably anticipated future land use of a site,  and  under the
   Brownfields Program to support community-based planning for assessment,
   cleanup, and subsequent reuse: EPA's Superfund Redevelopment Initiative
   www.epa.gov/superfund/programs/recycle. Brownfields Program
   www. epa. gov/brownfields.

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               Worksheet #1:  Establishing Project Goals
Project Name/Identifier

General Property Description
Number of Parcels:
Tax Map Parcel Number(s):
Address(es):
Parcel Size (Acres):
Current Zoning:
Existing Structures on Parcels (Please list):
Current Appraised Value:
Brief Description of Past Use (e.g., service station, manufacturing facility):
Other:

Project Parameters (See Sections 2.2, 2.3 and 2.4)
   •   What is the desired outcome of the redevelopment?

   •   How important is the redevelopment?

   •   How time critical is the redevelopment?

   •   Describe any known budgetary or other constraints.
       Is this property linked to or part of a larger redevelopment effort?
       [Y/N/Unknown]. If so, how does that affect the property-specific goals (e.g.,
       timing, budget, necessity, general coordination)?
   •   Would the future uses be restricted to current zoning? [Y/N/Unknown]. Describe.

   •   Describe any other relevant factors?

Project Goals
   •   State the project goals.

                                                                             10

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                Worksheet #2: Reuse Assessment
   What are the potential reuses being considered for the property?
   Are these uses consistent with the existing municipal master plan, zoning, and
   other planning documents? [Y/N/Unknown]. Describe.
   What is the level of support for these uses from municipal officials? The
   community? Other key stakeholders?
   Has a community needs assessment been conducted?  [Y/N/Unknown]. If yes,
   summarize key findings.
   Does it support the intended uses? [Y/N/Unknown]. Describe.


•  Has an opportunities and constraints analysis been conducted?  [Y/N/Unknown].
   If yes, summarize key findings.


   Does it support the intended uses? [Y/N/Unknown]. Describe.
   Has a marketing study been conducted? [Y/N/Unknown]. If yes, summarize key
   findings.

   Does it support the intended uses? [Y/N/Unknown]. Describe.


   Have any other relevant studies been conducted regarding the reuse of the
   property?  [Y/N/Unknown]. If yes, summarize key findings.
   Has an evaluation of the property's suitability for the intended use been done?
   [Y/N/Unknown].  If yes, summarize key findings, including physical features of
   the property that would limit or support future uses (e.g., parcel size, topography,
   road access).
•  Has a preliminary financial feasibility analysis of intended future reuses been
   performed to determine whether those uses are realistic?  [Y/N/Unknown]. If yes,
   summarize key findings.
                                                                         11

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Are there interested buyers/developers for the property?  [Y/N/Unknown].
Describe.
If so, what partnering role might they play in assessing, cleaning up or
redeveloping the property?
Are there infrastructure issues that need to be addressed (e.g., access roads,
utilities)?  [Y/N/Unknown]. Describe.
Are there other known or anticipated complicating factors or other considerations
relating to the redevelopment?  [Y/N/Unknown].  Describe.
Are there significant data gaps that should be prioritized as part of future
information gathering efforts? [Y/N/Unknown]. Describe.
Is there any other relevant information that should be considered?
[Y/N/Unknown]. Describe.

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Property Recovery Actions
                                                     Describes types of property
                                                     recovery actions

                                                     Discusses the pre-screening
                                                     of property recovery actions
3.1    Types of Property Recovery Actions

There are a variety of property recovery actions available
to municipalities that can be used to facilitate the
redevelopment of contaminated properties. These
typically fall into two general categories:  acquisition
approaches, in which the municipality takes title to the
property for some period of time, and non-acquisition
approaches. Each action carries its own set of issues that
must be understood in order to develop a strategy for
managing project risks and, ultimately, achieving a
successful project. Some of the more common property
recovery actions include:

   •   Acquisition and long-term ownership

   •   Acquisition and interim ownership with subsequent transfer to a third party

   •   Leasing by the municipality

   •   Acquisition and "simultaneous" transfer to a third party
   •   Collaboration with the current property owner

   •   Transfer tax liens

   •   Incentives to promote redevelopment

In a generalized way, these
property recovery actions are
organized in descending order of
municipal control over the
property. Often, this control comes
with an increased potential for
incurring project risk. This
"control vs. risk" relationship is
illustrated by Figure 3.1.
While the examples identified
above do not represent the full
spectrum of actions available to a
municipality, these actions and the
issues they  raise are broadly
representative of most real-world
situations.
Worksheet  #3, provided at the end
of this chapter, may help
municipalities identify potential
                            Figure 3.1 - Control vs. Risk Relationship
                                                                          13

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property recovery actions that may warrant further evaluation (available for download at
www.epa.gov/region 1/brownfields/prepared). To establish the proper baseline for evaluating
these property recovery actions, municipalities should compare them to a "no action"
option in which the municipality does not directly intervene to facilitate redevelopment.
When considering the acquisition of a property, the method of acquisition (e.g., tax
foreclosure, escheat, eminent domain, purchase, inheritance, abandonment, donation)
may be important. For example, as discussed in Section 7.2.3, this could affect the
applicability of certain liability protections under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA).

3.1.1 Actions that Involve Taking Title to the Property

Acquisition and long-term ownership
Taking title provides control over the property to the title holder.  Municipalities often
take and retain title to an underutilized property if there is a public reuse planned, such as
a park or municipal facility. Ownership may also allow the municipality to have a greater
role in the cleanup and reuse of the property.  Also, by controlling the land uses,
municipalities can better ensure that land use restrictions are being met and cleanup
components (e.g., ground water monitoring wells, landfill caps) are properly maintained
and not compromised.
While different responsibilities may apply depending on the state and federal laws that
are implicated, in general, the specific responsibilities of taking title to a contaminated
property may include:

    • Responsibility for carrying out the cleanup action on the property

    • Responsibility for cleanup action beyond the property boundaries

    • Responsibility for responding to third party suits related to the contamination on
      the property or emanating from the property (unless otherwise protected from
      these suits through, for example, a settlement agreement with EPA and/or the
       state)
Other parties, including former owners and operators of the property, may also be
responsible for a property's environmental issues.

Acquisition and interim ownership with subsequent transfer to a third party
Acquisition by the municipality followed by a transfer to a third party is a way to involve
private developers in the redevelopment process while shielding them from some of the
uncertainties and difficulties of property acquisition.  Some municipalities have
redevelopment authorities or land banks that will take title to properties and hold them
while parcels are assembled and redevelopment proposals are evaluated.  Typically, the
properties are then leased, sold, or transferred to a developer who will implement an
agreed upon redevelopment plan. An advantage to the municipality is that the private
entity performs the redevelopment and, in many cases, the cleanup action  as well. A
disadvantage to the municipality is that it may have limited control over the cleanup and
the future use of the property.
                                                                                14

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                                          Skirvin Hilton Hotel
                                Case Study:  Skirvin Hotel
Municipal Acquisition and Interim Ownership with Subsequent Transfer to a Third Party
The Skirvin Hotel in the heart of downtown
Oklahoma City was built in 1910 by oilman
W.B.Skirvin. The hotel's magnificent
architecture and luxurious accommodations
made it a landmark that drew numerous
dignitaries and celebrities, and greatly
enhanced the economic and cultural vitality of
the area. The property was later listed on the
National Register of Historic Places.

Falling victim to a declining economy brought
on in large part by a regional oil bust, the
hotel eventually closed in 1988. In the years
that followed, the structure lay abandoned
and suffered serious deterioration.  By 2000,
a variety of factors combined to spur renewed interest in restoring the hotel to its former splendor.  There
were,  however, a number of serious issues that would first need to be addressed, including the presence of
asbestos, lead paint and other environmental problems.  To facilitate the rebirth of the Skirvin Hotel, the City
took the unusual step of acquiring the hotel in 2002. Importantly, this provided the City with access to the
property and allowed it to conduct the environmental cleanup and other actions needed to prepare the
property for redevelopment. The cost for the asbestos abatement and other environmental cleanup
activities totaled about $2.3 million, funded in part with a $720,000 loan made by the Oklahoma's
Department of Environmental Quality through its EPA  Brownfields Cleanup Revolving Loan Fund Grant.
Title to the building structure was transferred to the developer selected by the City in September 2005. The
City retained ownership of the land.

The Skirvin Hilton Hotel, as it is now called, reopened  in 2007.  Approximately $56 million in private and
public funds was invested  in the project.  The City expects that  all of the $22 million  from public funding
sources will be recouped.  The renovation generated over 400 construction jobs and the four-star rated hotel
now employs 225 people.  The project has helped provide a much needed stimulus  to the area and
preserved an important part of the City's heritage. It is widely recognized that without the City's leadership,
the infusion of public funds, and the cooperation of numerous public and private sector entities, this outcome
could  not have been achieved.

More information on the Skirvin  Hotel project can be found in facts sheets prepared  by EPA-Region 6
(www.epa.gov/region06/6sf/pdffiles/skirvinokcsuccess2007.pdf) and the U.S. Conference of Mayors
(www.usmaYors.org/uscm/us mayor  newspaper/documents/04 19  10/pg 12 skirvin.asp)
                                                                                           15

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Acquisition and "simultaneous" transfer to a third party
Acquisition and "simultaneous" transfer to a third party is similar to the above approach,
except that the municipality and the third party recipient of the property prearrange their
agreements for the property, and the property's transfer can be accomplished immediately
after the acquisition by the municipality. This has the potential advantage to the
municipality of minimizing expenditures and property maintenance responsibilities;
however, control limitations may be similar to those where the municipality acquires the
property and transfers it to a third party months or even years later.


3.1.2  Actions that Do Not Involve Taking Title to the Property

Leasing by the municipality
In this action the municipality enters into a long-term ground lease with the owner that
allows for the development and use of the property (e.g., establishing a library on the
property) without taking title. One potential advantage is that the current owner may
assume some or all of the responsibility for conducting cleanup and maintaining the
remedy components (such as treatment systems or landfill covers). Alternatively, the
municipality may agree to take on those obligations.  In either case, the terms of the lease
would typically need to cover these roles and responsibilities.
Leasing does not necessarily shield the municipality from environmental liability.  For
example, as discussed later in this workbook, a party leasing a contaminated property
may, depending on the circumstances, be liable as an "operator" under certain federal and
state environmental statutes.  Some courts have also held that long-term leases can be
equivalent to ownership for the purposes of establishing liability.  A municipality may
also incur legal liability for causing or contributing to the environmental contamination as
the  result of its use of the property or by a party that sublets the property from the
municipality. Conducting due diligence to understand the environmental conditions can
therefore be as important when leasing a property as it is with acquisition.
Before entering into a lease, a municipality should carefully consider  its environmental
liability risk, including whether it might qualify for any liability protections under
specific statutes.

Collaboration with the property owner

In some situations the property owner may be unwilling or unable to perform
environmental investigation, cleanup, or other activities needed to improve the
marketability of the property or address health and safety issues, but may allow or work
with the municipality to do so. To gain support for this approach, municipal  officials
may need to build a convincing case that such collaboration is in the best interests of both
the  property owner and the municipality (Discussed further in Section 10.3).
Collaborative partnerships may be one way to deal with "mothballed" properties (i.e., the
owner continues to pay property taxes, but prefers to "sit-on" the property). Cooperative
owners can provide property access for environmental assessments and other
investigations without involving the municipality in the chain of title.  Another advantage
                                                                                16

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                             Case Study: Camilla Wood Preserving Company
                             Municipal Acquisition through Tax Foreclosure
The Camilla Wood Preserving Company
Superfund site occupies 40 acres approximately
a half-mile south of downtown Camilla in
southern Georgia.  A wood treating facility was
built on the property by the Louis Wood
Preserving  Company in 1947. The Camilla
Wood Preserving Company later operated the
facility until 1991, when the facility shut down
permanently. EPA designated the site as a
federal National Priorities List Superfund site in
1998 after site investigations identified site
contaminants that included creosote, dioxins,
pentachlorophenol, and polyaromatic
hydrocarbons                                    A portion of the site is now in reuse as a soccer
                                                field.
In 2002, the City of Camilla initiated a
community-based reuse planning process for the site utilizing support resources provided by EPA. The
resulting reuse plan  identified a community park as the most appropriate use of the site.  EPA considered the
City's reuse priorities when it undertook a cleanup action on a portion of the site in 2006.

That year, the City began efforts to acquire the cleaned up portion of the site. After evaluating different
acquisition  options, the City determined that involuntary acquisition, which is covered under an explicit CERCLA
liability exemption, would provide an important liability protection for the City. Two property tax foreclosure
options were considered; one involving a judicial action and the other an administrative proceeding.  While a
judicial action would provide the City with unhindered title to the property, the lengthy legal process would likely
have meant delaying the planned opening  of the park — targeted for September 2007. Alternatively, an
administrative proceeding would provide the City with title to the property immediately, but the property would
be subject to redeemable interests for a 12-month period prior to the planned opening of the community park.
In theory, this meant that parties with a legal interest in the property could assert claims regarding  ownership.
The City decided to move forward with an administrative proceeding. Given that the unpaid property taxes
significantly exceeded the market value of the land, the City felt that it was unlikely that any party would step
forward.  Cooperation  between the City and Mitchell  County, which was also owed back property taxes, was
critical to the foreclosure process. In August 2007, the City successfully took clear title to the property.

The community park with soccer fields and a small RV park opened in September 2007 as planned.
Mitchell County's Recreation  Department operates the community park and plans to expand the sports complex
on the eastern half of the site following future cleanup.   It also moved its park management operations to a
remaining building on the site.  Key factors contributing to the success of the project were:  EPA's partnership
with the community allowing the site cleanup and reuse to be integrated; the local government's innovative,
flexible approach to site acquisition; and the County's cooperation
Additional site background and contact information is available at:
www.epa.gov/region04/waste/npl/nplga/camilaga.htm.

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is that the municipality or owner may then become eligible for federal brownfields site
assessment grants.
Depending on the nature of activities performed by the municipality, the municipality
may need to consider obtaining indemnifications and other agreements with the property
owner (See Section 10.2.3.9.1). As with other property recovery actions that lead to
direct involvement in activities on the property (e.g., investigation, cleanup,
construction), the municipality should consider whether this carries an unacceptable risk
of legal liability.

Transfer of tax liens
Where allowed under state law, the municipality may transfer or sell tax liens for the
property to a third party who then forecloses on the property and takes title. This action
can be used where the property is abandoned or where the current title holder is in arrears
on tax payments.  State laws governing the "right of redemption" by the owner or other
party with a vested interest in the property will also need to be taken into account.
While this process can take a year or longer to complete, it may be worth considering in
situations where the municipality can attract qualified developers and exercise sufficient
control over development. Many municipalities also auction portfolios  of tax liens.
Sometimes, however, a party will acquire the portfolio  with the intention of taking action
on only certain  properties in the portfolio. This may actually delay or inhibit
redevelopment  on the remaining properties.

Incentives to promote redevelopment
Generally, but not always, incentives pose fewer project risks to a municipality, but
provide it with less control over the development  of the property.  The extent that this is
true will depend on the specific incentive or incentive package being considered. For
example, certain financial incentives, such as those that involve forgiving back property
taxes, could carry little environmental liability risks, but may result in significant
financial risk and  lack support within the community.  Still, municipal incentives can
sometimes be viewed as a more attractive alternative than property recovery actions that
require more direct and active municipal involvement in the contaminated property.
Other examples of municipal incentives are:

    •   Zoning and Use Exemptions: The municipality may increase a property's
       attractiveness to developers by creating zoning and use exceptions prior to the
       developer  talking title, as that often represents a great source of uncertainty for
       developers.  However, the municipality can run the risk of establishing an
       unwanted  precedent by granting such exceptions.

    •   Tax increment financing (TIF): TIFs can sometimes attract developers to
       properties  that are otherwise financially unappealing.  TIFs encourage
       development of many types of underutilized properties, not just those with
       environmental issues. As with non-contaminated properties, the development
       needs to result in an increase in the value of the property for this technique to
       make economic sense.  The municipality should also carefully consider future
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                               Case Study: Whitmoyer Laboratories
                               Municipal Acquisition for Public Use
                                        Soccer fields at the new recreation complex
Whitmoyer Laboratories manufactured
veterinary and pharmaceutical products
at this 22-acre site in rural Jackson
Township, Pennsylvania from 1934 to
1984.  During that time, arsenic
compounds and other chemicals were
disposed of in unlined lagoons,
resulting in the contamination of soils,
ground water and surface water. The
site was subsequently abandoned. It
was added to the Superfund National
Priorities List in 1986.
Cleanup under Superfund began in
1993 and included the removal of large
volumes of sludge, contaminated soil and other materials; the capping of moderately or lightly contaminated
soil on site; and ground water treatment. These activities were funded by two parties whose prior
involvement with the facility caused them to incur liability under Superfund (referred to as "Potentially
Responsible Parties"). These Potentially Responsible Parties (PRPs) also had responsibility for the long-
term operation & maintenance of the cleanup.

Jackson Township officials expressed an interest in redeveloping the property, but were leery of taking any
actions that could expose the Township to potential liability and other unacceptable risks. The Township's
preferred reuse plan encompassed a variety of recreation and other public uses that would be best
accomplished by acquiring  the property,  which raised particular concerns for the local officials.

EPA and the PRPs worked closely with the Township to facilitate the municipality's acquisition and reuse of
the property. An agreement called a Prospective Purchaser Agreement was negotiated between the PRPs,
EPA and Jackson Township and signed  in 2004.  Under the terms of the agreement, the PRPs agreed to
fully incorporate the Township's plans for reuse into their cleanup activities. Actions taken by the PRPs
included the installation of infrastructure  to support the recreational uses (such as sewer, electrical, and
water lines), landscaping, and the construction of walking trails and the foundation for a concession stand.
The Township, in turn, assumed responsibility for conducting the long-term operation & maintenance
activities.  The Prospective Purchaser Agreement also established appropriate institutional controls and land
use restrictions at the site.  [Note: As  discussed in Section 10.2.2.2, Prospective Purchaser Agreements
are available in only very limited circumstances]

The property transfer was completed in 2005 and the site was turned into a park with three soccer fields, a
baseball field, a playground, a picnic area, and walking/jogging trails. The scenic  walking trails will be
surrounded by 4,000 newly-planted trees, shrubs and plants and provide linkages to local and regional
natural resources like the Tulpehocken Creek and historic Union Canal.

A fact sheet describing the  site and providing contact information is available at:
www.epa.gov/superfund/programs/recYcle/pdf/rtu09  whitmoyer.pdf.
                                                                                               19

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       obligations and tax revenues to make sure they can afford to grant this type of
       incentive.  See Appendix E for references on tax increment financing.

   •   Infrastructure Improvements: The municipality can make a project more
       financially attractive by providing infrastructure normally paid for by the
       developer. Potential negatives with this approach are the lack of control that the
       municipality has over the development, and the fact that the municipality's
       investments on new infrastructure will generally have to be made before any tax
       revenues are realized.

3.2    Screening Property Recovery Actions Based  on Project Goals

Once the project goals are established, the municipality should review the property
recovery actions to identify which ones warrant further consideration.  The first question
is whether the municipality needs to intervene at all. If developers are willing to reuse
the property in a way that the municipality supports, the municipality may be advised to
step out of the way and let the development proceed.  On the other hand, if no one has
brought forward a proposal that is acceptable to the municipality, more proactive
involvement by the municipality may be appropriate.
The screening process eliminates property recovery actions from further consideration
when it is apparent that they will not reasonably achieve the project goals.  Screening
avoids spending resources unnecessarily and provides an early "reality check" for the
project.
Worksheet #3 can be used to document the results of this screening exercise. At this
point in the evaluation process, due diligence often has not been performed and
information on the environmental conditions and other relevant property attributes may
not be available.  Subsequent chapters will discuss how information gathered through the
due diligence process will help municipalities evaluate property recovery actions.
                                                                               20

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Worksheet #3: Preliminary Screening of Property Recovery Actions

"8
Action
Eliminaf
n
n
n
n
•_ =

-------
n
n
Collaboration with the property owner

   • Briefly describe the property recovery action.

   • Briefly summarize the basis for eliminating or keeping this action under consideration.

   • If this option is still under consideration, briefly identify significant issues and
     information needs.

Transfer tax liens

   • Briefly describe the property recovery action.

   • Briefly summarize the basis for eliminating or keeping this action under consideration.

   • If this option is still under consideration, briefly identify significant issues and
     information needs.

Other Property Recovery Action

   • Briefly describe the property recovery action.

   • Briefly summarize the basis for eliminating or keeping this action under consideration.

   • If this option is still under consideration, briefly identify significant issues and
     information needs.
                                                                                       22

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      Conducting Due Diligence
4.1    Overview of the Due Diligence Process

Due diligence for a property transaction is conducted to
obtain and verify available information regarding the
property attributes and conditions, previous uses and
ownership, and other information relevant to its
redevelopment. Due diligence is an essential step in
evaluating property recovery actions even if a
municipality is not planning to take title to a property.
The benefits to the municipality include gaining a better
understanding of potential redevelopment obstacles and
project risks.  Another potential  benefit is that developers
often are more likely to consider properties where the
municipality has already completed significant portions of
the due diligence process. In addition, environmental due diligence (described below) is
                               conducted to meet the requirements for all appropriate
                               inquiries (AAI).  All appropriate inquiries, as defined
                               in Section 101(35)(B) of the Comprehensive
                               Environmental Response, Compensation and Liability
                               Act (CERCLA), must be conducted prior to property
                               acquisition for a property to be eligible for certain
                               liability protections provided under CERCLA.  See
Chapter 7 for a description of CERCLA liability protections.  Worksheet #4 is provided
at the end of this chapter to  help municipalities summarize key information collected
during the due diligence process (www.epa.gov/regionl/brownfields/prepared').
                                                              This Chapter:
                                                          Describes the due diligence
                                                          process and its significance
                                                          to the redevelopment
                                                          process

                                                          Discusses the information
                                                          that can be generated during
                                                          due diligence
Due diligence is an essential
step in evaluating property
recovery actions even if a
municipality is not planning
to take title to a property.
An important component of the due diligence process is commonly referred to as
"environmental due diligence" and is conducted to identify and/or address:

   •   Presence and management of hazardous substances and petroleum products on the
       property

   •   Conditions indicative of releases or threatened releases of hazardous substances
       at, in, from, or to a property

   •   Inspections of environmental conditions at the property, including conditions of
       buildings and environmental  media (e.g., soil, ground water, surface water,
       sediment) located on the property

   •   Historical, current, and potential future cleanup  action on the property

   •   Regulatory status of the property

   •   Current and historical ownership and property access issues

   •   Potential risks and liabilities associated with the presence of hazardous substances
       and petroleum products on the property and potential cleanup action needed
                                                                                23

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While this chapter focuses primarily on
environmental due diligence, traditional
real estate due diligence is also necessary to
understand and evaluate issues such as:
    •  Property appraisal

    •  Ownership
    •  Tax and other debt status

    •  Legal status (e.g., liens, property
       survey,leases)

    •  Suitability for the planned use (e.g.,
       engineering, infrastructure)

    •  Sales and rental comparables

    •  Market trends and property values

    •  Financing strategies and alternatives

Some issues related to real estate due
diligence are discussed in this chapter;
however, a comprehensive discussion of
real estate due diligence is beyond the
scope of this document.

The environmental due diligence process
typically begins with an all appropriate
inquires investigation or a Phase I
Environmental Site Assessment (Phase I
ESA). There is often confusion about the
distinction between the terms "due
diligence" and "all appropriate inquiries."
See the text box  on this page for further
discussion

The most common way to conduct a Phase I
ESA, and the generally accepted business
practice for doing so,  is the ASTM El527-
05  Standard Practice.  ASTM International (ASTM) — an international standards
organization that develops and publishes voluntary consensus technical standards —
developed voluntary consensus standards for conducting Phase I and II ESAs.

Based on the results of an AAI investigation or Phase I ESA, a Phase II Environmental
Site Assessment (Phase II ESA) may be necessary to better understand the type and
extent of any potential environmental contamination at the property.  The following
sections describe Phase I and II ESAs and provide additional information on conducting
environmental due diligence.  Chapter 5 discusses how the information collected during
the due diligence process is used to identify redevelopment obstacles and aid in the
evaluation of property recovery actions.
 Due Diligence vs. All Appropriate Inquiries
In this document, the term "due diligence" refers
generally to the array of inquiries and activities that
a prospective property owner might conduct prior
to taking title to a commercial property.  Or, in the
context of this Workbook, that a municipality might
take to evaluate property recovery actions.

The term "all appropriate inquiries" refers to the
specific regulations codified at 40 CFR 312 that set
out the activities and practices that must be
conducted to comply with one of the statutory
criteria for obtaining certain liability protections
under CERCLA.  The All Appropriate Inquiries
Rule recognizes the ASTM E1527-05 Phase I
Environmental Site Assessment standard as
compliant with the AAI regulatory requirements.
All appropriate inquiries investigations are
described further in Section 4.7.1.

While there is substantial overlap between the two,
due diligence conducted for a property is generally
broader in scope than what is required for an all
appropriate inquiries investigation (including, for
example, a Phase II ESA, utility infrastructure).
From a risk management perspective, these
additional inquiries and activities can provide
information necessary to more fully assess both
the source and magnitude of potential project risks.
It is for this reason that this Workbook uses the
broader term "due diligence" when describing such
information gathering efforts. The term "all
appropriate inquiries" is used when specifically
referring to the statutory requirements of 40 CFR
312.
                                                                                      24

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4.2    Phase I Environmental Site Assessment

The Phase IESA is conducted to identify the presence or potential presence of hazardous
substances and petroleum products on or underlying a property as well as in or around
physical improvements to the property (e.g., buildings and other structures).  The Phase I
ESA process is described in ASTMEl527-05 - Standard Practice for Environmental Site
Assessments: Phase I Environmental Site Assessment Process (www.atsm.org)
and referenced in the USEPA Standards for Conducting All Appropriate Inquiries (40
CFR Part 312).  See EPA's AAI Web page for more information:
www.epa.gov/brownfields/aai/index.htm.
The ASTM El527-05 standard provides best practices for conducting a Phase I
Environmental Site Assessment of a commercial property.  EPA recognizes this standard
along with ASTME2247-08 - Standard Practice for Environmental Site Assessments:
Phase I Environmental Site Assessment Process for Forestland and Rural Property as
compliant with the requirements for all appropriate inquiries as defined under CERCLA
(42 U.S.C. 9601(35)(B).  These requirements are discussed further in Section 4.7.1. The
municipality is encouraged to verify that its Phase I ESA meets the requirements of both
ASTM El 527-05 and EPA requirements for AAI. A Phase I ESA must meet the
requirements of the AAI final rule (40 CFR 312) for a municipality to qualify for
protection from liability under CERCLA as an innocent landowner, bona fide prospective
purchaser, or a contiguous property owner (discussed in Chapter 7).
If a municipality is purchasing a property for which a Phase I ESA was previously
conducted, the ESA should be reviewed and updated to ensure that the most current
information on the environmental conditions of the property are included in the final
assessment report. To be compliant with the AAI regulation, a Phase I ESA conducted in
compliance with ASTM E1527-05  must be reviewed and undated if the Phase I ESA is
older than one year at the time of property acquisition.  In addition, any AAI
investigation (or any AAI-compliant Phase I ESA) that was performed more than 180
days prior to the date on which the  property is acquired must include updates to certain
aspects of the AAI assessment (e.g., records review, property inspections, interviews and
lien searches).
Neither the AAI regulation nor the  ASTM El 527-05 standard requires the collection of
samples or chemical analysis (although some states may require such at this stage);
rather, an AAI investigation or Phase I ESA is conducted to identify "recognized
environmental conditions" (or conditions indicative of releases or threatened releases of
hazardous substances) on a property. See the text box on the next page for a description
of recognized environmental conditions. When conducting an AAI investigation or
Phase I ESA,  information may also be collected to identify and characterize public health
issues (e.g., trash,  rodents) and safety issues (e.g., broken windows, damaged fencing)
that may require action on the part  of the current property owner or municipality. A
Phase I ESA (and the AAI regulation) generally involves:
   •   A visual inspection of the property to identify likely environmental conditions
       associated  with the use, handling, storage, or disposal of hazardous substances or
       petroleum products on the land (e.g., surface staining, distressed vegetation, trash,
       disposal areas, and aboveground or underground tanks) or structures (e.g.,
       hazardous  substances or petroleum stored or used within buildings or other
                                                                              25

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   What is a Recognized Environmental
               Condition?
A recognized environmental condition (REG) as
defined in ASTM 1527-05 means "the presence or
likely presence of any hazardous substances or
petroleum products on a property under conditions
that indicate an existing release, a past release, or
a material threat of a release of any hazardous
substances or petroleum products into structures
on the property or into the ground, ground water,
or surface water of the property." The term
includes hazardous substances or petroleum
products under conditions in compliance with laws
(e.g., permitted discharges).
Under this definition, a recognized environmental
condition could not only relate to spills, releases, or
other unauthorized disposal of hazardous
substances or petroleum products, but also
permitted or otherwise authorized discharges or
disposal activities.
       structures). To perform the visual
       inspection or walkthrough,
       permission to access the property
       generally must be obtained from the
       current property owner if one exists,
       or other actions taken to obtain legal
       access.
    •   An observation of the general
       conditions of adjoining properties.
       This typically involves a
       walkthrough of the area surrounding
       the property to observe activities,
       conditions, and land use associated
       with adjoining properties.
    •   A review of historical sources of
       information about the property,
       including a title search  and
       examination of municipal or county
       planning files to identify the current
       and historical ownership of the
       property,  prior land usage and permits, environmental liens, and activity and land
       use restrictions that may be placed on the property (e.g., deed restrictions,
       easements, environmental  covenants).
    •   Interviews with persons familiar with the property's history including current and
       past property owners, property managers, tenants, and neighbors.
    •   A review of regulatory agency files, data bases,  and other available information
       pertaining to the use, handling, storage, disposal, migration, or corrective action
       of hazardous substances or petroleum on the property and surrounding properties.
    •   Additional sources of information (e.g., historic  aerial photography of the
       property and vicinity).
The Phase IESA may also include visual inspections or records reviews for other
potential environmental issues that may go beyond the general scope of the ASTM Phase
I ESA standards, but may be important to the future use, disposition, or redevelopment of
the property.  An evaluation of the presence of any of the contaminations listed below
may be included  as part of an ASTM Phase I ESA, at the request of the user, even though
such investigations are not routinely conducted during a Phase I ESA.
    •   Asbestos-containing building materials
    •   PCB-containing transformers or ballasts
    •   Lead-based paint
    •   Potable drinking water (where supplied by wells)
    .   Mold
    •   Radon
                                       26

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    •   Wetlands
    •   Threatened and endangered species
    •   Earthquake hazard
    •   Vapor intrusion (i.e., volatile contaminants entering the air space of a building
       from underlying soils or groundwater)

The AAI rule and the ASTM El527-05 Phase IESA standards require that an ESA be
overseen or supervised by an individual who meets the definition of an environmental
professional,  as provided at 40 CFR 312.10.  [Note: the ASTM E1527-05 and E2247-08
standards reference the definition contained in EPA's AAI final rule (40 CFR 312.10)].
Under the AAI final rule an environmental professional is defined as someone who
possesses specific education, training, and experience necessary to exercise professional
judgment to develop opinions and conclusions regarding conditions indicative of releases
or threatened releases of hazardous substances on, at, in, or to a property, sufficient to
meet the objectives and performance factors of the AAI rule.  Specifically, the
environmental professional  must:

    •   Hold a current Professional Engineer's or Professional Geologist's license or
       registration from a state, tribe, or U.S. territory (or the Commonwealth of Puerto
       Rico) and have the equivalent of three (3) years of full-time relevant experience;
       or

    •   Be licensed or certified by the federal government,  a state, tribe, or U.S. territory
       (or the Commonwealth of Puerto Rico) to perform environmental inquiries as
       defined in 40CFR312.21 and have the equivalent of three (3) years of full-time
       relevant experience; or

    •   Have a Baccalaureate or higher degree from an accredited institution of higher
       education in a discipline of engineering or science and the equivalent of five (5)
       years of full-time relevant experience; or

    •   Have the equivalent often (10) years of full-time relevant experience.

A person not meeting the definition of an environmental professional may assist in the
investigation if that person's work is conducted under the supervision or responsible
charge of a person meeting the definition of environmental professional.

4.3   Phase II Environmental Site Assessment

As noted previously, the Phase II ESA is conducted to further investigate the potential
presence of hazardous substances and petroleum products on a property and the extent of
any contamination. The Phase II ESA is usually an intrusive investigation that requires
collection and analysis  of environmental and other media samples (e.g., soil, ground
water, electrical equipment, insulation). The Phase II ESA will generally require the
execution of an access agreement with the current property owner, if one exists, or other
action to gain the access needed to collect the samples.
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The Phase IIESA is intended to determine if a hazardous substance or petroleum product
is present in an area where an environmental condition was identified. A Phase II ESA
may also investigate the extent and severity of any contamination.  The ASTM E1903-
97(2002) Standard Guide for Environmental Site Assessments: Phase II Environmental
Site Assessment Process provides guidelines for conducting a Phase II ESA. The scope
of a Phase II ESA will be specific to the property and to the environmental condition
subject to further consideration.
The scope for a Phase II ESA should be developed in consultation with an environmental
professional or other individual qualified in environmental investigations and should
include:
   •   Identification of the environmental or other media to be sampled
   •   Number of samples to be collected
   •   Analytical method to be used or specific hazardous  substances and petroleum
       products to be evaluated
   •   Target levels (e.g., state or federal standards, action levels or screening levels)
       above which potential further action is warranted
The Phase II ESA may need to be conducted in several subphases based  on the extent of
the identified environmental conditions and financial considerations of the municipality
or responsible entity.  For example, where there is a significant amount of additional
investigation to be conducted, the municipality may want to prioritize specific actions for
the Phase II ESA to first address the environmental conditions that will have the most
impact on project objectives and property recovery actions. The results of the initial
Phase II ESA will then help in determining what additional investigation may be needed.

4.4    Environmental Investigation and  Cleanup Action

Environmental Investigation
Environmental investigations typically go beyond the scope of traditional Phase  I and
Phase II ESAs and are intended to:
   •   Characterize the nature and distribution of hazardous substances and petroleum
       products in environmental media
   •   Evaluate the potential fate and transport of hazardous substances  and petroleum
       products in environmental media
   •   Assess risks to human health and the environment
   •   Determine the need for cleanup action
   •   Conduct appropriate evaluation to identify applicable cleanup actions
Environmental investigations are generally conducted to comply with specific federal or
state regulatory cleanup statutes and programs  (e.g., Resource Conservation and
Recovery Act (RCRA), CERCLA, Underground Storage Tanks (UST), voluntary state
cleanup programs). As a result, the scope and extent of the environmental investigation
may be driven by the requirements of those statutes and programs.
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Environmental investigations typically involve the collection of soil, sediment, ground
water, and surface water samples through, for example, the installation of soil borings
and monitoring wells.  The data collected are used to support the environmental risk
assessment and the selection and design of cleanup actions.  Depending on the size of the
property and potential distribution of hazardous substances and petroleum products in
environmental media, the environmental investigation may be conducted in multiple
phases.  If the intended reuse of the property is known, the environmental investigation
can often be tailored to reflect those uses.  This can not only streamline the environmental
investigation, thereby reducing costs and minimizing delays, but also help ensure that the
cleanup will be protective for those intended uses.
Cleanup Action
Cleanup actions generally are designed to reduce or eliminate potential exposures to
various  constituents of concern, hazardous substances, hazardous wastes, or petroleum
products in environmental media.  Cleanup actions can range from relatively aggressive
approaches such as soil removal and ground water extraction and treatment to less
aggressive approaches such as monitored natural attenuation (where line of evidence
show that protective cleanup levels will be achieved over a reasonable time frame),
passive  vapor barriers, and institutional  controls (e.g., environmental covenants, land use
restrictions) that compliment other cleanup actions involving engineered controls. Often,
a combination of cleanup action approaches is used.
Municipalities should carefully consider the impact of reuse plans on cleanup actions for
the property.  In addition, reuse plans should be compatible with cleanup actions which
sometimes introduce physical obstacles (e.g., ground water extraction wells, treatment
structures) and other constraints that limit the use of all  or portions of the property while
the cleanup actions are underway or in place. Discussing reuse plans with the party
responsible for carrying out the cleanup (e.g., EPA or the state) can help identify
potential conflicts between the redevelopment and cleanup that may be avoided or
mitigated — assuming this can be done  without compromising the ability of the cleanup
to protect human health and the environment or introducing unjustifiable costs.

4.5    Determining Regulatory Status

Assessing the regulatory status of the property is an important objective of due diligence.
Issues of environmental liability, regulatory process, and other considerations relevant to
redevelopment efforts are all dependent on which federal, state, and local environmental
laws could apply based on the environmental conditions, operating practices, and other
factors.  Proper coordination with the regulatory programs having jurisdiction over the
cleanup also depends on having this information.
Federal  statutes administered by EPA that are commonly associated with the
investigation and cleanup of contaminated property are:

   •   Comprehensive Environmental Response, Compensation and Liability Act of
       1980 (CERCLA), commonly known as "Superfund"

   •   Resource Conservation and Recovery Act (RCRA) (Subtitles C, D & I)
                                                                                29

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    •   Toxic Substance Control Act (TSCA) — Provisions relating to PCBs

    •   Clean Air Act (CAA) — Provisions relating to asbestos

These key statutes will be discussed in Chapter 7 and Appendix D of this workbook.
There are a number of other federal environmental  statutes that may also be relevant to a
redevelopment project.  For example, the management of run-off from the property could
be regulated by the Clean Water Act and any impacts on source water for public water
supplies by the Safe Drinking Water Act. Identifying the applicability of these and other
statutes should also be a part of the due diligence process.  In addition, many states have
their own statutes and programs that  apply to the cleanup of contaminated properties and
state environmental agencies should be consulted regarding potential applicability.  Some
federal statutes, such as RCRA, provide that states can be delegated authority to
implement a state program in lieu of the federal program (although EPA retains its
enforcement authority).
The federal Brownfields Program is a grant assistance program authorized under
CERCLA to provide funding for the  assessment and cleanup of certain contaminated
properties so that the properties can be restored to a beneficial reuse. The Small Business
Liability Relief and Brownfields Revitalization Act (Brownfields Amendments) enacted in
2002 amended CERCLA by providing funds to assess and  cleanup brownfields and to
enhance state and tribal response programs as well  as clarifying CERCLA liability
protections.  The cleanups using federal brownfields grant money are normally regulated
under state voluntary cleanup programs  and must comply with all relevant state and
federal law.

4.6   Property Access

All government employees — including municipal  employees — need to be aware of the
serious consequences of entering private property without the proper authority.  Since it
is necessary to enter onto property in order to conduct due diligence, the municipality (or
the entity entering the property) must first contact the owner and request permission to
access the site.

More specifically, the municipality will  need access to the property to perform the visual
inspection associated with a Phase IESA and to carry out Phase IIESA activities, if a
Phase II Environmental Site Assessment also is needed.  Although some property owners
may verbally assent to entry upon their property, municipalities should consult with their
lawyers about the need to obtain such permission in writing. It is not unusual for the
process of obtaining site access to include the negotiation and execution of a written
agreement granting permission to enter the property for specific purposes.  Such written
agreements may delineate:

    •   Onsite Activities. The activities to be conducted on the site may include a
       description  of who will be accessing the site, the purpose of the activities to be
       conducted, and a description of the specific  activities to be conducted. In the case
       of a Phase II ESA, a description  of all sampling activities and specific sample
       locations might also be included.
                                                                               30

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    •   Conditions of the Access.  This may include descriptions of any specific
       conditions of access to the property, such as the time of day during which access
       is allowed, notification requirements, non-interference with current operations,
       and health and safety procedures.

    •   Indemnities. Indemnities may be on the part of either or both parties; however, it
       is more common for the party requesting access to protect the property owner
       against actions that could result in death or injury; and for damage or loss of
       property caused by or resulting from the activities of the party accessing the
       property.

    •   Insurance. Insurance requirements may include general liability, vehicle
       liability, and workers compensation.  Insurance may be required when activities
       such as drilling will be conducted.
Property access agreements are generally executed by the entity or individuals entering
the property or by those directly responsible for the individuals who will be entering the
property. In cases where a viable property owner cannot be identified or where the owner
is not willing to allow access, other regulatory authorities may  be available to the
municipality through public health codes or state environmental regulations.

4.7   Key Questions to Consider When Conducting Due Diligence

The following questions identify some key considerations for municipalities when
conducting environmental due diligence. These questions do not represent a
comprehensive list of all the considerations that might apply to a property or project.
These questions are provided to enable municipalities to better understand how
environmental conditions and other issues could impact the redevelopment of a property,
and improve communication with the consultants hired to conduct due diligence. This
will help ensure that the due diligence process provides the  information a municipality
needs to make informed decisions regarding potential property recovery actions and the
preparation of a project strategy.

4.7.1  All Appropriate Inquiries

Will the Phase I Environmental Site Assessment meet the  requirements for all
appropriate inquiries?
Meeting the requirements for AAI is necessary to potentially qualify for certain CERCLA
liability protections (See Chapter 7).  EPA published a final rule establishing standards
and practices for conducting all appropriate inquiries that became effective on November
1, 2006. As noted previously, the AAI final rule recognizes ASTM El 527-05 and ASTM
E2247-08 as consistent with the final rule,  so that parties that meet these ASTM
standards will be in compliance with the AAI final rule for purposes of CERCLA
101(35)(B). EPA's AAI final rule is summarized in a fact sheet titled All Appropriate
Inquiries Final Rule (EPA 560-F-05-240, October 2005), available at:
www.epa.gov/brownfields/regneg.htm. and is also discussed in the "Common Elements
Guidance" found in Appendix A of EPA's Revitalization Handbook at
www.epa.gov/compliance/resources/policies/cleanup/superfund/common-elem-guide.pdf.  AAI
                                                                               31

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must be conducted or updated within one year prior to the date of property acquisition.
Certain aspects of the AAI requirements must be conducted or updated within 180 days
prior to acquisition.
Among the required activities and other considerations included in all appropriate
inquiries:
                                                    Documenting the All Appropriate
                                                           Inquiries Results
                                                 While the results of the all appropriate
                                                 inquiries investigation must be documented
                                                 in a written report, federal regulations do not
                                                 specify a particular format for the report,
                                                 require that it be submitted to EPA or any
                                                 other government agency, or require that it
                                                 be retained by the party conducting the all
                                                 appropriate inquiries investigation.
                                                 If, however, the party decides to acquire or
                                                 lease the property, retaining the written
                                                 report and any supporting documentation
                                                 and records is advisable should it later
                                                 become necessary to demonstrate
                                                 compliance with CERCLA liability protection
                                                 provisions.
    •   Definition of an Environmental
       Professional - Qualifications for and
       certification by environmental
       professionals performing due diligence
       work

    •   Interviews - Interviews with past and
       present owners, operators, and occupants
       of the facility to gather information about
       hazardous substances on the property

    •   Historical Sources of Information -
       Previous activities and land uses since
       first development available from reviews
       of chain of title documents, aerial
       photographs, building department
       records, land-use records, etc.

    •   Search for Environmental Cleanup
       Liens - Searches for recorded
       environmental cleanup liens filed under
       federal, state, or local law

    •   Review of Government Records - Review of federal, state, and local
       government records (e.g., waste disposal records, underground storage tank
       records, and hazardous waste handling, generation, treatment, disposal, and spill
       records).

    •   Visual Inspections - Visual inspection of subject property and adjoining
       properties

    •   Specialized Knowledge or Experience -Takes into account the prospective
       purchaser's knowledge about the  property and adjoining properties

    •   Purchase Price - Considers the relationship of the purchase price to the value of
       the  property if the property was not contaminated

    •   Knowledge of Property - Commonly known or reasonably identified
       information about the property

    •   Potential for Hazardous Substances - The degree of obviousness of the
       presence of hazardous substances and the ability to detect hazardous  substances at
       the  property
An important part of the AAI investigation is the visual inspection of the property. This
requires access to the property and its buildings and other structures.  In cases where
access cannot be obtained after all  good faith efforts are employed, the AAI rule provides
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for a limited exemption to the visual inspection requirement that requires the
environmental professional to:

   •   Visually inspect the property by another method (e.g., aerial imagery) or from an
       alternate vantage point (e.g., walking the property line).

   •   Document efforts taken to gain access to the property.

   •   Document the use of other sources of information to determine the existence of
       potential environmental contamination.

   •   Express an opinion about the significance of the failure to conduct a visual
       inspection on the ability of the environmental professional to identify conditions
       indicative of releases or threatened releases.


4.7.2 Property History
Who were the prior owners and tenants of the property?
In addition to being important sources of historical information, past owners and tenants
also may have a regulatory responsibility to conduct investigations or corrective action.
Under CERCLA, for example, owners and operators at the time of disposal of hazardous
substances may have liability for response costs. In some situations, particularly those
involving abandoned properties, past owners or tenants may cooperate in performing,
funding, or co-funding due diligence assessments or cleanup.  This cooperation may be
motivated by a desire to resolve potential federal or state liability.  Before entering into
these joint efforts, however, the municipality should refer to Chapters 7 and 8 to assess
potential legal and financial risks and to Chapter 10 for tools and approaches for
managing those risks.
What were the prior land uses and activities on the property?
Historical uses and activities can provide valuable clues regarding the types and locations
of potential contaminants on the property and can help focus potential Phase IIESA
investigations, reduce costs and provide more reliable results. Good sources of historical
information regarding past uses of a property include Sanborn maps, aerial photographs,
municipal records, and state and federal regulatory agency records.  Prior owners,
tenants, or former employees of businesses on the property  may also have information
that is not publicly available or forthcoming from the current owners.
If the property was once part of a larger parcel,  or past operations involved other parcels,
that information may also help shed some light  on past practices on the targeted property.
For example, the property may have been used to store raw materials for a manufacturing
facility on a nearby parcel or served as a disposal area for wastes from that facility.
Are previous development plans for the property available?
Previous development plans for the property, even if they were never implemented, can
provide useful information on prior or existing property conditions, such as: utility
infrastructure, structural integrity of buildings, wetland delineations, physical obstacles to
construction.  In addition, they may suggest potential redevelopment opportunities that
would have undergone some level of financial and market analyses at the time. Although
this information should not be used as the sole  source of historical information on a
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property, especially if it is somewhat outdated, it might be useful in providing
preliminary information if property access is not available, or help in focusing future
information gathering efforts.

4.7.3 Property Status

What is the ownership status?
A municipality's involvement will not only depend on who holds property title, but also
on the owner's intentions regarding the ownership or disposition of the property.  In
addition, the municipality should assess the owner's willingness (or unwillingness) to
work cooperatively with the municipality. In many cases, abandoned, mothballed, or
underutilized properties may present a liability for the property owner. Such situations
may create opportunities for municipalities to  discuss a collaborative arrangement that
will allow the current owner to dispose of the property (see Section 10.3 for a discussion
of some risk management considerations associated with the ownership status). A
working relationship with the owner can facilitate property access for conducting
environmental assessments and can potentially avoid adversarial actions.
Is there clear title to the property?
Although title issues are not unique to contaminated properties, it is not uncommon to
find that a contaminated property is abandoned or that owners declared bankruptcy or
dissolved corporations that held title to the property.  The prospect of complicated and
time consuming efforts to resolve these ownership issues can be a "deal breaker" for
many potential developers that might otherwise be interested in the property. Through
foreclosure and other means, municipalities may be able to obtain clear title and remove
this potential impediment.
Are there existing or likely liens on the property?
The types of liens that might encumber the property include those associated with:
mortgages; contractor or commercial services; federal, state, and local tax delinquencies;
and federal and state environmental response actions (i.e., "environmental liens").  If
EPA or the state expended resources at a property as the result of environmental
investigations, cleanup or other response actions, liens often are perfected (i.e., recorded)
on the property to help recover these costs.
For example, CERCLA provides for two types of liens on properties where EPA has
conducted "remedial" or "removal" response actions.  The first type of lien is for all costs
and damages for which the property owner is liable.  The second type of lien, the
"windfall" lien, is on a facility owned by a non-liable "bona fide prospective purchaser,"
where EPA has unrecovered response costs at  the facility and EPA's response action
increases the fair market value  of the facility.  Depending on the  circumstances
surrounding the acquisition transaction, municipalities or other entities acquiring the
property may be subject to these liens. These  and other statute-specific liens are
discussed further in Chapter 7 and Appendix D.
Because federal and state governments may not have necessarily perfected liens on
certain properties, it may  be important to contact EPA and state regulatory agencies to
inquire about the potential for these liens and about a process for resolving outstanding
liens.
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What is the current land use of the property?
The current land use may indicate quite a bit about the property's redevelopment
potential.  Due diligence should include an assessment of the location, the surrounding
community, size, and condition of buildings and other significant structures; available
utilities; property access (e.g., roads, rail, bridges, waterways); environmental features
that might limit developable space or otherwise restrict usage (e.g., wetlands, natural
features, surface water, flood plains); and other relevant factors.
These land uses and physical features also should be evaluated in the context of potential
cleanup activities.  For example, many states may not allow certain wastes to be placed in
on-site landfills or "capped" with protective covers if they are located within flood plains.
This may result in the wastes being moved to other on-site locations, potentially
occupying land intended for redevelopment purposes, or to be sent at greater expense to
an off-site facility.  Wetlands and other water bodies can introduce ecological receptors
that can influence cleanup.  Even existing roads and access routes that may be suitable for
the planned redevelopment may not be adequate for hauling large volumes of
contaminated soil off-site or bringing clean fill onto the property. All of these can drive
up redevelopment costs or create significant obstacles to property reuse.
The evaluation of current land uses should also look for general conditions and operating
practices that may indicate underlying environmental problems, such as: poor overall
maintenance, signs of waste or debris dumping, areas of spillage, lack of fencing, or other
ways to restrict illegal dumping.
What is the current zoning of the property and its relationship to local master plans
and other planning studies?
Zoning laws, master plans, and local ordinances play an important role in the
establishment of cleanup goals under CERCLA and other federal and state cleanup
statutes. Exposure models for assessing human health risks from contamination are
based on assumptions about reasonably anticipated future land uses.  EPA and the state
will typically consider zoning and master plans along with other relevant factors in
making future land use assumptions.
Are buildings, structures, or areas of the property of historical importance?
The requirements of the National Historic Preservation Act (NHPA) must be kept in
mind if any federal funds or federal permits are used to assess, clean up, or redevelop the
property. Common federal  agencies that are involved in funding  or permitting include
EPA, Department of Housing and Urban Development, Department of Commerce,
Department of Agriculture - Rural Development Administration, and the U.S. Army
Corps of Engineers. Be aware that federal funding or a federal license, permit or
approval may trigger compliance with the review and consultation requirements of the
NHPA.
Pursuant to Section 106 of the NHPA,  the Advisory Council on Historic Preservation
(ACHP) has promulgated regulations found at 36 CFR Part 800 that require federal
agencies to conduct a review and consultation process to protect historic resources. This
process, commonly referred to as "106 Review" should be conducted when two
thresholds are met:
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    •   There is a federal undertaking, defined as a project, activity or program funded in
       whole or in part under the direct or indirect supervision of a federal agency,
       including those carried out with federal financial assistance, or those requiring a
       federal license, permit, or approval; and

    •   That action has the potential to affect properties listed on or eligible for listing on
       the National Register of Historic Places.

The NHPA established the National Register of Historic Places. Historic properties (or
historic resources) are defined as: sites, districts, buildings, structures, and objects listed
on or eligible for the National Register of Historic Places. In addition, traditional cultural
properties (Native American dance grounds, waterways, or campsites) may also be
subject to protection.
There are four steps to the Section 106 Review process, which are summarized below.
For a more complete description of this process, you should review the ACHP regulations
found at 36 CFR Part 800:
Step 1: Initiate Process
The relevant federal agency(ies) should determine whether the proposed project is a
federal undertaking.  There must be federal involvement for an activity to be considered
an undertaking for Section 106 purposes. As described above, a federal undertaking may
be federal funding, non-financial federal assistance, or a federal approval such as a
license or permit.  If it is determined that there is no federal undertaking, the parties have
no additional 106 Review obligations.
Step 2: Identify Historic Properties
It should be determined whether the undertaking affects or has the potential to affect
historic properties. To make this determination, the municipality should engage the
services of a qualified historian or archaeologist to review background information, seek
information from knowledgeable parties, and conduct additional studies as necessary. If
the undertaking could affect historic properties, the scope of appropriate identification
efforts should be determined, and historic properties in the area of potential effects should
be identified.
Step 3: Assess Adverse Effects
Determine whether the redevelopment activity will or could potentially have an adverse
effect on the property(ies). Examples of adverse effects include:

    •   Physical  destruction  of, damage to, and/or removal of all or part of the property;
    •   Alteration of a property including restoration, rehab, repair, or remedial action
       that is not consistent with Standards for the Treatment of Historic Properties (36
       CFR part 68);

    •   Change or the character of the property's use or to physical features within the
       property's setting that contribute to its  historical significance; and

    •   Introduction of visual, atmospheric, or  audible elements that diminish the integrity
       of the property's historic features.
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The federal agency will make a determination, based on the historian/archaeologist's
report and in consultation with the SHPO and/or THPO, regarding the historical status of
the resource and the potential for adverse effects. If historic properties will not be
adversely affected, the Section 106 Review process is complete.  Otherwise, resolution of
adverse effects is required.
Step 4: Resolve Adverse Effects

The main focus of this step is to avoid, minimize, or mitigate potential adverse effects.
To avoid or minimize an effect on historic resources, the redevelopment may shift in
alignment, relocate to a different area of the site, or modify designs or processes.  If this
is not possible, mitigation may include data recovery, or education (creation of an
exhibit) and outreach (pamphlets, reports, etc.).
In this step, the consulting parties, including but not limited to the lead federal agency,
the developer, the community, and the SHPO/THPO, consult to resolve adverse effects.
On occasion, the ACHP may participate in consultation, particularly when there are
issues of concern to Indian tribes. Consultation usually results in a Memorandum of
Agreement (MOA) between the lead federal agency, the SHPO and/or THPO, the
community,  and the developer. The MOA memorializes the measures to avoid, reduce, or
mitigate adverse effects on historic resources.  If the SHPO/THPO and the federal agency
fail to agree  on the terms of an MOA, the agency must request the ACHP to join the
consultation.
In summary, it is the responsibility of the municipality or community developer to inform
the federal agencies involved when an historic resource might be impacted by the funded
activity, and to provide the information needed to determine the historical significance of
the resource and potential adverse effects. It is the responsibility of the federal agency to
determine whether or not the proposed project constitutes a federal undertaking. In
addition, in consultation with the SHPO and/or THPO, the federal agency determines
whether a historic resource is eligible for the National Register and the scope, if any, of
adverse effects. The lead federal agency, the SHPO/THPO, and the developer, as a
consulting party, work to reach consensus regarding alternatives to avoid or minimize
those adverse effects. If this is not possible, mitigation for the loss of the resource is
expected. Implementation of activities to avoid, minimize, and/or mitigate adverse effects
are memorialized in an MOA.  The ACHP may be consulted if the parties cannot reach
agreement, but ultimately, the federal agency involved has the responsibility for the
project's compliance with the NHPA.
Additional information on the National Historic Preservation Act can be found at:
www. achp. gov/nhpp .htm.

4.7.4  Property Appraisal

What is the appraised value  of the property?
The municipality needs to have a sense  of the current appraised value of the property that
reflects  its physical and environmental condition. This evaluation should consider
current property tax assessments as well as historical sale values. If there are appraisals,
especially recent ones, these  are useful in determining the appropriate current and future
values of the property given potential reuse scenarios.
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The value of the property may need to be adjusted to include additional costs associated
with the environmental condition of the property and cleanup. Knowledge of these costs
can be factored into the purchase price if the municipality intends to acquire the property,
or can enhance the property's marketability if the goal is to facilitate redevelopment by a
third party. Properties where the cost of cleanup exceeds the market value (i.e., "upside
down" properties) typically will require financial or other incentives to be of interest to
the real estate community. Chapter 7 discusses how apro forma can be used to evaluate
the impact of cleanup costs on a project's financial viability.

If the municipality intends to acquire the property by exercising eminent domain, it
should determine if state law allows adjustment of the purchase price to reflect cleanup
costs. Otherwise, the municipality may be forced to pay considerably more for the
property than its actual discounted value. A May 2008 report by the Northeast Midwest
Institute provides a summary of how different states currently address this issue. See
State Programs and Policies to Encourage Local Government Actions to Address
Brownfields: How State Liability Protections, Eminent Domain Reforms, and Cost
Recovery Authority can Spur Local Government Action to Acquire and Redevelop
Brownfields, available at: www.nemw.org.

4.7.5  Regulatory Status

What federal and state cleanup statutes are likely to apply to the property?
In order to evaluate the risk of incurring legal liability through the acquisition or leasing
of contaminated property, a municipality must first understand which  federal and state
cleanup statutes apply to the  property and then whether any relevant statutory exemptions
from or defenses to liability exist under those applicable statutes. Such an understanding
will also allow the municipality to coordinate with all of the appropriate federal and state
cleanup programs that might be involved.  Further, this will help the municipality choose
consultants having the requisite expertise to perform due diligence and other cleanup
work on the property. In making this assessment, it is important to consider the
following points:
1.  Applicability of Multiple Statutes
It is not unusual for the cleanup of contaminated property to be governed by more than
one federal and/or state statute due to the presence of a variety of contaminants. For
example, a property may contain underground storage tanks covered by Subpart I of
RCRA, PCB contamination regulated by TSCA, and hazardous waste releases regulated
by CERCLA or Subpart C of RCRA.
2.  Overlapping Statutes
There are  other situations where the same contamination may be addressed by
overlapping statutory authorities (i.e., more than one statutory authority could be used to
require investigation or cleanup of the particular contaminant).   For example, the
contamination at a particular property—say, a release of various solvents — could
potentially be regulated under CERCLA, Subtitle C of RCRA (hazardous waste
provisions), a state Superfund program, a state voluntary cleanup program, or a state
property transfer statute.  In  situations where regulatory agencies initiate the addition to
RCRA corrective action investigation and cleanup of property, it may not always be
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evident which authorities will be invoked. For instance, based on site-specific factors,
CERCLA authorities could be used in lieu of or in authority at a RCRA (Subtitle C)
hazardous waste treatment, storage or disposal facility.
Generally, for priority, problematic, or otherwise "non-routine" sites, EPA and states will
often triage the situation and determine how best to accomplish cleanup using the various
statutes and authorities available.  Rather than trying to guess which of the applicable
authorities might be invoked, it is best to consult with EPA and the state agency to
understand what they may  be contemplating for a particular property.
In some situations where the municipality, developer, or other entity may be willing to
voluntarily take on the investigation and cleanup, there may be an opportunity to
negotiate an agreement regarding legal risk in connection with the applicable authorities
and cleanup program alternatives.
3.  Enforcement Discretion
For many different reasons, EPA may not pursue every property owner liable  for the
costs of a cleanup at a particular site.  EPA is able to use its "enforcement discretion" in
determining how and when to exercise its statutory authority. Enforcement discretion
may be applied broadly through Agency guidance or narrowly to resolve issues at a
specific site.
Over the  years, EPA has issued a range of guidance explaining how it will use its
enforcement discretion in connection with the cleanup of contaminated property. An
example under CERCLA is EPA's Final Policy Toward Owners of Property Containing
Contaminated Aquifers which describes the use of enforcement discretion for  properties
impacted by ground water  contamination from an off-site source.
In general, EPA uses its  enforcement discretion in specific situations or under certain
circumstances. Where it is exercising its enforcement discretion, EPA will always
reserve its rights to enforce under its statutes if the circumstances change.

Have federal- or state-mandated cleanup actions already been or are likely to be
conducted at the property?
Knowing whether the property is or was subject to a cleanup action is important for a
number of reasons. First, this should prompt the municipality to contact EPA and the
state to determine what further plans they may have for the property.  For example, if a
CERCLA removal action was completed, EPA can discuss whether additional removal
actions are contemplated for other releases, or whether the site is being proposed for
inclusion on the National Priorities List (NPL) (See Section 7.2.1 for a discussion of the
NPL and CERCLA process). Often, the removal action will have addressed the most
immediate contamination threats and EPA may be willing to defer any remaining cleanup
activities to the oversight of the state voluntary cleanup program.
Second, in cases where EPA completed a removal or other response action, the Agency
may be able to provide a "comfort/status letter" describing cleanup status and, to the
extent  applicable, indicating that it does not anticipate further federal Superfund
involvement.  Comfort/status letters are briefly discussed in Section 10.2.2.3 and further
discussed in Section IV. A ofEPAJsRevitalization Handbook. Comfort letters may be
valuable in assessing potential environmental liability for any remaining contamination at
the property, and can ease the concerns of prospective developers, lenders, and insurers.
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Where further action is planned, knowing that information can help inform the project
planning process.
Third, as discussed in Section 4.7.4, EPA and the state may have perfected or plan to
place liens on the property to recover costs spent for response actions at the property.
Fourth, if a federal- or state-mandated environmental investigation is underway or
planned, this may affect the scope and timing for the municipality to conduct its own
Phase II Environmental Site Assessments.  Typically, the results of these investigations
are publicly available and can be readily accessed by the municipality.

EPA developed an internet-based information system called ECHO (Enforcement and
Compliance History Online) that provides useful environmental compliance information
on EPA-regulated facilities. ECHO is available at: www.epa-echo.gov/echo. A users
guide for ECHO is available at:  www.epa-echo .gov/echo/firsttime users .html. In addition,
the current status of EPA-regulated sites can be obtained by visiting the Web sites of
specific regulatory programs.  These Web sites are provided in Chapter  7 for each of the
federal statutes covered in that chapter.
Have "potentially responsible parties" been identified for the property?
If a formal action requiring investigation or cleanup of the property was taken or is
planned by EPA or a state agency, responsible parties may be identified or are in the
process of being identified. While this can be good news in that it could bring resources
necessary to clean up the property, the municipality should be aware that this could
complicate future dealings involving the property.  Negotiations between the regulatory
agencies and responsible parties can also introduce significant delays to the process.
Is the municipality  already or likely to be a "potential responsible party" under
CERCLAfor the property or  have existing cleanup obligations under other federal or
state environmental statutes?
The municipality should consider its existing liability under CERCLA or other
environmental statutes early in the process  of evaluating property recovery actions.
CERCLA and some state statutes operate on a retroactive, strict, joint, and several
liability frame work that casts a rather wide liability net. For example, a municipality
could be a responsible party under CERCLA if it owned or operated a property  during the
time in which hazardous substances were disposed of at the property. This could include,
for example, situations where  the municipality owned, leased, or operated a municipal
landfill that at some point accepted hazardous substances, or where the municipality sent
hazardous substances to a facility that later became a Superfund site due to improper
management of hazardous substances.  The creation of a redevelopment authority by a
municipality may not shield the municipality from CERCLA liability for a property that
the redevelopment authority has acquired. (See discussion of redevelopment authorities
in Section 10.2.3.7).
If the municipality has reason to believe that it may have had past or present involvement
with the contaminated property, it should get competent legal  and technical advice to help
assess its potential liability under CERCLA and other environmental statutes (refer to
Chapter 7 and Appendix D for statute-specific discussions of liability).
Being a liable party for a property carries the responsibility of contributing to the
cleanup,  but that responsibility should not prevent a municipality from evaluating the
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risks and benefits that might accrue from acquiring the property. There may be certain
strategic benefits to the municipality in moving forward with the transaction. For
example, if the municipality intends to acquire the property and use it for some public
purpose, it may be beneficial to acquire the property prior to the cleanup so that the
cleanup can be tailored to the future reuse.  Ownership also provides greater control over
the actual reuse of the property, so that the municipality can ensure that land use
restrictions are being met and cleanup components (e.g., ground water monitoring wells,
landfill caps) are not compromised.
Finally, just because the municipality has had past or present involvement with a
contaminated property does not necessarily mean that it will be responsible for the costs
of conducting a CERCLA cleanup. It should first consider whether EPA has taken or is
likely to take a CERCLA response action involving that site. Sites where EPA has taken
response actions under CERCLA are identified at: www.epa.gov/superfund/sites/cursites.
Generally, EPA will take  a CERCLA response action at seriously contaminated
properties that are not likely to be addressed through some other action.  The vast
majority of contaminated properties are addressed through state voluntary cleanup
programs or other regulatory programs such as RCRA or TSCA.

4.7.6  Environmental Conditions

What regulatory oversight occurred or is occurring for environmental
investigations/studies and cleanup?
Environmental investigations and cleanups mandated through federal and state
enforcement actions or  automatically triggered by a law or regulation will impose a
process of regulatory oversight.  In many cases, regulatory agencies will be directly
involved in that oversight; in others, such as with state voluntary cleanup programs,
primary oversight may occur through a licensed environmental professional.
Regulatory oversight provides some level of assurance that the proper protocols and
requirements are being met. Without this, regulatory agencies may not accept the
findings and conclusions of investigations should they later be needed to  support a
cleanup determination.  Insurance providers and financial lenders may also be reluctant to
accept them.  This also  applies when utilizing past studies performed by previous owners
or other parties. Environmental investigations deemed to be inadequate can usually be
augmented through additional studies in the future, but the cost of re-mobilizing the
environmental contractors and equipment, combined with other process inefficiencies,
often makes this more expensive  in the long run.
When conducting environmental  investigations without regulatory oversight, it is
important to, at a minimum, hire consultants that have extensive expertise with the
protocols  and other requirements that would apply should regulatory approval be needed.
This requires an understanding of which federal and state cleanup statutes might apply.
Has the validity of data and other information or conclusions  in previous
environmental investigations/studies been evaluated?
While environmental reports previously prepared by other parties can provide valuable
background information, they must be carefully scrutinized before utilizing them to draw
conclusions regarding current environmental conditions. Even if the original studies
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were well designed at the time they were conducted, the information may be outdated and
no longer valid.  Comparing data in one study to data in another can also be problematic
if, for example, the sampling and analytical methodologies used in the two studies were
different.  There are many other considerations that can result in misleading or incorrect
conclusions if not properly taken into account. Phase I and IIESA reports prepared by a
municipality's consultants should explicitly address the use and validity of all data used.
Do existing environmental investigations/studies and cleanups address off-site sources
of contamination ?
Contamination that originates from an off-site source can impact redevelopment and have
potential environmental liability implications. Potential liability under various federal
cleanup statutes for off-site sources of contamination is discussed in Chapter 7 and
Appendix D.
Even if the municipality or other entity is not legally liable for contamination from an
off-site source, it is important to consider how this contamination might impact current or
future uses. For instance, ground water contamination could render the ground water
unusable for some time or, if volatile substances are involved, may create a vapor
intrusion issue requiring that buildings be designed or retrofitted to prevent exposure.
Restrictions may need to be imposed on soil excavation in order to protect construction
workers from exposure to these volatile compounds, which may necessitate hiring
specially-trained and licensed construction firms. Other steps could be necessary to
ensure that protections from legal liability are not jeopardized from the use of the
property or the failure to meet other obligations.
If it is determined through the due diligence process that contamination from an off-site
source may be affecting the property, the state environmental agency or EPA should be
contacted.  If this represents a previously unknown contamination source, these agencies
may take action to eliminate or bring that source under control, and compel the
responsible parties to conduct cleanup. Depending on the extent to which the property is
impacted by that contamination, the timeframe for bringing those source areas under
control could be a factor in how the municipality chooses to proceed. If, on the other
hand, there is an ongoing cleanup, the agencies may be able to provide information on
cleanup status and discuss how it could impact the property's current and future uses.
Have hazardous substances or petroleum products associated with activities on the
property been identified on adjacent properties, or are hazardous substances or
petroleum products expected to migrate to adjacent properties?
Contamination associated with the property could be or come to be located on adjacent
properties. This most commonly occurs when contaminated ground water or surface
water migrates from the property, but can also be the result of other activities, such as the
operation  of manufacturing or processing equipment (e.g., rotary kilns, emergency
venting of hazardous materials storage or production vessels, metal grinding equipment).
Depending on the circumstances, a municipality may be liable under federal and state
statutes for cleaning up this contamination. Potential liability under various federal
cleanup statutes for contamination that migrates off-site is discussed in Chapter 7 and
Appendix D. There may also be potential civil liability associated with third party
damages (e.g., inability to use the adjacent property or associated resources for their
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highest and best use, health related claims for exposure to hazardous substances and
petroleum products).
Do the existing environmental investigations and cleanup address asbestos, lead-paint
and other hazardous materials that were used in the construction of buildings and
other structures?
The demolition and renovation of buildings containing asbestos and lead paint require
additional procedures to be done safely and in accordance with applicable laws. It should
not be assumed that a cleanup that occurs under federal or state regulatory cleanup
programs (such as CERCLA or RCRA) will have addressed lead paint, asbestos, or other
hazardous materials within a building. For example, under CERCLA response actions,
asbestos contained within a building is not always remediated unless there is an actual or
threatened release that could pose unacceptable risks to human health and the
environment (e.g., a collapsed building that exposes friable asbestos).
Do existing environmental investigations and cleanups address all areas of the
property?
As discussed in Section 4.7.5, multiple cleanup statutes could potentially apply to the
property; or the environmental investigation or cleanup may not have comprehensively
addressed all releases, types of waste, areas of the property, off property releases, etc.
This may be the case with "removal" actions conducted under CERCLA (Removal
actions are taken for spills or other releases that require a more time critical response, but
often additional cleanup may be necessary).  It is important for the municipality to
understand the limits of the existing environmental investigations and cleanups involving
the property.
Are there known or believed to be serious, immediate threats to human health and the
environment associated with the environmental condition identified on the property?
In some cases, a threat to human health and the environment may be identified  during the
due diligence process that requires an immediate response action to prevent exposure by
or hazard to area residents or workers on the  property such as:

    •   Fire or safety hazards

    •   Levels of hazardous substance or petroleum product vapors that could cause an
       explosion or acute health effects

    •   Impacts to an active water supply well, water supply line, or surface water intake

    •   Impacts to surface waters, fish, wildlife, sensitive habitats, or endangered,
       threatened, or rare species

    •   Contained (e.g., tanks, drums) hazardous substances that pose a threat of release
Where an immediate threat is identified, regulatory state and federal agencies should be
appropriately notified.  If the municipality intends to take direct actions through, for
example, its health or safety departments, the municipality should coordinate with the
regulatory agencies to ensure that the potential risks associated with hazardous
substances, petroleum products, or other materials are properly considered.
Consultations with state and federal regulatory authorities may reduce the municipality's
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exposure for environmental liability issues that could arise due to the initiation of
emergency response actions.
For properties where cleanup occurred, are the existing activity and land use
assumptions and cleanup goals consistent with planned or intended uses of the
property?
Cleanup goals are typically based on land use assumptions made as part of the formal
cleanup decision process. If the planned or intended uses at some later date are not
consistent with these cleanup goals, it may be necessary to modify cleanup goals and the
selected cleanup remedy (if the remedy is still ongoing) or to perform an additional
cleanup. Depending on the nature of those modifications and the regulatory program
under which cleanup decisions were made, this could involve considerable time and
resources.
If a municipality or other entity such as a developer acquires the property and requests
modifications to the cleanup, it will be responsible for demonstrating that the proposed
modifications will be protective for the new uses.  Similarly, the municipality or
developer will likely bear the responsibility and expense of implementing the
modifications unless applicable federal and state laws provide otherwise.
Are there health studies that suggest a possible link between releases from the property
and adverse health impacts on humans?
Information concerning known or suspected current or  historical health effects associated
with activities on a property provides an insight into potential liability as well as potential
cleanup needs for a property.  Known health effects will be a major focus of cleanup and
other actions on the property.  Suspected health effects  may be a driver for health
monitoring or other studies to be conducted before decisions are made about a property.
If a health study was conducted in conjunction with a CERCLA cleanup, coordination
with local and state health departments routinely takes place and the results are made
publicly available.
Are long-term cleanup action-related treatment systems or other engineered controls in
place or planned?
Existing or planned cleanup action-related treatment systems or other engineered controls
can have a significant impact on the use of a property.  Engineered controls are the
physical structures designed to monitor, treat, and prevent exposure to contamination.
Examples of engineered controls include:

    •   Landfill soil caps

    •   Impermeable covers and liners

    •   Slurry walls

    •   Fences
    •   Bioremediation systems

    •   Ground water "pump & treat" and monitoring systems
Structures associated with engineered controls can impose physical obstacles and other
restrictions that can reduce available space or influence the placement of buildings, roads,
utilities, or other features needed for the future use. Providing long-term access for
                                                                                44

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monitoring and maintenance of engineered controls also must be considered. For certain
engineered controls (such as protective caps), monitoring and maintenance could be
required indefinitely, and cleanup action treatment systems will need to be maintained
and monitored until defined cleanup objectives have been met.  If a municipality takes on
management responsibilities of a property through acquisition or leasing, it is generally
advisable to establish a routine schedule for inspecting engineered controls to identify
developing problems before they become more serious. Consideration should also be
given to:

   •   Who is responsible for the long-term monitoring and maintenance of treatment
       systems or engineered controls, and what controls (e.g.,  consent orders,
       environmental covenants, escrow accounts) are in place to ensure that continued
       monitoring and maintenance is conducted

   •   The potential short- and longer-term impacts on the use  of the property if the
       cleanup action treatment system or engineered controls fail

   •   The potential impacts the future use may have on the continued operation of these
       systems or controls

   •   The potential liability from claims that the municipality  caused or contributed to
       the failure of a cleanup action treatment system or other engineered control
       (including the cost of defending against those claims)

If the implementation of a future reuse plan  requires the relocation or redesign of existing
engineered controls, or requires additional cleanup action, the costs of doing so may be
borne by the municipality or other prospective owner of the property. These costs could
be relatively minor in the case of planned treatment systems or controls,  but could be
significant for existing systems or controls.  In addition, modifications to existing or
planned cleanup action systems or controls will require regulatory approval that may
extend the project timeline.

4.7.7  Environmental Restrictions
Are there environmental restrictions implemented or identified for the property?

When contamination remains on a property as part of a completed cleanup remedy or
ongoing cleanup operations, institutional controls may be used alone or in combination
with engineered controls to ensure protection of human health and the environment.
Other terms, such as "activity and use limitations" are sometimes used to describe these
types of controls. Generally, institutional controls are designed to limit land or resource
use (e.g., prohibitions on residential use or extraction of ground water) and ensure the
integrity of engineered controls (e.g., restrictions on  excavating soils above a landfill
cap).  As with engineered controls, institutional controls must be maintained, monitored,
and evaluated for as long as unacceptable risks at a property are present.   Institutional
controls are generally divided into four categories:
    •  Proprietary controls (e.g., easement, real covenant, statutory covenant)

    •  Government controls (e.g., zoning, building permit, land use ordinance)
                                                                                 45

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    •   Enforcement and permit tools (e.g., consent decree, permit, order)

    •   Informational devices (e.g., deed notice, government advisory, state registry)

Institutional controls don't always get the attention they deserve.  They are an integral
part of the overall cleanup and failure to comply with institutional controls can result in
contaminant releases that could, for example, endanger human health or the environment,
cause the party responsible to incur costs to repair any  resulting damage, face lawsuits
from injured parties, or even jeopardize eligibility for liability protections under
CERCLA and other environmental statutes (discussed  further in Chapter 7 and Appendix
D). Vague, confusing, or unnecessarily restrictive or inflexible institutional controls can
also create significant obstacles to redevelopment. This is more likely to be the case with
older cleanups. In more recent years, EPA and the states have been taking a hard look at
the issues associated with the use of institutional controls and ways to make them more
effective and efficient.
    What is an Institutional
           Control?
An institutional control is a legal or
administrative restriction on the use
of, or access to, a contaminated
property to protect: 1) the health of
both humans and the environment;
and 2) ongoing cleanup activities
and to ensure viability of the
engineered controls.
                                If institutional controls already exist, it is important that
                                the municipality understands the obligations they
                                impose and how they might be viewed by future
                                owners, developers and property users. In some
                                situations, EPA or the state may be willing to modify
                                existing institutional controls to facilitate the
                                appropriate reuse of the property providing the cleanup
                                will not be compromised.  Where institutional controls
                                are being considered by the regulatory agencies but
                                have not been finalized, there may be opportunities for
                                municipalities to weigh in on the final form they will
                                take. The EPA institutional control guidance
referenced at the end of this section will better prepare local officials to work with EPA
and state officials in crafting effective institutional controls.
Irrespective of whether they own or lease the property, municipalities often play a key
role in implementing, monitoring, and enforcing certain institutional controls —
particularly those that they have the legal authority to implement (e.g., zoning
restrictions, building or excavation permits,  well construction permits).  Municipalities
also can work proactively with developers, prospective buyers and tenants, and other
parties to ensure that institutional control requirements are understood and properly
integrated into the planning and future reuse of the property.  The case study of Midvale,
Utah on the following page highlights how institutional controls are being effectively
implemented for a large redevelopment project at a Superfund site.
Additional information on institutional controls can be found in EPA's interim final
guidance Institutional Controls: A Guide to  Implementing, Monitoring, and Enforcing
Institutional Controls at Contaminated Sites (November 2010):
www.epa.gov/superfund/policy/ic/pdfs/PIME-IC-Guidance-Interim.pdf.  EPA's institutional
controls Web  site is: www.epa.gov/superfund/action/ic/index.htm.
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                                Luxury town house complex
                     Case Study: Midvale, Utah
Effective Use of Institutional Controls for a Large Redevelopment Project
The 446-acre Midvale Slag Superfund site is
located about 12 miles south of Salt Lake City
in Midvale, Utah.  Smelting occurred on and
near the site from 1871  until 1958. These
activities resulted in heavy metal and other
contamination to the surface water, ground
water and soil.  EPA conducted extensive
cleanup operations that included the
consolidation and on-site capping of
contaminated soils and  other material, and
also required institutional controls restricting
land use.

The site represented  a serious dilemma and an
important opportunity for the City. Midvale is a
rapidly growing  bedroom community for Salt
Lake City and much of Midvale's available land
for expansion is contained within the site.  Using funds provided by EPA, a reuse plan titled the Bingham
Junction Reuse Assessment and Master Plan was prepared by the City of Midvale in conjunction with the
community, landowners, and other stakeholders.  This plan envisioned a sustainable community that
included residential, commercial, and recreational uses. The City of Midvale subsequently enacted zoning
changes to reflect the reuse plan.

Among the primary barriers to implementing this reuse plan were the institutional controls prescribed by the
Superfund cleanup that required the implementation of deed restrictions.  Because the establishment of
these institutional controls predated the reuse planning process, they were based on a now-obsolete
industrial use scenario.  In many areas of the site, the institutional controls would have prevented the reuse
plan from being realized.

Recognizing the importance to the community of revitalizing the site, EPA and the Utah Department of
Environmental Quality worked with the City of Midvale and the other stakeholders to establish institutional
controls more specifically  tailored to the intended reuse, but which continue to ensure that the site will
remain protective of human health and the environment.  Importantly, the City of Midvale created a full-time
position to oversee the implementation and monitoring of the institutional controls.  This includes serving as
a liaison to the developers, owners, tenants, and general public to help communicate the institutional control
requirements and to resolve any related issues that might arise. This position has been instrumental in
addressing concerns  that  might otherwise  have been a serious disincentive to redevelopment.

A great deal  of redevelopment progress has occurred at the site. As of fall 2010, over 860 residential units
have been built, an additional 350 were under construction, and major commercial and office facilities are
operating or  under construction.  Efforts are also underway to restore the Jordan River and riparian areas
that transect the site and to complete a linear park that links up with the Greater Salt Lake Area trail system.
A light rail that will service this area is also planned.

A fact sheet describing the site and providing contact information is available at:
www.epa.gov/superfund/programs/recYcle/pdf/midvale.pdf.
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                       Worksheet #4:  Due Diligence
Project Name/Identifier


Property Description

   •   Briefly describe the property including size of property and number of buildings.

All Appropriate Inquiries [Section 4.7.11

   •   Have the requirements for all appropriate inquiries been met? [Y/N/Unknown].
       Describe.

Property History [Section 4.7.21

   •   What are the prior land uses and activities?

   •   Who were the prior owners and tenants of the property?

   •   Are there past development or reuse plans prepared for the property that can
       inform the due diligence or reuse planning process? [Y/N/Unknown]. If yes,
       summarize relevant information and findings.

   •   Describe any other relevant factors relating to property history that should be
       considered during the evaluation and reuse planning process.

Current Property Status [Section 4.7.31

   •   What is the ownership status (e.g., private, abandoned, publicly owned)?

   •   Is there clear title to the property? [Y/N/Unknown]. If no or unknown, describe.

   •   What is the current land use of the property?

   •   What is the current zoning and relationship of the property to local master plans
       and other planning studies?

   •   Are buildings, structures or areas of the property of historical importance?
       [Y/N/Unknown}. Describe.

   •   Are there other relevant factors (e.g., physical condition of structures, access to
       property, ecological issues) relevant to property status that should be considered
       during the redevelopment planning?
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Property Appraisal [Section 4.7.41

   •   What is the appraised value of the property?

   •   Describe any other relevant factors (e.g., limitations or conditions associated with
       an appraisal, significant variability in appraisals) relating to property appraisal
       that should be considered during the redevelopment planning.

Regulatory Status [Section 4.7.51

   •   What federal  and/or state cleanup statutes are potentially applicable to the
       property?

   •   Have federal- or state-mandated cleanup actions already been or are likely to be
       conducted at the property?  [Y/N/Unknown].  Describe.

   •   Have potentially responsible parties been identified for the property?
       [Y/N/Unknown].  Describe.

   •   Is the municipality already or likely to be a potentially responsible party?
       [Y/N/Unknown].  Describe.

   •   Describe any other relevant factors (e.g., specific regulatory requirements,
       permits, violations) relevant to regulatory status that should be considered during
       the redevelopment planning.

Environmental Conditions [Section 4.7.61

   •   Is there a known or suspected environmental condition on the property?
       [Y/N/Unknown].  If yes, provide a brief summary of each known or suspected
       environmental condition.

   •   Are there data gaps either identified or indicated in the Environmental
       Assessments? [Y/N/Unknown]. Describe.


   •   What regulatory oversight has occurred or is occurring for environmental
       investigations/studies and cleanup?


   •   Has the validity of data and other information or conclusions in previous
       environmental investigations/studies been  evaluated?  [Y/N/Unknown].
       Describe.


   •   Do existing environmental investigations/studies and cleanups address off-site
       sources of contamination? [Y/N/Unknown].  Describe.
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   •   Have hazardous substances associated with activities on the property been
       identified on adjacent properties or are hazardous substances expected to migrate
       beyond the property boundaries?  [Y/N/Unknown]. Describe.


   •   Do existing environmental investigations/studies and cleanups address asbestos,
       lead-paint and other hazardous materials that were used in the construction of
       buildings and other structures?  [Y/N/Unknown].  Describe.


   •   Do existing environmental investigations/studies and cleanup address all areas of
       the property?  [Y/N/Unknown]. Describe.


   •   Are there known or believed to be serious, immediate threats to human health and
       the environment associated with the environmental condition identified on the
       property?  [Y/N/Unknown]. Describe.


   •   For properties where cleanup has occurred, are the existing activity and land use
       assumptions and cleanup goals consistent with the planned or intended uses of the
       property?  [Y/N/Unknown]. Describe.


   •   Are there health studies that suggest a possible link between releases from the
       property and adverse health impacts on humans?  [Y/N/Unknown]. Describe.


   •   Are long-term cleanup-related treatment systems or other engineering controls in
       place or planned?  [Y/N/Unknown]. Describe.


   •   Are there other factors (e.g., significant additional assessment requirements,
       restrictions on obtaining additional information) relevant to environmental
       conditions status that should be considered during the redevelopment planning?
       [Y/N/Unknown]. Describe.

Environmental Restrictions [Section 4.7.71

   •   Are there environmental restrictions implemented or identified for the property?
       [Y/N/Unknown]. Describe.

   •   Describe any other relevant factors (e.g., long-term stewardship requirements,
       condition of the restriction) relevant to environmental restrictions that should be
       considered during the redevelopment planning.

Other Information

   •   Has a cleanup action plan been developed for the  property? [Y/N/Unknown].
       Describe.
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       If yes, is the proposed cleanup action consistent with the potential future use?
       [Y/N/Unknown].  Describe.

    •   Describe any other relevant factors relevant to the property that should be
       considered during the evaluation and reuse planning process.


Worksheet Completed By:

Name:                                          Title:


Representing:                                    Date:
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Redevelopment Obstacles
                                                        This Chapter:
                                                 Discusses the identification of
                                                 potential redevelopment
                                                 obstacles through the due
                                                 diligence process
5.1    General
Information obtained through the due diligence process
enables a municipality to identify potential redevelopment
obstacles for a property.  These redevelopment obstacles
can include those associated with the environmental
conditions, as well as those commonly encountered
through traditional real estate due diligence (e.g., title
encumbrances, easements, infrastructure).  Resolving
these obstacles and the project risks they present will be
key to addressing the four core questions and completing the PREPARED approach
outlined in Section 1.5. Chapter 11 discusses this exercise more fully. Chapters 6
through 10 will help the municipality identify potential sources of project risk and ways
to manage those risks.
The redevelopment obstacles will often depend on the property recovery action being
considered. Obstacles may, however, be common to more than one property recovery
action. Worksheet #5 at the end of this chapter can be used by the municipality to
identify and prioritize the redevelopment obstacles applicable to each property recovery
action (available for download at www.epa.gov/regionl/brownfields/prepared')..

5.2    Identifying Redevelopment Obstacles
There are many combinations of redevelopment obstacles and issues that could apply to
contaminated properties. Similarly, the range of actions that a municipality might take to
resolve them will vary widely based on the particular circumstances surrounding the
property, the municipality's comfort with taking risks, available resources,  and other
factors.
The process of identifying redevelopment obstacles is iterative.  As due diligence
proceeds and more information is obtained, certain redevelopment obstacles may be
eliminated or revised, or new obstacles may be identified. As obstacles are identified,
they should be prioritized on the basis of their impact on the project.
Figure 5.1 lists some common redevelopment obstacles relating to a property's
environmental conditions.
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Figure 5.1 - Common Redevelopment Obstacles Relating to Environmental Conditions, and
Potential Causes or Contributing Factors
      REDEVELOPMENT
         OBSTACLE
Delays and costs to resolve
complicated or uncertain
ownership or title
     POTENTIAL CAUSE OR CONTRIBUTING FACTORS
 Property abandoned, corporation dissolved, multiple property
 owners, tied up in probate, etc.
 Uncooperative owner (e.g., "mothballed" property).
 Liens, easements or other encumbrances.	
Insufficient information on
the environmental conditions
and/or uncertain cleanup
costs
 Incomplete, outdated, or technically deficient studies.
 Past environmental reports, studies, and other information prepared
 by the owners or other parties are not publicly available.
 Inability to gain access for environmental investigations and
 other studies.
 Little or no  regulatory oversight on past investigations/cleanups; this
 raises questions about adequacy and finality (e.g., Will the
 regulatory agencies require additional cleanup in the future?).
 Cleanups to date did not address all regulatory programs and
 statutes that could apply (e.g., PCBs under TSCA, petroleum
 products under LIST).
 Potential off-property sources of contamination (especially ground-
 water related) could impact property use. Gaining information on
 these source  areas can be difficult and cleanup action may not be
 within the direct control of the municipality or potential developer.
 Technically complex cleanups that are difficult to implement or which
 may require extensive future modification if the cleanup goals are
 not being met (e.g., contamination in bedrock fractures).	
Delays due to extensive
environmental
investigation/cleanup
activities or uncertainties in
the regulatory process
 Complex investigations and cleanups can take many years.
 Timeframes can depend on which regulatory programs or statutes
 are involved.
 Administrative requirements can be long and prescriptive (e.g.,
 permitting and associated public participation requirements).
 Modification of existing remedies may be necessary if the approved
 cleanup standards and remedy were based on land use
 assumptions different from what is now intended.	
Uncertain responsibility for
operating and maintaining
engineering controls
For existing cleanup, inadequate review of cleanup agreements.
For future cleanup, may be dependent on which federal or state
cleanup authority is used.
Uncertain community support
for specific reuse proposals
or the use of municipal funds
and other resources to
facilitate private
redevelopment projects
Inadequate community engagement and/or planning.
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Physical and operational
constraints on property use due
to engineered or institutional
controls
Physical obstructions resulting from engineered controls such as
treatment equipment, capped areas, monitoring wells, etc.
Land use restrictions on excavation and ground water use,
prohibitions on certain use categories (e.g., residential,
recreational, child care facilities.), notification requirements.
Many treatment systems operate for very long periods of time
(e.g., ground water treatment systems can continue for decades)
and engineered controls could remain in place indefinitely.
Future  modification to the approved remedy due to design flaws or
inability to achieve cleanup objectives may result in disruption to
ongoing land use activities (e.g., a parking lot built on a landfill
may be torn up in  order to repair damage to the protective cover
due to erosion or subsidence).	
Cleanup costs greatly exceed
the fair market value of the
property (i.e., "upside down"
property)
Owner is unwilling to perform cleanup action or is unable to do so
due to inadequate resources.
EPA and the state have not targeted the property for cleanup
under CERCLA, which could provide resources through
Superfund or require responsible parties to perform environmental
investigations and cleanup.	
Uncertain legal liability under
CERCLA or other federal and
state environmental statutes
Inadequate project risk analysis.
Difficulty in obtaining affordable
financing or insurance for
property development
Inadequate characterization of contamination
 o   Uncertain cleanup costs.
 o   High potential for unanticipated contamination issues.
Existing or planned remedies require high maintenance or are
otherwise prone to failure.
Lack of regulatory agency oversight or approvals.
Inadequate plan for managing project risk.
Uncertain regulatory process.
Lender lacks expertise with environmental statutes, particularly
those provisions dealing with lender liability.
"Upside-down" properties.
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Worksheet #5:  Identification and Prioritization of Redevelopment
Obstacles associated with a Property Recovery Action

First column: Record a general description of the redevelopment obstacle (See Figure
5.1 for examples). The description should be concise, but include sufficient information
to describe the redevelopment obstacle and any specific concerns.
Second column: Assign a priority to the redevelopment obstacle based on the relative
importance and risks posed by the  obstacle. The following criteria are used in this
workbook to define "priority":
   •   High priority obstacles are deal breakers (i.e., necessary to resolve) that would
       cause the property recovery action to be discarded if the potential liability or risk
       associated with the redevelopment obstacle are too great and acceptable risk
       management tools could not be identified to adequately reduce the risks.
   •   Medium priority obstacles would be those that are important, but not critical, to
       resolve and could cause the property recovery action to be discarded if the
       potential liability or risk associated with the redevelopment obstacle are too great
       and acceptable risk management tools could not be identified to adequately
       reduce the potential liability or risk. A property recovery action would  be more
       likely to be  discarded if there are a number of medium risk obstacles.
   •   Low priority obstacles would be those that are not critical to resolve and would
       not cause the property recovery action to be discarded even if the risk sensitivity
       could not be reduced through risk management tools.
High priority obstacles are generally evaluated first.  If risks associated with high priority
obstacles are not acceptable and cannot be adequately addressed by a risk management
option, then further evaluation of the property recovery action and associated obstacles
may not be necessary.
Third column:  Summarize any additional information or details that may be important
in understanding or evaluating the  redevelopment obstacle (e.g., potential causes or
contributing factors, critical information gaps).
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             Worksheet #5: Identification and Prioritization of Redevelopment Obstacles






Property Recovery Action: 	
  Describe potential redevelopment obstacles/issues      Priority
Additional information
                                                                                                           56

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6      Assessing Project Risk
                                                               This Chapter:
                                                        Briefly describes the types of
                                                        project risk that could be
                                                        associated with a redevelopment
                                                        project
6.1   General
Risk assessment involves the identification and
prioritization of risks that could adversely impact the
achievement of the municipality's project goals. These
project risks include legal liability, financial risk, and
community issues. There may be additional risks and
other considerations not specifically addressed in this
workbook that will need to be factored into the evaluation
and decision process.  The risk management framework
that is described should, however, apply equally well in evaluating those issues.
Worksheets #6 and #7 (see Chapter 11) can be used to document potential risks
associated with each property recovery action.  The bases for assessing these risks will be
described in more detail in Chapter 7 (Potential Liability  under Federal and State Cleanup
Statutes), Chapter 8 (Project Economics and Financial Analysis) and Chapter 9
(Community Issues).

6.2   Environmental Liability

The generic term "environmental liability" is used to describe the various obligations and
responsibilities that can result from federal, state, or local environmental statutes — and
the regulations and ordinances based on those statutes — as well as common law
liabilities that can derive from negligent behavior or activities. Common law liability can
also encompass contractual disputes arising through indemnification agreements, service
contracts relating to the cleanup and management of a particular property, or other legal
agreements. A general introduction to environmental liability can be found in "A Primer
for Local Governments on Environmental Liability" prepared jointly by the International
City/Council Management Association and the Public Entity Risk Institute (available at:
www.lgean.org/documents/primer.pdf).
The discussion of environmental liability in Chapter 7 will primarily focus on federal
environmental cleanup statutes with some general reference to relevant state laws and
programs, such as voluntary cleanup programs and property transfer laws. Common law
                                     liability is an area of law well beyond the scope
                                     of this workbook; however, the workbook will at
                                     times point out where common law could impact
                                     the evaluation and decision processes.
                                     While environmental liability is a key
                                     consideration when evaluating property recovery
                                     actions, it must be viewed in the context of the
entire project — specific facts concerning the project will dictate the significance of
environmental liability for a particular property or project. For example, if the
contamination associated with the property is very limited or poses minimal risks to
 [Environmental liability] must be
 viewed in the context of the entire
 project - specific facts concerning
 the project will dictate the
 significance of environmental
 liability for a particular property or
                                                                                57

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human health or ecological systems, then environmental liability may not result in
significant project risks. If, on the other hand, there is extensive contamination that has
not been adequately addressed, then the consequences of taking on environmental
liability are much greater and need to be carefully managed. Determining if there is
environmental liability is only a first step (albeit an important one) in the evaluation of
project risks.

6.3   Financial Risk

Financial risk is present in all development projects.  For a private developer, financial
risk generally relates to profitability (i.e., whether their investment will be able to provide
a reasonable rate of return). For a municipality looking to facilitate the redevelopment of
an underutilized or abandoned property,  often the main focus is on limiting the amount of
municipal funds that are needed and ensuring that those funds are used to maximum
public benefit.  The financial risk to the municipality is that the necessary funds will be
significantly higher than what had been expected or, worse, that despite the
municipality's investment the desired redevelopment does not occur. For this reason, a
municipality's financial risk is often closely tied to the financial risk of a potential
developer; a project that carries a high financial risk to a developer is far less likely to be
pursued or ultimately successful. Impaired marketability of a property contributes to the
municipality's financial risk, and environmental issues, left unaddressed, can adversely
impact marketability.

It is also worthwhile to consider the relationship between a municipality's environmental
liability and its financial risk. Chapter 7 discusses a municipality's potential liability
under various federal environmental statutes and explains the provisions under which
municipalities may minimize or avoid liability. Oftentimes, however, the municipality's
real concern boils down to the financial risk resulting  from its environmental liability.
The issue  for the municipality may  not be environmental liability per se, rather it is
whether that environmental liability results in the municipality's share of the cleanup,
redevelopment and other costs exceeding what it is willing to assume. In this regard,
financial risk, not environmental liability, may be more likely to influence the
municipality's decision on whether or not to proceed with a property recovery action.

For these reasons, understanding the project economics from the perspectives of both the
municipality and potential developers is  necessary to assess financial risk. Chapter 8
provides an overview of some of the factors that influence project economics and
describes a useful tool that can be used to estimate the financial viability of potential
redevelopment scenarios.

6.4   Community Issues

As the term is used in this workbook, community issues refer to neighborhood or local
concerns regarding the current conditions of the property, or the cleanup and
redevelopment being considered. These concerns often relate to environmental justice
issues such as the potential social, economic, and/or health impacts of contamination; the
effects of economic blight on a neighborhood; or the burdensome effects of
redevelopment plans such as increased pollution, traffic, congestion or gentrification.  In
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some cases, the decision not to take action on a contaminated or underutilized property
may itself raise significant community issues by fostering the impression that these issues
are not a priority for the municipality.

Addressing community issues first requires identifying those issues. As will be discussed
in Chapter 9, community engagement is an important tool for accomplishing this.
Community engagement can also be used to communicate the tradeoffs that the
municipality may need to balance when making decisions regarding the cleanup and
reuse of contaminated property.  This contributes to more productive discussions that can
help build community support for those actions and reduces the likelihood that
community opposition will delay or even derail a project. If the potential for community
opposition is high enough, developers and investors could be driven away. The support
of the community becomes especially important if the municipality plans to access the
property to conduct environmental assessments, acquire or lease the property, or take
other actions that might require the municipality to expend public funds or incur
significant financial and  other risks.  To put it simply, a positive project pro forma may
not mean a thing if the needs and concerns of the community are not being met and the
community stakeholders oppose the project.
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7  Potential Liability under Federal and State Cleanup
   Statutes
                                                              This Chapter:
                                                        Discusses regulatory liability
                                                        associated with CERCLA, RCRA,
                                                        and certain provisions of TSCA
                                                        and the CAA
7.1    General
Assessing potential liability under federal and state
cleanup statutes is very fact specific and requires a
thorough understanding of the applicable laws, property
conditions and operating circumstances. The discussions
in this chapter and Appendix D are intended to provide
municipalities with a general understanding of
environmental liability as it relates to various
environmental laws commonly associated with the
investigation and cleanup of contaminated properties.
This chapter will focus on key EPA-administered statutes such as CERCLA, RCRA
(Subtitles C, D and I), and certain provisions of TSCA and the Clean Air Act (CAA).
Because state laws can vary widely, it is not practical for this workbook to discuss state
laws and programs in anything other than broad generalities. The EPA manual State
Brownfields and Voluntary Response Programs: An Update from the States that was
referenced in Chapter 1 provides a synopsis of state laws and programs. The questions
posed in this section and Appendix D should help guide a municipality's inquiries into
state requirements.
Once it is determined that a particular statute could potentially apply to a property, the
municipality should consider how a given property recovery action could affect its
liability under that statute. This chapter discusses how the federal cleanup statutes might
generally be relevant and summarizes key statutory exclusions/defenses and other
provisions and policies relating to those statutes.  Appendix D provides a response to
some specific questions that a municipality may have regarding potential liability under
each of the federal statutes discussed in Chapter 7. Table 7.1 is a directory of where
these discussions can be found in this workbook.

Table 7.1 -Directory of Statute-Specific Overviews and Discussions
Statute An overview discussion Responses to specific liability
can be found in: questions can be found in:
CERCLA
RCRA (Subtitle C)
RCRA (Subtitle D)
RCRA (Subtitle 1)
TSCA (Title 1)
(PCB only)
CAA - NESHAP
(Asbestos only)
Section 7.2. starting on page 61
Section 7.3.1, starting on page 75
Section 7.3.2, starting on page 81
Section 7.3.3, starting on page 84
Section 7.4, starting on page 88
Section 7.5, starting on page 92
Appendix D, Section I, starting on page 161
Appendix D, Section II, starting on page 171
Appendix D, Section III, starting on page 177
Appendix D, Section IV, starting on page 180
Appendix D Section V, starting on page 183
Appendix D, Section VI, starting on page 186
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                         CERCLA (Superfund)
7.2    CERCLA

Superfund is the name given to the environmental program established to address
hazardous waste sites under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (CERCLA — pronounced SIR-kla). Superfund
sites are often excellent candidates for reuse because they have been extensively
 It should also be noted that EPA
 CERCLA cleanups are conducted at
 a relatively small percentage of all
 known contaminated properties.
 EPA is most likely to take CERCLA
 action at high priority sites where the
 cleanup cannot be adequately
 addressed by state or local
investigated, remediated, and publicly vetted in
a transparent, well-documented process. This
helps to minimize uncertainty regarding the
environmental conditions, which generally
enhances the marketability of a property.  In
addition, the 2002 Brownfields Amendments to
CERCLA and efforts by EPA to clarify and
communicate CERCLA liability protections
                                     have provided municipalities with important
tools for understanding and managing potential CERCLA liability.  It should also be
noted that federal CERCLA cleanups are conducted at a relatively small percentage of all
known contaminated properties. EPA is most likely to take CERCLA action at high
priority sites where the cleanup cannot be adequately addressed by state or local
programs.
7.2.1  Overview of CERCLA

CERCLA was enacted by Congress on
December 11, 1980 in the wake of the
discovery in the 1970s of toxic waste
dumps threatening public health.  The
law provides EPA broad federal
authority to respond to releases or
threatened releases of hazardous
substances and pollutants and
contaminants that may endanger public
health or the environment.  It also allows
EPA to compel responsible parties to
perform cleanups or to reimburse the
government for cleanups performed by
EPA. CERCLA further establishes a
trust fund (known as the "Superfund") to
provide for cleanup (e.g., when no
responsible party can be identified). The
trust fund was initially funded  through a
tax on the chemical and petroleum
industries authorized by CERCLA. That
tax authorization has since expired.
Currently, CERCLA cleanups  that are
               Key CERCLA Terms
   The following are not legal definitions. They are
   intended to provide a basic understanding of the
   general meaning and usage of these terms.

   Hazardous substances are those substances
   specifically designated as hazardous under CERCLA
   and those which are incorporated from other statutes,
   including RCRA hazardous wastes and hazardous
   constituents. CERCLA excludes petroleum from the
   definition of hazardous substances.

   A Potentially Responsible Party (PRP) refers to an
   entity that may have CERCLA liability for a site.

   [Note: Responsible party is used generically
   throughout this workbook to refer to an entity that has
   or may have liability under any federal or state
   statute.]
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not paid for by the responsible parties are funded by Congressional appropriations to
EPA (these are generally referred to as "fund-lead" cleanups).

EPA is authorized to implement CERCLA in all 50 states and U.S. territories. Under
CERCLA, EPA involves states and ensures community involvement.  Superfund site
identification, monitoring, and response activities in states typically are coordinated with
the state environmental protection or
waste management agencies.
The Superfund cleanup process is very
comprehensive. CERCLA authorizes
two general kinds of response actions:

  • Removal Actions generally are
    shorter-term actions taken to clean
    up or address releases

  •  Remedial Actions generally are
     longer-term actions that are
     designed to significantly reduce the
     dangers associated with releases or
     threats of releases of hazardous
     substances that pose an
     unacceptable risk to human health
     or the environment. These actions
     normally are conducted only at
     sites listed on EPA's National
     Priorities List (NPL) (See text box
     this page).
                                                    The National Priorities List
The National Priorities List is a list of EPA's national
priorities among the known releases or threatened
releases of hazardous substances, pollutants, or
contaminants throughout the United States. Generally
speaking, it includes the most seriously contaminated
sites identified for long-term cleanup. The listing
process is governed by statute and regulation.
When EPA proposes to add a site to the NPL, the
Agency engages in a formal rule-making process
which includes public notice in the Federal Register
and a period  of time during which any member of the
public may comment on the proposed listing. In
addition to notice in the Federal Register, EPA
generally issues notice of the public comment period
to the community through local media resources.
EPA must respond  to all public comments received
during the comment period.  Once a site is listed on
the NPL, EPA typically issues fact sheets or flyers to
provide important information to the community in the
vicinity of the site.
The blueprint for the Superfund program is the National Oil and Hazardous Substances
Pollution Contingency Plan (NCP), a regulation federal agencies use when responding to
hazardous substance releases.

Additional information about the Superfund program is available on EPA's Web site at:
www.epa.gov/superfund. For information concerning Superfund liability issues and
enforcement, visit EPA's Superfund enforcement Web site at:
www.epa.gov/compliance/cleanup/superfund/index.html. Superfund enforcement policy and
guidance documents, arranged by topic, are available at:
http://cfpub.epa.gov/compliance/resources/policies/cleanup/superfund.  A fact sheet titled
CERCLA Liability and Local Government Acquisitions and Other Activities (December
2010) is available at:
www.epa.gov/compliance/resources/publications/cleanup/brownfields/local-gov-liab-acq-fs.pdf.
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7.2.2  Liability under CERCLA

    Under CERCLA, EPA has the
   authority to issue administrative
orders to parties to compel  cleanup for
 any release of hazardous substances
 and to enter into settlements to obtain
their cooperation in cleaning up a site.
   The statute explicitly names four
  groups as potentially liable for the
          costs  of a cleanup:

  •  Owners or operators of a facility

  •  Owners or operators of a facility,
     if they  owned or operated the
     property at the time of disposal
     of a hazardous substance

  •  Those who arranged for
     treatment or disposal of
     hazardous substances at a
     facility (in most cases, the
     generators)

  •  Transporters of hazardous
     substances who selected the
     disposal site

CERCLA liability is retroactive, joint
and several, and strict.  Retroactive
liability means that parties may be
held liable for releases that occurred
prior to the enactment of the statute in
1980.  Joint and several liability
means that any one potentially responsible party may be held liable for the entire cleanup
of the  site. Strict liability means that liability is without regard to fault or intent.  If a
party falls into one of the four named categories in the statute,  the party is liable whether
or not  its actions were consistent with industry standards and whether or not its actions
were in violation of any existing law.  However, defenses to and exemptions from
liability are discussed in Section 7.2.3.
EPA has developed an array of enforcement tools to achieve cleanup at Superfund sites.
Those  tools include administrative orders, consent orders, consent decrees, and other
types of settlement documents.  When potentially responsible parties cannot be easily
identified or located or when they are not able to contribute resources, EPA may clean up
the site itself. If EPA performs the cleanup, EPA may act to recover its costs from
responsible parties once the response action has been completed.
          Assessing CERCLA Liability
                Key Questions
The following key questions related to CERCLA liability
are addressed further in Appendix D.
•   Could the municipality incur liability under CERCLA
    by acquiring or leasing a property?
•   Could the municipality be liable under CERCLA for
    contamination that originates from an off-property
    source?
•   How does sub-dividing or parceling a CERCLA site
    affect liability under CERCLA?
•   Even if the municipality is not liable under CERCLA
    for a particular property, could it be responsible for
    maintaining institutional controls, engineering
    controls, or operating on-going treatment systems if
    it acquires or leases the property?
•   Even if the municipality is not liable under CERCLA
    for a particular property, could it be responsible for
    reimbursing EPA for "unrecovered" CERCLA
    response costs if Superfund liens have been placed
    on the property?
•   Could the municipality incur liability under CERCLA
    by performing environmental investigations,
    cleanups, building demolition, or physical
    improvements on a property it does or does not own
    or lease?
•   Are municipalities protected from third parties
    seeking to recover costs they spent to perform
    CERCLA environmental investigations and cleanup
    involving the property?
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7.2.3  CERCLA Liability Defenses, Exemptions, and Policies

7.2.3.1    General Discussion
As described in Section 7.2.2, owners of property as well as persons who were owners at
the time of the disposal of hazardous substances on the property may be liable under
CERCLA for the costs of the cleanup of the property.  In order to assess its potential legal
risk under CERCLA, a municipality must understand the statutory provisions that allow it
to acquire property without incurring CERCLA liability. An important potential benefit
of CERCLA liability protections is possible eligibility for federal brownfields grant
funding (i.e., potentially liable parties under CERCLA are generally not eligible for
brownfields funding).  CERCLA liability  protections will be discussed in some detail
below; however, it may be useful to first highlight some general points.
First and foremost, a municipality
should never consider acquiring any
property without conducting due
diligence on that property prior to
acquisition (for more on due diligence,
see Chapter 4).  There are a number of
important risk management reasons
for conducting due diligence. For
example, due diligence allows a
municipality to determine what is
known about the extent of
contamination  on a particular property
and to consider the long-term
obligations necessary to protect public
health and the environment.
     CERCLA Provision
"Involuntary Acquisition by a
Municipality" Exclusion
Bona Fide Prospective
Purchaser
Third Party Defense ("Innocent
Landowner")
                                      Contiguous Property Owner
                                                                 Is Ml Required?
                                                                      No, but
                                                                   recommended
                                                                       Yes
                                                                       Yes
                                 Yes
                                      Figure 7.2 - CERCLA provisions requiring AAI
                                      prior to acquisition
Also, due diligence is an important
concept under CERCLA. Most of the
liability protections under CERCLA
require that all appropriate inquiries be
performed prior to the acquisition of
property (for more on all appropriate
inquiries see Section 4.7.1).  Figure 7.2 is a summary of which CERCLA provisions
discussed in this chapter specifically require that all appropriate inquiries be conducted
prior to property acquisition to qualify for protection from liability under CERCLA.
The bona fide prospective purchaser provision enacted in 2002 represents a significant
change in CERCLA.  It allows a party to purchase property with knowledge of
contamination and not be held liable for past contamination under CERCLA as long as
that party meets the criteria described in the bona fide prospective purchaser provision.
The bona fide prospective purchaser provision is discussed in greater detail below.
Several CERCLA liability protections delineate requirements, often broken into two
categories referred to as threshold criteria and continuing obligations, which must be
met to maintain the liability protection. Threshold criteria are the requirements that must
be met in order to "qualify" for the liability protection, while continuing obligations are
those requirements that may require additional affirmative steps to ensure that the
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protections survive over time. Continuing obligations might include requirements to
provide access needed to implement and maintain EPA response actions, and to take
reasonable steps to prevent releases and limit exposure to previous releases. Threshold
conditions and continuing  obligations applicable to specific CERCLA provisions are
described below.  Again, all threshold conditions and continuing obligations must be met
if the municipality is to be protected from CERCLA liability. CERCLA landowner
liability protections are also discussed at:
www.epa.gov/compliance/cleanup/revitalization/landowner.html.

7.2.3.2   Specific CERCLA liability protections
This section discusses three specific CERCLA liability protections that are especially
relevant to municipalities:  (1) involuntary acquisition of property by a municipality; (2)
bona fide prospective purchasers provision; and (3) the eminent domain provision of the
third party defense.  A fourth provision, often referred to as an enforcement bar, is
discussed in Section 7.2.4.  The method of property acquisition will effect which of those
protections will apply.  See Table 7.3.

Table 7.3 -Applicability of CERCLA Liability Provisions Based on the Method of Acquisition
• - Could apply to local governments
o - Could apply to local governments under certain circumstances
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1. Involuntary acquisition of property by a municipality
The definition of an owner or operator in CERCLA excludes states or municipalities
acquiring property involuntarily. Involuntary acquisitions include property acquisitions
through bankruptcy, tax delinquency, abandonment, or other circumstances in which the
municipality is acquiring title by virtue of its sovereign function.
The exclusion does not apply to any municipality that has caused or contributed to the
release or threatened release of hazardous substances before or after acquisition of the
property. Property donated to a municipality, and property acquired by eminent domain,
are not considered involuntary acquisitions (however, other forms of liability relief may
apply to such acquisitions).
The statute does not require the  owner to conduct all appropriate inquiries to receive the
benefit of the exclusion from liability for involuntary acquisitions as set forth in the
definition of owner or operator.  However, there are many other important reasons to
perform some level of due diligence prior to property acquisition, leasing, or taking any
other property recovery actions.
Involuntary acquisition is described further in Section EL C.I of EPA's Revitalization
Handbook.  Also, refer to EPA's fact sheet The Effect ofSuperfund on Involuntary
Acquisition of Contaminated Property by Government Entities (December 1995)
(www.epa.gov/compliance/resources/policies/cleanup/superfund/fs-involacquprty-rpt.pdf).

2. Bona Fide Prospective Purchaser (BFPP) Provision
The BFPP provision was added  to CERCLA through the 2002 Brownfields Amendments
and applies even to purchasers who knew or had reason to know of contamination on the
property. The BFPP provision protects parties from CERCLA liability as long as they
meet certain threshold conditions and continuing obligations.  The threshold conditions
are:

    •   The purchaser must conduct all appropriate inquiries prior to acquiring the
       property;

    •   The property must be acquired after January 11, 2002;

    •   All  disposal of hazardous substances must have occurred prior to the acquisition;
       and

    •   The purchaser must not be potentially liable or have an affiliation with a party that
       is potentially liable for response costs at the facility.

The purchaser also must meet certain continuing obligations:

    •   Not impeding the performance of a response action or natural  restoration;

    •   Complying with land use restrictions and not impeding the effectiveness and
       integrity of institutional controls;

    •   Taking reasonable steps  to prevent releases and to limit exposure to previous
       releases;

    •   Providing cooperation, assistance and access;
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    •   Complying with information requests and administrative subpoenas; and

    •   Providing legally-required notices.
As long as the acquisition occurs after January 11, 2002, the BFPP provision is available
to municipalities to provide CERCLA liability protection for acquisition methods that are
not considered involuntary acquisitions.
The BFPP provision is described further in Section III.A.3 of EPA's Revitalization
Handbook. Appendix A ("Common Elements Guidance") of the handbook provides a
detailed discussion of the threshold conditions and continuing obligation requirements.
The Common Elements Guidance is available at:
www. epa. gov/compliance/re source s/publications/cleanup/brownfields/handbook.
Because of the important role that leasehold interests can play in facilitating the cleanup
and reuse  of contaminated properties, EPA also has issued guidance explaining the
applicability of the BFPP liability protection to tenants.  The guidance addresses those
circumstances in which EPA may exercise its enforcement discretion not to enforce
against two categories of tenants. The guidance also discusses how EPA will treat those
tenants if the landlord loses its BFPP status during the tenancy.  The two categories of
tenants are:

    •   A tenant whose lease gives sufficient indicia of ownership to be considered an
       "owner" and who meets all of the statutory requirements regarding BFPPs

    •   A tenant of an owner who is a BFPP
EPA's decision not to enforce CERCLA liability does not preclude the risk of a third
party suit.
The guidance titled Enforcement Discretion Guidance Regarding the Applicability of the
Bona Fide Prospective Purchaser Definition in CERCLA ง101(40) to Tenants (January
2009) can be found at:  www.epa.gov/compliance/resources/policies/cleanup/superfund/bfpp-
tenant-mem.pdf. A frequently asked questions factsheet titled Enforcement Discretion
Guidance  Regarding the Applicability of the Bona Fide Prospective Purchaser Definition
in CERCLA Section 101(40) to Tenants: Frequently Asked Questions (November 2009),
is available at: www.epa.gov/compliance/resources/publications/cleanup/superfund/tenant-
bfpp-guide-ref.pdf.

 3. Third-Party Defense
CERCLA includes three statutory defenses to liability for cleanup costs: an act of God,
an act of war, and an act or omission of a third party — the so-called third-party defense.
Among other things, the third-party defense protects municipalities acquiring property
through escheat (i.e., the reversion of property to the state upon the death of the owner
when there are no heirs), or through the exercise of eminent domain authority.
The third-party defense is a somewhat complicated legal concept.  To take advantage of
the third-party defense, an owner must demonstrate that:

    •   The release of hazardous substances has been caused solely by an act of a third
       party who is not an employee or agent of the owner; and
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    •   The act resulting in the release of hazardous substances has not occurred in
       connection with a contractual relationship between the owner and third party (the
       term contractual relationship is defined below).
There are two additional requirements that then must be demonstrated:

    •   The owner has exercised due care with respect to the contamination; and

    •   The owner has taken precautions against foreseeable acts of the party that caused
       the contamination and against foreseeable consequences of those acts.

For the purpose of the third-party defense, CERCLA defines contractual relationship to
include documents transferring title or possession of real property. Thus, in general, a
purchaser of property is not entitled to use the third-party defense. However, there are
several key exceptions to this definition that a municipality should be aware of (see
following paragraph).  For properties acquired after January 11, 2002, the BFPP
provision generally is an easier standard to meet since it applies to purchasers who
knowingly acquired contaminated property.
There are three exceptions to that general definition of contractual relationship. In order
to meet any of these exceptions, the property on which the facility is located must have
been acquired after the disposal or placement of the hazardous substances on, in, or at the
facility. Then, the "defendant" making the third-party defense must  establish one of the
following:

    •   At the time the defendant acquired the facility the defendant did not know and had
       no reason to know that any hazardous substance which is the subject of the release
       or threatened release was disposed of on, in, or at the facility;

    •   The defendant is a government entity which acquired the facility by escheat, or
       through any other involuntary transfer or acquisition, or through the exercise of
       eminent domain authority by purchase or condemnation; or

    •   The defendant acquired the facility by inheritance or bequest.

For the above-mentioned defenses to liability, there are additional requirements that must
be met similar to those for a BFPP. Although a municipality might qualify for any of
those three defenses, in practice it is the second defense related to certain types of
government acquisitions that is most likely to be available to a municipality.
The third-party defense may be important to municipalities because it applies to eminent
domain takings that are not identified as involuntary acquisitions under the exclusion
found in the owner/operator definition.  If the municipality acquires the property through
eminent domain after the disposal or placement of hazardous substances at the facility, it
does not have to show that it had no knowledge of the contamination at the time of
acquisition.  However, it does have to meet the other statutory requirements of the
defense.
To protect certain parties from liability,  CERCLA contains both liability exemptions and
affirmative defenses to liability. A party who is exempt from CERCLA liability with
respect to a specific act cannot be held liable under CERCLA for committing that act.  A
party who believes that it has an affirmative defense to CERCLA liability must prove that
defense by a preponderance of the evidence. A municipality that acquires contaminated
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property involuntarily may be exempt from CERCLA liability as an owner/operator; that
municipality may also have the somewhat redundant option of arguing the third part
defense as an affirmative defense.
Additional discussion of the third-party defense can be found in  Section III.A.2 and
Appendix A (Common Elements Guidance) of EPA's Revitalization Handbook. Due to
the complexity of the third-party defense, a municipality should  seek legal counsel in
interpreting whether it applies to the acquisition being considered.

4. CERCLA Liability Provisions and Policies Applicable to Off-Site Sources of
   Hazardous  Substances
A municipality may find that property
under its consideration is impacted by
contamination that originates from an
off-site source. Most often, this
situation occurs when contaminated
ground water flows beneath a site, but it
may also occur due to the migration of
contaminants in surface water and air.
As explained below, the 2002
Brownfields Amendments offer limited
liability protection to contiguous
property owners whose property is
impacted by off-site sources. EPA's
"Contaminated Aquifer" Policy also
addresses liability associated from
contamination in ground water
originating solely from an  off-site
source.
Generally speaking, landowners
qualifying for contiguous property
owner liability protection would not be
responsible under CERCLA for the
cost of cleaning up a groundwater
plume solely originating from an off-
site source (see text box on this page).
But municipalities considering the
acquisition or leasing of property
underlain by a contaminated
groundwater plume from an off-site
source must understand how the use
and management of the property could
affect eligibility for the statutory
liability protections offered in the
contiguous property owner and BFPP provisions of CERCLA and in EPA's
"Contaminated Aquifer" Policy.  As an example, if a municipality operates an onsite
groundwater well, the operation of the well could influence the migration of
If a Property is Underlain by Contaminated
Ground Water Emanating from a Source on a
Contiguous or Adjacent Property, Do
"Reasonable Steps" Include Remediating the
Groundwater?
Generally not. Absent exceptional circumstances, EPA
will not look to a landowner whose property is not a
source of a release to conduct ground water
investigations or install ground water remedial action
systems. Since 1995, EPA's policy has been that, in
the absence of exceptional circumstances, such a
landowner did not have "to take any affirmative  steps to
investigate or prevent the activities that gave rise to the
original release" in order to satisfy the innocent
landowner due care requirement. See May 24,1995
"Policy Toward Owners of Property Containing
Contaminated Aquifers" (1995 Contaminated Aquifers
Policy).  In the Brownfields Amendments, Congress
explicitly identified this policy in noting that reasonable
steps for a contiguous property owner "shall not require
the person to conduct ground water investigations or
install ground water remedial action systems," except in
accordance with that policy. See CERCLA
ง107(q)(1)(D). The policy does not apply "where the
property contains a ground water well, the existence or
operation of which may affect the migration of
contamination in the affected area." 1995 Contaminated
Aquifers Policy, at 5. In such instances, a site-specific
analysis should be used to determine reasonable steps.
In some instances, reasonable steps may simply mean
operation of the ground water well consistent with the
selected  remedy.  In other instances, more could be
required.
Source: EPA's "Common Elements Guidance."
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contaminants in the groundwater. Under certain circumstances, the operation of that well
could result in the municipality incurring liability for cleanup.

4a. Contiguous Property Owner Provision

The "contiguous property owner" provision was added to CERCLA through the 2002
Brownfields Amendments.  It provides another exemption from owner/operator liability
under CERCLA. The liability protection applies to owners of land contaminated by a
release or threatened release of hazardous substances from property owned by someone
else. The landowner cannot qualify for this protection if the landowner knew or had
reason to know at the time of acquisition that the property was or could be contaminated
by releases of hazardous substances from property owned by someone else.  Again, to
benefit from the liability protection, threshold conditions and continuing obligations are
applicable. The following conditions must be met:

   •   The landowner does not own the property from which there  is a release or
       threatened release;

   •   The landowner's property is contiguous to or otherwise similarly situated with
       respect to the property from which there is a release or threat of release of
       hazardous substances;

   •   The landowner did not cause, contribute or consent to the release or threatened
       release;

   •   The landowner is not liable or affiliated with any other person potentially liable
       for the response costs at the site. An affiliation includes any direct or indirect
       familial relationship or any contractual, corporate, or financial relationship (other
       than one that is created by a contract for the sale of goods or services).  An
       affiliation may also be created by the reorganization of a business entity that was
       potentially liable;

   •   The landowner takes reasonable steps to stop any continuing releases; to prevent
       any future releases; and to prevent or limit exposure to any hazardous substances;

   •   The landowner provides full cooperation and access to those authorized to
       conduct response actions at the site  including the access necessary to install,
       operate, and maintain any partial or complete response action;

   •   The landowner complies with any land use restrictions established in connection
       with the response action at the site;

   •   The landowner does not impede the effectiveness or integrity of any institutional
       controls established in connection with the response action at the site;

   •   The landowner complies with any information requests or administrative
       subpoenas;

   •   The landowner provides all legally required notices with respect to the discovery
       or release of hazardous  substances at the site; and

   •   The landowner conducted all appropriate inquiries as  it is defined under CERCLA
       with respect to the property at the time at which the landowner acquired the
       property.
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Note that this defense differs from the BFPP defense because a BFPP may know of
contamination at the time of acquisition of the property.  In contrast, if a landowner
discovers or knows through all appropriate inquiries or otherwise that contamination has
migrated onto the property, and has this information at the time of acquisition, the
contiguous property owner defense is not available.  However, CERCLA ง 107(q)(l)(C)
explicitly recognizes that the landowner may still qualify as a BFPP even if they do not
meet all of the requirements for a contiguous property owner.
EPA believes that Congress did not intend for this provision to be limited only to
properties located immediately adjoining the source property.  Therefore, through the
exercise of its enforcement discretion, EPA will consider extending this liability
protection on a case-specific basis to otherwise eligible non-adjoining properties.
EPA's Revitalization Handbook discusses the contiguous property owner provision in
Section III. A.4.ii and in the "Common Elements Guidance" included as Appendix A.
Two other useful EPA resource documents, "Interim Enforcement Discretion Guidance
Regarding Contiguous Property Owners" (January 13, 2004) and the "Contiguous
Property Owner Guidance, Reference Sheet"  are available online at:
www.epa.gov/compliance/resources/policies/cleanup/superfund/contig-prop .pdf and
www.epa.gov/compliance/resources/policies/cleanup/superfund/contig-prop-faq.pdf.
respectively.  In addition, an EPA memo, Model CERCLA Section 107(q)(3) Contiguous
Property Owner Assurance Letter, dated November 9, 2009, discusses the factors that
EPA will consider in issuing assurance letters and provides a model assurance letter.
This memo is available at:
www .epa. gov/compliance/re source s/policies/cleanup/superfund/cpo -assure-mod-ltr-mem .pdf.

4b. Contaminated Aquifer Policy

Well before the enactment in 2002 of the CERCLA statutory provision on contiguous
properties, EPA issued its Final Policy Toward Owners of Property Containing
Contaminated Aquifers.  The policy, issued in 1995, was directed at landowners where
groundwater contamination had migrated from a source outside their property. More
specifically, the policy applied to hazardous substances contained in groundwater solely
as the result of subsurface migration from a source located on another property where the
landowner did not cause, contribute to, or aggravate the release of any hazardous
substances.
Consistent with that policy, EPA has considered de minimis settlements if such a
landowner is threatened with lawsuits by third parties. A de minimis settlement under
CERCLA generally refers to a settlement between EPA and parties who are responsible
for only a comparatively small amount and comparatively low toxicity of hazardous
substances at a Superfund site. Because de minimis settlements are resource intensive for
the government, EPA utilizes that settlement tool only under compelling circumstances.
These circumstances are described in the documents referenced below.
A detailed discussion of the applicability of the final policy is found in  Section III.AAi
of EPA's Revitalization Handbook, and in the policy issued in May,  1995, which is
available at:  www.epa.gov/compliance/resources/policies/cleanup/superfund/contamin-aqui-
rpt.pdf and in a fact sheet issued in November, 1995, available at:
www.epa.gov/compliance/resources/policies/cleanup/superfund/contamin-aqui-fs.pdf.

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7.2.4  State Voluntary Cleanup Programs

State response programs, commonly referred to as voluntary cleanup programs (VCPs),
play a significant role in assessing and cleaning up brownfields and other lower-risk sites.
As Congress recognized in the legislative history of the 2002 Brownfield Amendments to
                                CERCLA, "[t]he vast majority of contaminated sites
 As Congress recognized in the    across the Nation will not be cleaned up by the
 legislative history of the 2002     Superfund program. Instead, most sites will be
 Brownfield Amendments to       cleaned up under State authority."  Links to state
 CERCLA, "[t]he vast majority of   VCPs can be found at:
 Contaminated Sites across the     www.epa.gov/swerosps/bf/state tribal.htm#links.
 Nation will not be cleaned up by
 the Superfund program. Instead,   EPA has historically supported, and continues to
 mosf sites will be cleaned up      support, State VCPs through grant  funding to
 under Sfafe authority."           establish and enhance VCPs and non-binding
                                memoranda of agreements with individual states that
include general enforcement assurances to encourage the assessment and cleanup of sites
addressed under VCP oversight.  This approach to VCPs is codified as  CERCLA Section
128 by the 2002 Brownfields Amendments.  Section 128(b) limits federal enforcement
actions under CERCLA Sections 106 and 107 at "eligible response sites" (this is a site
similar to a "brownfield site" and defined at CERCLA ง101(41)) where a person is
conducting or has completed a cleanup in compliance with a state response program.
That limitation is often referred to as an enforcement bar.  There are significant
exceptions to the enforcement bar, including when a state requests EPA assistance in the
performance of a response action; when contamination has migrated across  state lines or
onto property subject to the jurisdiction of the federal government; when  contamination
presents an imminent and substantial endangerment to public health, welfare, or the
environment; or when previously unknown information indicates that further remediation
is necessary to protect public health, welfare, or the environment. See CERCLA ง
128(b).  For additional discussion of eligible response sites, see EPA's March 6, 2003
memorandum titled Regional Determinations Regarding Which Sites are Not  "Eligible
Response Sites" Under CERCLA Section 101(41)(C)(i), as Added By the Small Business
Liability Relief and Brownfields Revitalization Act
(www.epa.gov/compliance/resources/policies/cleanup/superfund/reg-determ-small-bus-
mem.pdf).

7.2.5  Other CERCLA Considerations

There are a variety of other CERCLA liability considerations that should be taken into
account in assessing environmental liability. These include potential liability for
maintaining the integrity of institutional and engineering controls (see Section 4.7.7); the
existence, perfection, enforcement, or resolution of Superfund liens under CERCLA
Sections 107(1) or 107(r); and protection from third-party lawsuits, such as those by
responsible parties seeking contribution under CERCLA ง113 to recover costs they spent
to perform CERCLA environmental investigations and cleanup involving the property.  A
number of these issues are discussed in Appendix D.  In addition, lenders may be
concerned about potential liability under CERCLA if they are involved in the financing
of contaminated properties (See text box on the next page).
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                                Lender Liability Considerations
If private financing is needed by a municipality or developer for a redevelopment project, the municipality
should consider what effect the environmental and regulatory status may have on that party's ability to
secure the funding.  Although in recent years the lending community has become far more comfortable
dealing with contaminated properties, the level of sophistication and willingness to take on these projects
varies somewhat among lenders.  Lenders' concerns will often stem from the uncertainties that are
associated with the environmental conditions, particularly higher-than-anticipated cleanup costs or
extended delays due to environmental investigations, permitting, or cleanup. Specific concerns may
include:
  • Determining the property's value as loan collateral
  • Project viability  and the ability of the borrower to repay loans or continue with the project in the face of
    unanticipated environmentally-related problems
  • Liability under CERCLA or other federal and state environmental laws in the event of a foreclosure,
    and the obligations to maintain  the property and address immediate health and safety concerns
  • Ability to sell the property following foreclosure

A lender's willingness to finance a project, as well as the financing  rates and fees, will be influenced by the
level of certainty that the party seeking the loan can bring to the negotiating table.  A development
proposal that identifies and effectively manages the potential project risks will have an important
advantage.

Municipalities should be aware that specific CERCLA liability protections are available to lenders that hold
ownership in a CERCLA facility primarily to protect their security interest in the facility, providing they do
not "participate in the management  of the facility." The CERCLA lender liability protections are described
in CERCLA 101(20) and Sections III.D of EPA's Revitalization Handbook, and a fact sheet titled "CERCLA
Lender Liability Exemption:  Updated Questions and Answers"  (July 2007), is available at:
www.epa.gov/oecaerth/resources/publications/cleanup/superfund/factsheet/lender-liab-07.fs.pdf.

The Underground Storage Tank (UST) Lender Liability Rule also provides certain exemptions to lenders.
These  are discussed in Section III.D.3 of EPA's Revitalization.  Further information on the UST rule is also
available at: www.epa.gov/oust/fedlaws/280  i.pdf.
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                            RCRA (General)
7.3    RCRA
The Resource Conservation and Recovery Act (RCRA — pronounced "rick-rah")
regulates the management of solid and hazardous waste and underground storage tanks
(USTs). In many respects, RCRA serves as a compliment to CERCLA by helping to
ensure the proper management of wastes that might otherwise result in releases requiring
cleanup under CERCLA.
RCRA is composed of three primary programs (or RCRA Subtitles) which may affect
redevelopment projects involving contaminated property:

   •   The hazardous waste program (Subtitle C), which establishes a federal program to
       manage hazardous waste from "cradle to grave," i.e., from generation to final
       disposition, and a "corrective action" program to clean up contamination caused
       by  hazardous waste treatment, storage or disposal.

   •   The solid waste program (Subtitle D), which establishes requirements for the
       management of non-hazardous solid wastes, such as household garbage and
       nonhazardous industrial waste, including minimum requirements for municipal
       landfills.

   •   The UST program (Subtitle I), which establishes requirements for the
       management of USTs that contain petroleum or hazardous substances (as  defined
       under CERCLA).
It is important to recognize that a municipality may become subject to RCRA for a
contaminated facility by virtue of its ownership or other involvement with the facility.
Because RCRA, like many other state and federal environmental statutes, is a complex
law with an equally complex body of regulations, municipalities are strongly encouraged
to seek experienced counsel and technical consultants before engaging in activities for
which RCRA might be applicable.
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              RCRA (Subtitle C) - Hazardous Waste
7.3.1  RCRA (Subtitle C) - Hazardous Waste

7.3.1.1 Overview of RCRA (Subtitle C)

RCRA (Subtitle C) regulates the generation; transportation; and treatment, storage, and
disposal of hazardous waste.  The 1984 amendments to RCRA known as the Hazardous
and Solid Waste Amendments (HSWA, pronounced "hiss-wa"), among other things,
gave EPA additional authority to require corrective action at RCRA treatment, storage
and disposal facilities (TSD facilities) to investigate and clean up contamination caused
by hazardous waste treatment, storage, or disposal.

RCRA (Subtitle C) facilities generally fall into three categories: TSD facilities,
generators, and transporters.

TSD Facilities
Owners/operators of operating facilities at which treatment, storage or disposal of
hazardous waste occurs generally must obtain a permit for those activities unless the
owners/operators qualify for interim status or are otherwise exempt from EPA's
permitting requirements. It is useful to distinguish between facilities that operate as
commercial TSD facilities from those that undertake hazardous waste management
activities in the general course of operating their principal business. Commercial TSD
facilities accept hazardous wastes that are generated at an off-site location and treat, store
or dispose of these  hazardous wastes  as their primary function. Commercial TSD
facilities are relatively few in number and a municipality would not typically be involved
in their redevelopment. Far more common are manufacturing facilities that are classified
as TSD facilities because they generate spent solvents, plating sludge, and other
hazardous wastes and store or otherwise manage them prior to sending them to a
commercial TSD facility.  In some cases, these manufacturing facilities may also treat or
dispose of their hazardous waste onsite.  Occasionally, a manufacturing TSD facility may
also manage hazardous waste from other facilities owned by the same parent company.

In addition to these operating TSD facilities, there are many non-operating facilities at
which treatment, storage, or disposal  of hazardous waste previously occurred.  Some of
these facilities  have hazardous waste  management units (see text box of key RCRA
terms) that have not yet been thoroughly cleaned up. As will be discussed in the
following section, operating and non-operating TSD facilities are subject to cleanup
under both closure/post-closure and  corrective action requirements.
RCRA TSD facilities must be registered with EPA and the state regulatory agency (if the
state is authorized). Currently there are about 8,000 known TSD facilities nationwide.
These TSD facilities are identified  at  EPA's Web site at: www.epa.gov/correctiveaction.
TSD facilities may  additionally be  regulated as generators.
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          Key RCRA (Subtitle C) Terms
Generators
Some facilities generate hazardous waste, but do not meet the definition of a TSD facility
and therefore do not require a RCRA hazardous waste management permit for those
activities. For example, the storage of hazardous waste for less than 90 days generally
does not require a RCRA hazardous waste management permit provided certain
conditions are met. Generators are none-the-less subject to specific requirements that
must be complied with, such as
recordkeeping, manifesting, labeling
of containers. See generator
requirements at 40 CFR Part 262.
EPA or the authorized state              j^e following are not legal definitions. They are intended
regulatory agency can identify           to provide a basic understanding of the general meaning
whether a facility is currently            and usage of these terms.
registered as a hazardous waste
"generator."  It is important to note
that a municipality may become a
generator if it produces a hazardous
waste or causes a hazardous waste to
become subject to regulation under
Subtitle C — even if the facility was
not previously operating as a
generator.  This might occur, for
example, in the course of conducting
a cleanup at a facility (e.g., the
generation of a hazardous residue
from a treatment system).  Further, a
generator may become subject to
RCRA (Subtitle C) requirements as a
TSD facility  if treatment, storage or
disposal  occurs  or previously
occurred at the facility.
Hazardous waste refers to those wastes required to be
managed under RCRA (Subtitle C) due to toxicity or other
specified hazardous properties (see 40 CFR ง261).

Hazardous constituents are chemical compounds
whose presence resulted in certain categories of wastes
being classified as hazardous under RCRA (Subtitle C).
The presence of these hazardous constituents in soils,
water, ground water and air indicates a release that may
need to be addressed as part of closure/post-closure and
corrective action activities.  Hazardous constituents are
listed in Appendix VIII of 40 CFR ง261.

Hazardous waste management facilities, or more
commonly, TSD facilities (Treatment, Storage, and
Disposal), are facilities at which treatment, storage or
disposal of hazardous waste takes place. Owners and
operators of TSD facilities generally must obtain a permit
for those activities.

An interim status TSD facility is a TSD facility that has
not yet had  a final determination made on its hazardous
waste management permit.

A generator facility is a facility where hazardous waste is
generated and temporarily stored in a manner that does
not require a hazardous waste management permit.

A hazardous  waste management unit (HWMU) is an
area where treatment, storage, or disposal occurs (e.g.,
surface impoundment, waste pile).
Transporters
Transporters must be licensed to
transport hazardous wastes, and
municipalities would not generally
fall into that category. However, if
the municipality becomes a generator
it would be subject to certain RCRA
requirements that apply to the
transportation of hazardous waste
(such as, manifesting, labeling of
containers).  Before transporting
hazardous waste off-site, the municipality should contact EPA or the authorized state to
confirm the compliance  status of both the transporter and the TSD facility receiving the
waste.
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7.3.1.2 Cleanup and Management of RCRA (Subtitle C) Waste
This section generally describes the federal RCRA (Subtitle C) program and discusses
when cleanup may be required under that program. It is important to keep in mind that
this represents the minimum requirements. That is, if cleanup is required under the
federal RCRA program, it will also be required under an authorized state RCRA
program. It may be, however, that the authorized state program also mandates cleanups
in other circumstances or the program is otherwise broader in scope, or that the required
cleanup standards or program requirements are more stringent (See text box on this page)

Overview of RCRA  (Subtitle C) Cleanup Programs

 Under RCRA (Subtitle C) certain investigation and cleanup obligations categorically
apply to all RCRA (Subtitle C)  facilities. There are, however, some differences
depending on whether the facility is classified as a permitted TSD facility, interim status
TSD facility, or hazardous waste generator.
Again, these distinctions may not be as
relevant under certain authorized state
programs that impose enforceable cleanup
 Regulation Under Authorized State RCRA
          (Subtitle C) Programs
obligations on a broader array of
contaminated sites.
To understand how cleanup obligations
could apply to TSD facilities and
generators, it is necessary to consider the
requirements of the two RCRA (Subtitle C)
cleanup programs: closure/post-closure and
corrective action.
1  Closure/Post-Closure

Closure involves the decommissioning and
cleanup of HWMUs used to treat, store, or
dispose of hazardous waste (such  as a drum
storage area or a lagoon that was
historically used to settle metals out of
liquid waste). If the cleanup meets certain
standards, it is considered a clean closure
and no further cleanup of that HWMU
under RCRA (Subtitle C) is required.  If
not, the HWMU may need to be managed
as a "closed" disposal area and be subject
to post-closure requirements that typically
involve long-term monitoring and maintenance. TSD facilities and generators must meet
closure requirements for all HWMUs and for releases from those units.
2. Corrective Action
Permitted TSD facilities are also categorically subject to corrective action requirements.
This means that in addition to completing closure/post-closure activities, the
owner/operator of a permitted TSD facility must address all routine and systematic
When a municipality is considering its
potential RCRA (Subtitle C) liability in a
state that EPA has authorized to
implement a state RCRA (Subtitle C)
program under RCRA ง 3006, it is
important to consult state-specific
requirements for cleaning up contaminated
properties.  As of 2009, EPA authorized
42 states to take the lead in implementing
the RCRA corrective action program,
which means that the state's authorized
RCRA requirements will apply.  A state
RCRA program can be no less stringent
than the federal requirements, although it
may be more stringent or broader in scope
than the federal requirements.  The EPA
corrective action Web  site noted on page
75 identifies which states are currently
authorized for the RCRA corrective action
program. Also, EPA's State Program
Summary, noted on page 2 summarizes the
various state programs.
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releases of hazardous waste and hazardous constituents within the facility boundaries
(i.e., facility-wide) and emanating from the facility.  It is important to emphasize that the
definition of facility includes more than just the HWMUs themselves. The
environmental investigation and any necessary corrective action will need to encompass
the entire facility. These activities take place under the oversight of EPA or the
authorized state.  Approximately 3,800
sites are undergoing corrective action;
more than three times the number of
sites found on the Superfund National
Priority List.  The following EPA Web
     Assessing RCRA (Subtitle C) Liability
               Key Questions
The following key questions related to RCRA liability are
addressed further in Appendix D.
site lists properties known to be subject
to corrective action:
www. epa. gov/correctiveaction.
A municipality acquiring or leasing a
TSD facility that completed these
required investigations will be able to
do so with considerable knowledge of
the environmental conditions of the
entire facility, at least as it applies to
hazardous wastes and constituents (i.e.,
non-RCRA wastes or materials may not
have been addressed). However, if
closure/post-closure and corrective
action requirements were not
completed, a municipality acquiring or
leasing  the property may, in certain
circumstances, need to conduct those
activities. Further, where hazardous
waste will remain onsite in landfills or
other disposal areas as part of the
"permanent" cleanup, the municipality
could potentially assume the
responsibility for monitoring and
maintaining those areas.  Unlike
CERCLA, where the responsible
parties (including previous owners)
may be obligated to perform these
activities as long as necessary to ensure
protectiveness, the RCRA closure/post-
closure obligations transfer to the party owning or operating the facility (EPA does have
enforcement authority under RCRA (Subtitle C) to compel past owners to remediate
contamination under certain circumstances).
Although corrective action is not categorically mandated for interim status TSD facilities
or generators as it is for permitted TSD facilities (unless closure/post-closure activities
require  a permit), RCRA provides other authorities that can be used to require
environmental investigations  or cleanup of RCRA-regulated waste if sufficient cause
     Could the municipality incur liability under RCRA
     (Subtitle C) by acquiring or leasing a RCRA
     (Subtitle C) facility?
     Could the municipality be liable under RCRA
     (Subtitle C) for contamination that originates from
     an off-site source?
     Could the municipality be liable under RCRA
     (Subtitle C) for hazardous waste or hazardous
     constituents that migrate off the RCRA (Subtitle
     C) facility?
     How does sub-dividing or parceling a RCRA
     (Subtitle C) facility affect liability under RCRA
     (Subtitle C)?
     Could a municipality be responsible for
     reimbursing EPA or the state for "unrecovered"
     response costs if it acquires or leases a RCRA
     (Subtitle C) facility?
     Could the municipality incur liability under RCRA
     (Subtitle C) by performing environmental
     investigations, cleanups, building demolition or
     physical improvements on a RCRA (Subtitle C)
     facility it does or does not own or lease?
     Are municipalities protected from past
     owners/operators or third parties seeking to
     recover costs they spent to perform
     environmental investigations and cleanup
     involving a RCRA (Subtitle C) facility?
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exists. Appendix D discusses such
authorities and common questions a
municipality might have relating to
RCRA (Subtitle C) liability.

Financial Assurance Requirements

 RCRA (Subtitle C) also requires
owners/operators of TSD facilities —
except for states and the federal
government — to provide financial
assurance to cover the estimated future
costs of closure/post-closure and, to the
extent applicable, corrective action
activities. Various mechanisms  can be
used to provide financial assurance.
These mechanisms can include
establishing an escrow account,
providing a letter of credit from  a
financial  institution, or, where the
owner/operator demonstrates financial
viability and adequate resources, a
corporate guarantee.  RCRA (Subtitle
C) also requires owners/operators of
TSD facilities to provide a specified
minimum amount of liability coverage
against sudden and, for certain types of
management units, non-sudden
accidental occurrences arising from
operations of the TSD facility. This
liability coverage may be through
insurance or other specific mechanisms.  The existence of these financial assurance and
liability coverage mechanisms can sometimes provide a source of funds that EPA or the
authorized state can access to address RCRA cleanup issues where, for instance, the
property becomes abandoned or the owners insolvent. On the other hand, municipalities
acquiring or leasing a TSD facility could be in the position of funding or providing
financial  assurance or liability coverage for any shortfalls that might exist.
Financial assurance requirements applicable to closure/post-closure and liability coverage
are specified in 40 CFR Part 264, Subpart H for permitted TSD facilities and Part 265,
Subpart H for interim status TSD facilities.  A useful reference for financial assurance for
corrective action is a September 30, 2003 EPA memorandum titled "Transmittal of
Interim Guidance of Financial Responsibility for Facilities Subject to RCRA  Corrective
Action" (www.epa.gov/waste/hazard/correctiveaction/resources/guidance/gen ca/finan9-03.pdf).
This memorandum also provides a general overview of financial assurance requirements
for closure/post-closure.
Before acquiring or leasing a RCRA (Subtitle C) facility, the  municipality should contact
EPA or the  authorized state to discuss the status of closure/post-closure and corrective
Remedial Action Plans: A Streamlined Process
for Corrective Action at RCRA (Subtitle C)
Facilities
Cleaning up RCRA facilities may involve the
management of large quantities of contaminated soils,
water, debris and sludge that contain hazardous
constituents. An owner/operator intending to treat, store
or dispose of these hazardous remediation wastes
(except when the treatment involves the combustion of
that waste) may obtain either a hazardous waste
management permit or a special form of permit referred
to as a Remedial Action Plan. The RAP is tailored more
specifically to the type of activities that would be
normally  associated with site remediation and can help
streamline both the permitting and remediation
processes. A RAP can be obtained for only those
portions of a facility meeting the definition of a
remediation wastes management site where the
treatment, storage or disposal of hazardous remediation
wastes will occur. A RAP can be issued at a permitted
TSD facility, interim status TSD facility,  a facility subject
to an EPA or state enforcement order or, importantly, for
voluntary cleanups.  A facility that becomes subject to
RCRA (Subtitle C) requirements solely by virtue of
cleanup activities will not be subject to the facility-wide
corrective action requirement. This, combined with the
streamlined permit and remediation process associated
with RAPs, creates an important incentive for self-
initiated cleanups. The requirements associated with
Remedial Action Plans are described in the Code of
Federal Regulations (CFR) Title 40 Part 270, Subpart H.
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action activities and also financial assurance/liability coverage.  If the owner/operator still
exists, it may be advisable to meet with them to negotiate the transfer or retention of
obligations for conducting closure/post-closure and corrective action activities.
To expedite corrective action and facilitate redevelopment of RCRA (Subtitle C)
facilities, EPA initiated a number of RCRA cleanup reforms and created the RCRA
Brownfields Prevention Initiative. Some of these efforts are described in the EPA fact
sheets: How Can the RCRA Brownfields Prevention Program Help You? and Applying
RCRA Cleanup Reforms to RCRA Brownfield (www.epa.gov/rcrabrownfields/pubs.htm').
One important reform that can help streamline the corrective action process is the
Remedial Action Plan (RAP) described in the text box on the previous page. Other
information on these initiatives can be found  at EPA's RCRA corrective action and
RCRA Brownfields Web sites: www.epa.gov/epawaste/hazard/correctiveaction and
www.epa.gov/rcrabrownfields, respectively. Guidance on RCRA corrective action can also
be found at: www.epa.gov/rcraonline.  Guidance on RCRA corrective action enforcement
can be found at:  http://crbub.epa.gov/compliance/resources/policies/cleanup/rcra/index.cfm.
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             RCRA (Subtitle D) - Hazardous Waste
7.3.2 RCRA (Subtitle D) - Solid Waste Management

7.3.2.1 Overview of RCRA (Subtitle D)

The term solid waste, as defined by the RCRA statute, is broad and includes not only
traditional nonhazardous wastes, such as municipal garbage and industrial wastes, but
also hazardous wastes. As discussed in Section 7.3.1, hazardous wastes are regulated
under RCRA (Subtitle C).  RCRA (Subtitle D) regulates the disposal of nonhazardous
                                             solid wastes and hazardous wastes
                                             exempted from the RCRA (Subtitle C)
                                             regulations (e.g., hazardous waste
                                             received from households and
Note: The following are not legal definitions. They    conditionally exempt small quantity
are intended to provide the reader with a basic
understanding of the general meaning and usage
of these terms.
        Key RCRA (Subtitle D) Terms
                                             RCRA does not authorize EPA to issue
                                             federal permits for the disposal of
                                             Subtitle D waste.  Instead, state and
                                             local governments are the primary
                                             planning, permitting, regulating,
                                             implementing, and enforcement
                                             agencies. However, EPA is required to
                                             establish the technical design and
                                             operating criteria that states must, at a
                                             minimum, include in their own
                                             regulations in order for a state Subtitle
                                             D program to be federally approved.
                                             States can also adopt more stringent
                                             requirements if they choose.  In states
                                             without an approved program, the
                                             federal criteria are self-implementing
                                             and the owner or operator of a solid
                                             waste disposal facility in those states
                                             must directly implement the applicable
                                             requirements. EPA can conduct
compliance inspections and enforcement of the federal minimum criteria if it has
determined a state's Subtitle D waste program to be inadequate.

7.3.2.2 Cleanup and Management of RCRA (Subtitle D) Waste
EPA promulgated federal criteria for nonhazardous solid waste disposal facilities in 40
CFR Part 257 and criteria that applies specifically to municipal solid waste landfill
(MSWLF) units in 40 CFR Part 258. Both types of facilities are described below.  A
solid waste disposal facility that does not comply with Parts 257 and 258 is considered an
open dump and is prohibited.  Solid waste disposal facilities that are in  compliance with
the applicable regulations are referred to as sanitary landfills. EPA also issued
Solid Wastes generally means garbage, refuse,
certain types of sludge, and other discarded
material resulting from industrial, commercial,
mining, and agricultural operations and from
community activities. Solid wastes are not limited
to wastes that are physically solid and can be
liquid, semisolid or containerized gases. See 40
CFR ง257.2.

Household wastes are wastes (including
garbage, trash and sanitary wastes in septic
tanks) that are derived from households (including
single and multiple residences, hotels, and
campgrounds).  See 40 CFR ง261.4(b)(1)

A person is a conditionally exempt small
quantity generator in a calendar month if they
generate 100 kilograms (about 220 pounds) or
less of hazardous wastes or 1  kilogram (about 2.2
pounds) or less of acutely hazardous wastes in
that calendar month. See 40 CFR ง261.5.
                                             generators).  See the text box on this
                                             page for a description of key terms.
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regulations under the Clean Air Act that
apply to emissions from large landfills. In
addition, certain criteria under the Clean
Water Act and other federal statutes may
be applicable.

1. Municipal Solid Waste Landfill
   Facility (MSWLF) Units

Most municipalities own or operate a
municipal  solid waste landfill. A
municipal  solid waste landfill facility unit
is a discrete area of land or an excavation
that: 1) receives household waste, and 2)
is not a land application unit, surface
impoundment, injection well, or waste
pile, as those terms are defined in 40 CFR
ง257.2.  A MSWLF unit also may receive
other types of RCRA Subtitle D wastes,
such as commercial solid waste,
nonhazardous sludge, conditionally
exempt small quantity generator waste,
and industrial solid waste.  In some states
and localities, however, additional
restrictions may be imposed on what can
be placed into landfills regulated under
Subpart D.  MSWLFs may be publicly or
privately owned.
All MSWLF units that received waste
after October 9, 1991 must comply with
the federal regulations in 40 CFR Part 258
or authorized state regulations; although
certain exceptions apply in limited
circumstances.  In addition, states with
federally approved Subtitle D programs
are allowed some flexibility in how they
administer those programs to take into
account site-specific conditions. Federal
MSWLF standards include:
   Assessing RCRA (Subtitle D) Liability
              Key Questions
 The following key questions related to liability under
RCRA (Subtitle D) are addressed further in
Appendix D
  •   Could the municipality incur liability under
      RCRA (Subtitle D) by acquiring or leasing a
      property containing solid waste disposal
      facilities?
  •   Could the municipality be liable under RCRA
      (Subtitle D) for releases from solid waste
      disposal facilities that originate from an off-
      site source?
  •   Could the municipality be liable under RCRA
      (Subtitle D) for releases from solid waste
      disposal facilities that migrate off the
      property?
  •   How does sub-dividing  or parceling a property
      affect liability under RCRA (Subtitle D)?
  •   Could a municipality be responsible under
      RCRA (Subtitle D) for reimbursing EPA or the
      state for "unrecovered"  response costs if they
      acquire or lease a property at which past
      cleanup involving solid  waste disposal
      facilities was conducted?
  •   Could the municipality incur liability under
      RCRA (Subtitle D) by performing
      environmental investigations, cleanups,
      building demolition or physical improvements
      on a property it does or does not own or
      lease?
  •   Are municipalities protected under RCRA
      (Subtitle D) from past owners/operators or
      third parties seeking to  recover costs they
      spent to perform environmental investigations
      and cleanup involving solid waste disposal
      facilities or releases from those facilities?
       Location restrictions
       Composite liners requirements
       Leachate collection and removal systems
       Operating practice
       Ground water monitoring requirement
       Closure and post-closure care requirements
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    •  Corrective action provisions
    •  Financial assurance

The Part 258 standards that apply to MSWLF units are discussed further in the EPA
documents: Introduction to Municipal Solid Waste Disposal Facility Criteria (September
2005) (www.epa.gov/solidwaste/infosources/pubs/hotline/training/mswlfD5.pdf ) and Criteria
for Solid Waste Disposal Facilities - A Guide for Owners/Operators (March 1993)
(www.epa.gov/epawaste/nonhaz/municipal/landfill/criteria/landbig.pdf).

2. Solid Waste Disposal Facilities

The requirements in 40 CFR Part 257 govern those solid waste disposal facilities and
practices that do not meet the definition of a municipal solid waste landfill. These
include waste piles, industrial nonhazardous waste landfills, surface impoundments, and
land application units.  The Part 257 regulations consist of two subparts.  Subpart A
contains requirements that apply to all solid waste disposal facilities not otherwise
regulated as a MSWLF under Part 258. Subpart A establishes criteria for siting,
designing,  and operating these facilities.  Subpart B provides disposal standards for non-
municipal non-hazardous waste disposal units that receive conditionally exempt small
quantity generator waste. These standards include conducting ground water monitoring
and implementing corrective action to address contamination resulting from releases from
the solid waste disposal facility.
When acquiring or leasing a property, a municipality should consider the possibility that
past disposal of solid waste may have taken place, particularly if the property has a
history of commercial or industrial use. The municipality could become responsible for
making those facilities compliant with RCRA (Subtitle D), including addressing any
releases that may have occurred.
Construction and Demolition (C&D) Landfills
A C&D landfill is an example of a solid waste disposal facility that may be particularly
relevant to redevelopment activities. These may exist as the result of past use of the
property, or the municipality or developer may consider creating one on the property to
manage C&D debris.  Municipalities should, however, first determine whether state or
local governments impose additional siting and other restrictions on this practice.
C&D landfills generally receive roadwork material, excavated material, demolition
waste, construction/renovation waste, and site clearance waste. A C&D landfill that
receives conditionally exempt small quantity generator waste would also need to comply
with Part 257, Subpart B.  A C&D landfill that accepts residential lead-based paint waste
and does not receive any other household waste would be subject to Part 257 instead of
the Part 258 standards for MSWLFs; however, lead-based paint waste from commercial
or industrial sites may in certain cases be  considered a hazardous waste subject to RCRA
(Subtitle C).  Similarly, demolition and renovation debris containing regulated asbestos
materials could be subject to the asbestos NESHAP (see Section 7.5).

There are a number of other materials often associated with C&D debris that could lead
to a solid waste disposal facility being out of compliance with Subtitle D.  This, and other
information pertinent to the disposal of C&D debris, is described in the EPA document,
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RCRA in Focus - Construction, Demolition, and Renovation (September 2004)
(www.epa.gov/epawaste/inforesources/pubs/infocus/rif-C&D.pdf).  Additional information on
RCRA (Subtitle D) is available at: www.epa.gov/solidwaste.nonhaz and the federal
regulations can be found at www.epa.gov/epawaste/laws-reg/regs-non-haz.htm.
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      RCRA (Subtitle I) - Underground Storage Tanks
7.3.3  RCRA (Subtitle I) - Underground Storage Tanks

7.3.3.1   Overview of RCRA (Subtitle I)
The RCRA (Subtitle I) program regulates certain underground storage tanks (USTs)
containing petroleum and hazardous substances. Not all tanks are regulated under the
Subtitle I program.  To meet the definition of an UST, at least 10% of the combined
volume of a tank and associated piping must be located underground. In addition,
Subtitle I excludes the following tanks, among others, from the definition of an UST:

   •   Farm and residential tanks of 1,100 gallons or less capacity holding motor oil
       used for noncommercial purposes
   •   Tanks storing heating oil used on the premises where it is stored
   •   Tanks on or  above the floor of underground areas, such as basements or tunnels
   •   Septic tanks  and systems for collecting storm water and waste water
   •   Flow-through process tanks

Furthermore, the Subtitle I regulations exclude certain USTs from its requirements.
Some examples of these excluded
USTs are: USTs of 110 gallons or less
capacity, emergency spill and overflow
USTs, and USTs that hold RCRA
hazardous wastes.  USTs that store all
other hazardous substances as defined
by CERCLA are, however, covered by
the Subtitle I program.  The UST
regulations impose certain
requirements that apply to hazardous
substance USTs that do not apply to
petroleum USTs, such as requiring
secondary containment.
Due in part to the large number of
regulated USTs and the diversity of the
regulated community, EPA has worked
with states (and local governments)
wherever appropriate to implement the
UST program. Accordingly, EPA has
approved most states' UST programs  to
operate in lieu of the federal UST
program.  In states that have not
received UST state program approval,
both state and federal UST regulations
apply.  The current status of UST state program approvals for each state is available at:
www. epa. gov/oust/wheruliv .htm.
  Underground Storage Tank Provisions of the
          Energy Policy Act of 2005
On August 8, 2005, President Bush signed the Energy
Policy Act of 2005. Title XV, Subtitle B of this act (titled
the Underground Storage Tank Compliance Act of
2005) contains amendments to Subtitle I of the Solid
Waste Disposal Act, the original statute that created the
underground storage tank (UST) program. The Energy
Policy Act significantly affects federal and state
underground storage tank programs,  requires major
changes to the programs, and is aimed at reducing
underground storage tank releases to our environment.
The Energy Policy Act contains provisions relating to:
operator training, inspections, compliance reporting,
public records, financial responsibility and installer
certification, secondary containment,  and delivery
prohibition.  The Energy Policy Act also requires the
issuance of a Tribal Report to Congress as well as the
development of a Tribal Strategy.

Additional information on the provisions and program
status can be found at:
www.epa.gov/oust/fedlaws/epact 05.htm
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Many states also have UST programs that are more stringent or broader in scope than the
federal requirements. For example, in some states, tank programs include heating oil and
above-ground tanks.  In addition to Subtitle I requirements, state and local fire and
building codes also apply to underground tanks containing petroleum and other
flammable and combustible liquids.  Tanks containing petroleum located in proximity to
navigable waterways of the United States or adjoining coastlines may also be subject to
the Spill Prevention Control and Countermeasures (SPCC) requirements, unless they are
fully regulated by EPA's UST regulations.  EPA is the lead federal response agency for
oil spills occurring in inland waters, and the US  Coast Guard is the lead response agency
for spills in coastal waters and deepwater ports.  See www.epa.gov/oilspill for more
information about the SPCC program.

7.3.3.2  Cleanup  and Management of USTs and UST Releases
While USTs are commonly associated with gas stations, municipalities may also
encounter USTs at other types of commercial and industrial properties. At properties
with a long history of such use, complete historical records may not always be available
and it is not unusual for a tank or a release from a tank to be discovered during
construction activities. To minimize this possibility, there are a number of non-intrusive,
geophysical survey techniques (e.g., ground penetrating radar) that can be used to
determine the presence of underground structures in areas where they are suspected of
being located.
If the municipality is an owner or operator of an UST, the municipality may become
responsible under Subtitle I for the removal of out-of-service USTs, and the inspection of
the tanks and testing of soils for signs of leakage.  If a release is found, the municipality
may be liable for investigating and, if necessary, cleaning up the release.  While there are
no "innocent purchaser" provisions in RCRA (Subtitle I), some state brownfields laws
provide relief from state liability for unknown tanks and unknown tank releases for
purchasers that conduct appropriate due diligence prior to taking title to a property. The
Underground Storage Tank Lender Liability Rule also provides certain exemptions for
lenders and other parties that maintain "indicia of ownership" in an UST primarily to
protect a security interest.  This is discussed further in Section IV of Appendix D.
The regulations in 40 CFR Part 280 establish the federal technical standards and
corrective action requirements for  owners and operators of USTs. The technical
standards cover the design, installation, maintenance, release detection, testing, removal,
and remediation of the tank systems, as well as impose financial  responsibility
requirements. An EPA document, titled Musts for USTs-A Summary of Federal
Regulations For  Underground Storage Tank Systems (July 1995) describes these
requirements (www.epa.gov/oust/pubs/index.htm). The full text of the regulations is
available at: www.epa.gov/oust/fedlaws/cfr.htm.  EPA's Office of Underground Storage
Tanks has created the Leaking Underground Storage Tank Corrective Action
Compendium, a clearinghouse of information relating to corrective action at LUST sites
(www.epa.gov/oust/lust/intro.html). The reuse of UST properties is also discussed in an
EPA publication called Petroleum Brownfields:  Selecting A Reuse Option (October 2009)
(www.epa.gov/oust/pubs/pubspbfreuseoption.pdf).  Additional information on UST is
available at: www.epa.gov/OUST or by contacting EPA and state offices. Regional EPA
contacts are listed in Appendix F.

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Financial Responsibility
Owners or operators are required to demonstrate financial responsibility for the costs of
corrective action and compensation of third parties arising from releases of petroleum
from regulated USTs. These requirements were established to help ensure that owners or
operators can respond promptly to
clean up releases and can compensate
third parties for associated bodily
injuries or property damages. From      The f0iiowjng key questions related to USTliability under
                                        RCRA (Subtitle I) are addressed further in Appendix D.
                                          Assessing RCRA (Subtitle I) "UST" Liability
                                                        Key Questions
the perspective of facilitating the
redevelopment of abandoned
properties, this financial
responsibility represents a potential
source of funds that EPA or the
delegated state could access to close
USTs and clean up releases.
Owners or operators of regulated
USTs are required to maintain
financial responsibility for both per
occurrence and annual aggregate
amounts, depending on the number of
USTs owned. Either the owner or the
operator of the UST must
demonstrate financial responsibility.
If they are different individuals or
organizations, it is the responsibility
of the owner and operator to decide
which one will demonstrate financial
responsibility.  Each is responsible if
either party fails to comply. Federal
and state governments and their
agencies that own USTs are not
required to demonstrate financial
responsibility; however, local
governments must do so.
The UST regulations specify a
number of options for demonstrating
financial assurance, including:
environmental impairment liability
insurance, financial guarantees, surety bonds, letters of credit, trust funds, and other
mechanisms established or authorized by the state.  Local governments also have other
options available to them that are  more tailored to their unique status.  These consist of a
bond rating test, financial test, guarantee, and a dedicated fund.
Two useful EPA documents on the UST financial responsibility requirements are:
Dollars and Sense — Financial Responsibility Requirements for Underground Storage
Tanks (July 2005), and Financial Responsibility for Underground Storage Tanks: A
Reference Manual (January 2000), available at: www.epa.gov/oust/pubs/index.htm.
                                             Could the municipality incur liability under RCRA
                                             (Subtitle I) by acquiring or leasing a property
                                             containing UST systems?
                                             Could the municipality be liable under RCRA
                                             (Subtitle I) for releases from UST systems that
                                             originate from an off-site source?
                                             Could the municipality be liable under RCRA
                                             (Subtitle I) for releases from UST systems that
                                             migrate off the municipality's property?
                                             How does subdividing or parceling a property affect
                                             liability under RCRA (Subtitle I)?
                                             Could a municipality be responsible under RCRA
                                             (Subtitle I) for reimbursing EPA or the state for
                                             "unrecovered" response costs if they  acquire or
                                             lease a property at which past cleanup under UST
                                             was conducted?

                                             Could the municipality incur liability under RCRA
                                             (Subtitle I) by performing environmental
                                             investigations, cleanups, building demolition or
                                             physical improvements on a property it does or
                                             does not own or lease?

                                             Are municipalities protected under RCRA (Subtitle
                                             I) from past owners/operators or third parties
                                             seeking to recover costs they spent to perform
                                             environmental investigations and cleanup involving
                                             UST systems or releases from those  systems?
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7.3.3.3  The Leaking Underground Storage Tank Trust Fund and Other
        Potential Funding Sources

Congress created the Leaking Underground Storage Tank (LUST) Trust Fund in 1986 to
be utilized by EPA and the states (through a cooperative agreement with EPA) for the
administration, oversight, and cleanup of petroleum releases from USTs in certain
circumstances. Many states use the LUST Trust Fund to, among other things, oversee
corrective action of UST releases and to clean up UST releases where a responsible party
cannot be found or is unwilling or unable to conduct cleanup, or which require
emergency action. More information on the LUST Trust Fund is available at:
www.epa.gov/OUST/ltffacts.htm.  Approximately 36 states have created state UST cleanup
funds separate from the federal LUST Trust Fund which a municipality can potentially
access if it meets the eligibility requirements of the state fund. The Association of State
and Territorial Solid Waste Management Officials (ASTSWMO) has published various
reports on state funds which can be obtained from:
www.astswmo.org/publicationsjanks.htm .
Municipalities may be also be eligible for EPA or state brownfields grants to help  offset
costs associated with the cleanup of certain UST petroleum releases. The Brownfields
Amendments of 2002 specifically authorize the use of federal funds for UST sites.
Appendix E identifies other general sources of potential funding.

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                         TSCA (Title I) - PCBs
7.4    TSCA (Title I) - PCB and PCB-Containing Wastes and
       Equipment

7.4.1  Overview of TSCA (Title I)

The Toxic Substances Control Act (TSCA) is comprised of four major sub-divisions or
"titles." The following discussion of TSCA will primarily focus on Title I as it relates to
the cleanup, management, and disposal of polychlorinated biphenyl (PCB) and PCB-
contaminated wastes in a redevelopment context.

Title n of TSCA, which mostly deals with asbestos abatement in schools, is not generally
applicable to the redevelopment of the types of properties that are the subject of this
workbook.  See EPA's Web site at: www.epa.gov/asbestos/pubs/aherarequirements.pdf for
additional information on the management of asbestos in schools. Of more direct
                                        relevance are the asbestos requirements
                                        under the National Emission Standard for
                                        Hazardous Air Pollutants (NESHAP).
                                        NESHAP is covered in Section 7.5.
  Regulating PCBs Under Other Cleanup
               Statutes
Because the cleanup and management of PCB
wastes are not solely regulated under TSCA, a
municipality should also consider its potential
liability under other applicable federal and state
statutes. For example, a PCB waste may be
regulated as a hazardous waste or hazardous
constituent under RCRA (Subtitle C), which could
subject the cleanup to RCRA corrective action
requirements. Similarly, EPA will often use
CERCLA authorities to clean up a site
contaminated with PCBs in situations where, for
example, other hazardous substances are
present, extensive contamination exists, the
property is abandoned or the owner is unwilling or
unable to conduct the cleanup, or an immediate
response is necessary.
                                         Titles III and IV, which regulate air radon
                                         and lead-based paint, respectively, routinely
                                         apply to redevelopment scenarios, but most
                                         municipalities are familiar with these
                                         requirements and they will not be addressed
                                         in this workbook. Residential lead-based
                                         paint disclosure requirements under Title IV
                                         are summarized at: www.epa.gov/lead/pubs/fs-
                                         discl.pdf.  New lead-safe work practice
                                         requirements for renovating, repairing, or
                                         painting a home, child-care facility, or
                                         school are summarized at:
                                         www .epa. gov/lead/pubs/renovation .htm.

                                         In enacting TSCA, Congress specifically
                                         directed EPA to regulate the use and
disposal, manufacturing, processing, and distribution in commerce of PCBs.  In this
regard, TSCA legislated true "cradle to grave" (i.e., from manufacturing to disposal)
management of PCBs in the United States.  Although TSCA provides the primary
regulatory framework for controlling PCBs, these compounds are also regulated to some
extent under the Clean Air Act, Clean Water Act, RCRA, and CERCLA (see the text box
on this page). Title I of TSCA cannot be delegated to the states and therefore jurisdiction
remains with EPA. However, a number of states establish their own laws and regulations
concerning PCBs.
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While PCBs are no longer commercially produced, municipalities that acquire or lease a
property may still encounter PCBs in certain equipment or products that were
manufactured prior to 1979 (such as transformers, capacitors and other electrical
equipment, paints, caulk, and hydraulic fluids), or as contamination arising from past use
or disposal.  Under TSCA, a property contaminated with regulated levels of PCBs must
be cleaned up or decontaminated in accordance with certain specified requirements.
Similarly, equipment containing PCBs at regulated levels which is no longer  in use or is
leaking must be properly disposed of or decontaminated.  PCB-containing equipment can
only be used in compliance with 40 CFR ง761.30.
TSCA is  a strict liability statute. Persons "responsible" for addressing PCB
contamination under TSCA (Title I) can  potentially include past and new property
owners and operators, and other parties that caused or contributed to the PCB
contamination.  This is discussed further in Appendix D Section V. This responsibility
also extends to the decontamination or disposal of regulated PCB-equipment.

7.4.2 Cleanup and Management of PCBs under TSCA
The PCB regulations promulgated under TSCA are found in 40 CFR Part 761.  The PCB
regulations provide several options for cleanup and disposal of PCB remediation wastes.
PCB remediation wastes include waste materials contaminated with PCBs as the result of
a spill, an intentional or accidental release or uncontrolled discharge of PCBs, or other
unauthorized disposal of PCBs (see 40 CFR ง761.3).  The cleanup and disposal options
for PCB remediation waste are briefly described below. Refer to 40 CFR 761.50(b)(3)
and 761.61  for the specific requirements.

1. Self-Implementing Cleanup and Disposal Option (40 CFR ง761.61(a)

The self-implementing option allows a site owner to conduct the cleanup and disposal of
PCB remediation wastes according to specified requirements and standards. The first
step is notifying the EPA no less than 30 days prior to the initiation of those activities; if
necessary, EPA may require additional or modified requirements.  The self-implementing
option may not be used to clean up surface or ground waters, sediments in marine and
fresh water ecosystems, sewers or sewage treatment systems, private or public drinking
water sources or distribution systems, grazing lands, or vegetable gardens.
Under this option, the extent of cleanup will depend primarily  upon two factors: 1) the
use of the property after the cleanup is completed (characterized as high or low
occupancy); and 2) the type of waste material that is contaminated with the PCBs (i.e.,
bulk PCB remediation wastes (e.g. soils), porous surfaces (e.g. concrete), non-porous
surfaces (e.g. metal surfaces), and liquid  PCBs).
Areas that are in continuous or semi-continuous use, such as residences or schools, are
generally classified as "high occupancy areas." Areas used to  a limited extent are
considered "low occupancy areas, such as electrical substations or locations in an
industrial facility where workers spend small amounts of time  (e.g., non-office  space
where occupancy is transitory)."
Under certain circumstances, depending  on the concentration and nature of the  PCB
remediation waste,  and the intended use of the area, the self-implementing option may
allow PCB remediation waste to remain on the property covered with a cap meeting
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certain specifications and requirements. Such a cap must be maintained in perpetuity or
until EPA determines that the cap is no longer needed. In addition, a site owner is
required to record a notation on the deed (i.e., deed restriction) if ongoing maintenance
requirements are part of the cleanup, to ensure that any new owner would continue to
comply with the requirements.
The self-implementing cleanup
provisions do not govern cleanups
conducted under other authorities,
including but not limited to, actions
taken under CERCLA or RCRA.  This
means that if a property will be
addressed under those authorities, the
party conducting the cleanup may not
be able to utilize this option.

2. Performance-Based  Disposal (40
   CFR ง761.61(b)

This option specifies off-site disposal
and/or decontamination requirements
for PCB remediation wastes that are
not part of a self-implementing
cleanup or risk-based disposal
approval.
3. Risk-Based Disposal (40 CFR
   ง761.61(c)
                                          Assessing PCB Liability Under TSCA (Title I)
                                                        Key Questions
                                         The following key questions related to PCB liability under
                                         TSCA (Title I) are addressed further in Appendix D
                                            • Could the municipality incur liability under TSCA
                                              (Title I) by acquiring or leasing a property
                                              containing RGBs or PCB remediation waste?
                                            • Could the municipality be liable under TSCA (Title
                                              I) for PCB remediation wastes that originate from
                                              a source outside the affected property's
                                              boundary?
                                            • Could the municipality be liable under TSCA (Title
                                              I) for PCB remediation wastes that migrate off the
                                              property?
                                            • How does sub-dividing or parceling a property
                                              affect liability under TSCA (Title I) for PCB
                                              remediation wastes?
                                              Could a municipality be responsible under TSCA
                                              (Title I) for reimbursing EPA or the state for
                                              "unrecovered" response costs if it acquires or
                                              leases a property at which PCB-related cleanup
                                              was conducted?
A party may seek approval from EPA
for cleanup, storage and/or disposal of
PCB remediation waste in a manner
other than that prescribed for the two
options described above.  A request for
a risk-based approval must
demonstrate that the proposed methods
will not pose an unreasonable risk of
injury to health and the environment,
taking into account relevant situation-
and site-specific factors (i.e., through a
risk assessment). Cleanup and related activities cannot be initiated until EPA issues a
written risk-based approval of the proposed activities.
When considering the acquisition or leasing of property that has undergone a prior PCB
cleanup, the municipality should consider whether the land use assumptions upon which
those cleanups were based are consistent with the intended future use.  Certain uses may
require more stringent requirements than what was previously acceptable. Such
assumptions  are often, but not necessarily always, incorporated into deed restrictions on
the property.
                                              Could the municipality incur liability under TSCA
                                              (Title I) by performing environmental
                                              investigations, cleanups, building demolition or
                                              physical improvements on a property it does or
                                              does not own or lease?
                                              Are municipalities protected from past
                                              owners/operators or third parties seeking to
                                              recover costs they spent to perform environmental
                                              investigations and cleanup involving PCBs or PCB
                                              remediation waste?
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EPA has published a manual for addressing the cleanup of PCB remediation waste titled
Poly chlorinated Biphenyl (PCB) Revitalization Guidance under the Toxic Substances
Control Act (TSCA) (www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/guidance .htm#Q&A). A
PCB "Questions and Answers" Manual that responds to a number of specific technical
and regulatory issues is available at:  www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/pcb-gui3-
06.pdf.  Other information, including an electronic version of the PCB regulations, can be
found on EPA's PCB Web site at: www.epa.gov/pcb.
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                  Clean Air Act- Asbestos NESHAP
7.5   Clean Air Act - NESHAP Requirements for Asbestos

7.5.1  Overview of the Asbestos NESHAP
The Clean Air Act (CAA) is the
comprehensive federal law that
regulates air emissions from stationary
sources (e.g., factories, refineries,
power plants) and mobile sources (e.g.,
cars, trucks, buses).  The CAA requires
EPA to develop and enforce regulations
to protect the public from exposure to
airborne contaminants that can be
hazardous to human health. The
National Emission Standards for
Hazardous Air Pollutants (NESHAP)
requirements for asbestos promulgated
under Section 112 of the CAA
establishes work practices to minimize
the release of asbestos fibers during
activities involving the processing,
handling,  and disposal of asbestos and
asbestos-containing material when a
regulated  facility, such as a building, is
being demolished or renovated.
NESHAP also regulates asbestos in
active and inactive waste disposal sites.
These requirements and standards are
described in 40 CFR Part 61, Subpart
M, available at:
www.epa.gov/oppt/asbestos/pubs/2003.pt6
l.pdf. The CAA allows EPA to
delegate NESHAP authority to state
and local agencies.  Even after EPA
delegates  this responsibility, the
Agency retains the authority to oversee
delegated programs and enforce
NESHAP regulations.
NESHAP is one of a number of federal
laws that govern how asbestos
materials must be handled in  schools, public buildings, and commercial or industrial
buildings. For example, Title II of TSCA, which was briefly discussed in Section 7.4.1,
addresses asbestos in schools. Title II also establishes accreditation requirements for
persons conducting asbestos inspections and abatement activities in schools, commercial
buildings  and public buildings. The Occupational Safety and Health Administration
 Assessing Asbestos Liability Under NESHAP
               Key Questions
The following key questions related to asbestos liability
under NESHAP are addressed further in Appendix D.
  •   Could the municipality incur liability under the
     asbestos NESHAP by acquiring or leasing a
     property containing asbestos or asbestos-
     containing materials?
  •   Could the municipality be liable under the
     asbestos NESHAP for asbestos that originate
     from an off-site source?
  •   Could the municipality be liable under the
     asbestos NESHAP for asbestos that migrates off
     the property?
  •   How does subdividing or parceling a property
     affect liability under the asbestos NESHAP for
     asbestos or asbestos-containing materials?
  •   Could a municipality be responsible under the
     asbestos NESHAP for reimbursing EPA or the
     state for "unrecovered" response costs if they
     acquire or lease a property at which asbestos-
     related cleanup was conducted?
  •   Could the municipality incur liability under the
     asbestos NESHAP by performing environmental
     investigations, cleanups, building demolition or
     physical improvements on a property it does or
     does not  own or lease?
  •   Are municipalities protected under the asbestos
     NESHAP from past owners/operators or third
     parties seeking to recover costs they spent to
     perform environmental investigations and
     cleanup involving asbestos or asbestos-
     containing materials?
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(OSHA) regulates exposure to asbestos in the workplace through the Construction
Industry Standards (29 CFR ง1926.1101) and General Industry Standards (29 CFR
ง1910.1001).
Asbestos is also regulated under other federal environmental statutes. For example,
asbestos that is released to the environment is regulated as a hazardous substance under
CERCLA.  Generally, though, unless a building or structure is in danger of collapse or
could otherwise release asbestos to the environment, EPA's Superfund program is not
typically involved in the asbestos abatement activities. An important exception would be
situations where removal of the building or structure is a necessary part of a CERCLA
response action (e.g., removal of a building or structure is necessary to provide access to
the underlying contamination). Another federal statute regulating asbestos is RCRA.
While the federal RCRA (Subtitle C) regulations do not specifically list asbestos as a
hazardous waste, EPA does have the authority to require cleanup of asbestos using, for
example, Section 7003 of the statute. Further, states may also regulate asbestos under
their authorized RCRA programs in a manner that is broader than scope than the federal
program, or they may have enacted other laws establishing additional requirements. In
addition to the federal and state laws described above, other requirements governing
asbestos are sometimes instituted at the local or county level.

7.5.2  Cleanup and Management of Asbestos under the Asbestos
       NESHAP
The asbestos NESHAP defines a facility, in part, as any institutional, commercial,  public,
industrial, or residential structure, installation, or building undergoing demolition or
renovation, and active and inactive waste disposal sites. Privately-owned residential
buildings having four or fewer dwelling units are generally excluded; however, if these
buildings are demolished or renovated as part of a commercial or public project (e.g.,
urban renewal, highway  construction, or any commercial or industrial development), they
would be regulated. Any facility that will be undergoing demolition or renovation must
be first properly inspected for regulated asbestos-containing materials (RACM)
regardless of the age of the facility.  RACM consist of:

   •   Friable material containing more than one percent asbestos; or

   •   Category I non-friable material containing more than one percent asbestos (i.e.,
       asbestos-containing gaskets, packings, resilient floor coverings, resilient floor
       covering mastic,  and asphalt roofing products) that has become friable,  or has
       been or will be subject to sanding, grinding, cutting, or abrading; or

   •   Category II non-friable material containing more than one percent asbestos (i.e.,
       any material excluding Category I non-friable material) that has a high probability
       of becoming crumbled, pulverized, or reduced to powder by the forces expected
       to act on the material in the course of demolition or renovation.

Asbestos NESHAP regulations must be followed for all renovations of facilities with at
least:
   •   80 linear meters (260 linear feet) of RACM on pipes;
   •   15 square meters (160 square feet) of RACM on other facility components; or
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    •   one cubic meter (35 cubic feet) off facility components where the amount of
       RACM previously removed from pipes and other facility components could not
       be measured before stripping.

These amounts are known as the "threshold" amounts.  Renovations involving less than
specified threshold amounts of RACM are not subject to the notification requirements.
However, asbestos NESHAP regulations (such as notification) must be followed for all
demolitions of facilities whether or not asbestos is present. Importantly, before initiating
demolition  and renovation activities, the owner or operator must notify EPA or the
delegated state or local agencies and remove all RACM from the affected areas at least
10 working days in advance of the project in accordance with the requirements specified
in 40 CFR ง61.145.  Asbestos-containing materials not meeting the definition of RACM
do not need to be removed prior to demolition, except where demolition will be by
intentional burning.  Disposal of RACM is subject to the requirements specified in 40
CFR ง61.150, which requires that all RACM be properly disposed of into an asbestos
NESHAP approved landfill using a waste shipment record. Many municipal landfills do
not accept RACM.
Although EPA does not directly oversee and enforce OSHA regulations, it is important to
emphasize that these regulations establish comprehensive requirements relating to
demolition, renovation, and other activities involving asbestos. Additional information is
available on OSHA's Web site: www.osha.gov/SLTC/asbestos. EPA's Worker Protection
Rule (40 CFR Part 763, Subpart G) extends the OSHA  standards to state and local
employees who perform asbestos work and who are not covered by the OSHA Asbestos
Standards, or by a state OSHA plan. The Rule parallels OSHA requirements and covers
medical examinations, air monitoring and reporting, protective equipment, work
practices, and record-keeping.
Additional information regarding the asbestos  NESHAP is available on EPA's Web site:
www.epa.gov/asbestos. Because asbestos in older buildings is so commonplace, a number
of publications are available that describe accepted demolition, renovation, and disposal
practices. Some of these are listed in Appendix E. A list of EPA regional and state
asbestos contacts is available at: www.epa.gov/oppt/asbestos/pubs/regioncontact.html.
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Project Economics and Financial Analysis
                                                          This Chapter:
                                                      Discusses potential project
                                                      costs, revenues and other
                                                      financial considerations

                                                      Describes the use of a pro
                                                      forma and sources-and-uses
                                                      chart to conduct a financial
                                                      analysis
8.1    General
To properly evaluate property recovery actions,
municipalities generally need to weigh the financial risks
and benefits of municipal involvement in the
redevelopment project. This evaluation may include
estimating the potential costs to the municipality of
undertaking a given property recovery action (e.g.,
property acquisition costs, environmental investigation
costs) and identifying potential sources of revenue and
other funding to implement that action and other aspects
of the project. In addition, a general understanding of the
financial viability of a desired redevelopment can help in
assessing whether the project goals are realistic and likely
to attract private investment. While a detailed discussion of financial analysis is beyond
the scope of this workbook, this chapter and other discussions throughout this document
identify some general factors relating to the environmental conditions that might be
appropriate to consider as part of a financial analysis.
Real estate developers routinely use a pro forma spreadsheet to conduct a financial
analysis of a project. Environmental costs are typically included as line items on the
spreadsheet.  The preparation of a detailed pro forma is a very involved process.
Accounting for project uncertainties in the pro forma can be a particular challenge. This
is discussed briefly in Section 8.2.
To assist municipalities in evaluating property recovery actions, an abbreviated pro forma
worksheet and instructions for completing the worksheet are provided in Appendix A and
discussed in Section  8.3 (available for download at
www.epa.gov/regionl/brownfields/prepared'). This pro forma worksheet is a rough
estimating tool that can be used by municipalities to preliminarily assess,  for example:

   •   the potential financial viability of different redevelopment scenarios

   •   the relative effect of various cost and revenue assumptions on profitability

   •   the amount of subsidies or incentives needed to attract a developer
Another tool  often utilized by municipalities for redevelopment project is the sources-
and-uses chart. A sources-and-uses chart provides a mechanism for identifying and
balancing potential expenses, funding needs, and sources of funding. The sources-and-
uses chart could be used by municipalities to evaluate property recovery actions that
either involve municipal development projects (e.g., a town building or park) or involve
facilitating private development.  An example of a completed sources-and-uses chart is
included in Appendix C.  Appendix E identifies resource materials describing some
potential sources of funding, including those available through EPA's Brownfields
Program.

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If the municipality could potentially assume significant financial risk by undertaking a
particular property recovery action, the municipality should enlist the services of
qualified financial consultants to conduct a more rigorous financial analysis if that
                                      expertise is not available in-house —
 If the municipality could potentially      particularly for large and complicated proj ects.
 assume significant financial risk by
 undertaking a particular property        The Preparation of a pro forma or sources-and-
 recovery action the municipal should    uses chart recluires havmงsome understanding
 enlist the service of qualified financial    of the intended PrฐPerty uses> as this
 consultants to conduct a more          establishes the basis for determining the
 rigorous financial analysis if that        potential costs and revenues. The financial
 expertise is not available in-house-     analysis should consider all maj or components
 particularly for large and complicated    of the development process.  Figure 8 1 shows
 projects                              ^e development components that could be
                                      associated with each of the property recovery
action discussed in Chapter 3  and identifies those components that might typically
involve the municipality. Even if a municipality will not be responsible for implementing
a given component, it should consider  how that component might impact the overall
project. For example, if cleanup has already taken place on the property, the municipality
may still need to assess how the future use, property management, marketability,
financing, or other components of the development process are affected by the
environmental conditions.

8.2   Pro Forma
A pro forma is used to analyze underlying redevelopment and environmental  cost data
and revenues involved in purchasing and developing the property. Examples of project
costs and revenue streams are shown in Figure 8.2.
Risks that can be quantified as a specific cost can sometimes be factored into  the pro
forma calculations (for example, in the form of premiums for insurance coverage or by
increasing the "safety" margin on a particular cost line item).  Any risk that cannot be
quantified is classified as an 'unquantifiable risk' that will require separate consideration
in the decision process. In some cases, an undefined or unquantifiable risk, if it is
significant enough and cannot be managed cost-effectively by the developer, may prevent
development from occurring.  Developers will therefore go to great lengths to identify
and manage risk factors to the extent practical.  Potential risk factors arising from
uncertainty may include, but are not limited to:

    •  Market risks due to the overall  economy

    •  Changing local market conditions

    •  Uncertainty in the environmental conditions or cleanup action costs

    •  Additional financing and insurance requirements due to potential project risks

    •  Greater than anticipated entitlement or engineering costs to redevelop or
       reposition the property

    •  Changing cost factors  as a result of a delayed timeframe for development
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Table 8.2 - Development Components Typically Associated with Property Recovery Actions
                                             Municipal Use
Acquisition with
long-term
ownership
Leasing for
municipal use
       o
                                     Development by Another Party
Acquisition with
interim
ownership
       o
Acquisition with
"simultaneous"
transfer to a
third party
                         o
Collaboration
with the
property owner
Transfer tax lien
Market/create
incentives
Guide:

• - Very likely to be performed by the municipality

o - Somewhat likely be performed by the municipality
Notes:

1Refers to financing or funding needed by municipality for
acquisition, environmental investigation, cleanup, or construction.

2ln some situations property title could revert to the municipality if
the third party does not meet certain obligations.

3 For example, where road improvements are to be made.

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While developers are used to dealing
with changing market conditions and
redevelopment-related construction
issues, uncertainty regarding the
environmental conditions is often less
understood. Generally, the more
certainty a municipality can bring to a
property (e.g., through environmental
investigations), the better positioned it
will be to attract development.  In
some cases, the developer may expect
some form of government assurance or
risk-sharing before moving forward
with a project.
 Section 8.3 describes how a
municipality might use the pro forma
worksheet to evaluate potential
redevelopment scenarios.

8.3    Using the  Pro Forma
       Worksheet
Cost of land

Infrastructure/property development
costs

Building construction costs

Soft costs, such as legal fees, permit
fees, architectural drawings

Costs of capital - interest and fees
Investigation and cleanup action

Legal or consulting fees

Maintenance of institutional or
engineering controls

Environmental liability insurance
Selling the property ready for
development

Dividing the property into parcels
for sale

Constructing and selling individual
buildings or units within building

Constructing and leasing buildings
or units within building

Creating and selling/leasing pad sites

Tax revenue

Other revenue (e.g., advertising
signage,  renewable energy
production, cell towers)
                                       Figure 8.2 - Examples of Project Costs and Revenue
                                       Streams
The pro forma worksheet provided in
Appendix A allows the user to prepare
"back-of-the envelope" financial
estimates to assess how a developer
might look at various redevelopment
scenarios.  The worksheet also helps
evaluate the general impact of various
cost and/or revenue assumptions. It
will not substitute for a detailed
financial analysis, is not  applicable to
complex projects, and should not be
used to make investment decisions.
Where the municipality does not have the in-house expertise to appropriately utilize the
pro forma worksheet, it should obtain consultants or other parties with that expertise.
The pro forma worksheet provides default values (such as per square-foot construction
costs and lease revenues for various types of reuse) that can be used to calculate each line
item. These default values are examples of the types of values to be input and may not
reflect current economic and market conditions or account for regional variations from
national averages. Local real estate brokers, economic development officials, lending
institutions, or developers should be able to provide appropriate values for a particular
geographic area.  A range of values can be used where estimates are uncertain.
It is important to understand and evaluate all assumptions included in the analysis,
particularly those that can dramatically affect results. For example, a small change in the
capitalization rate (whereby the income stream is capitalized to calculate a value for a
property) can quickly cause the project to become less financially viable.  Also, keep in
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mind that the rate of return in the pro forma worksheet does not reflect the number of
years the project will take. Developers, investors, and lenders use discounted cash flow
and other methods to adjust for the time value of money.
The pro forma worksheet will provide an estimate of profitability, but just because the
project appears to be profitable, does not necessarily mean that developers will be willing
to acquire and redevelop the property.  Individual developers and investors will have their
own view of what is considered an acceptable return on investment that takes into
account project risk. As a general rule, higher project risk carries the expectation of
higher potential returns. Developers will also utilize other tools such as market analysis,
highest and best use studies, and other investment-related information to determine the
viability of a project.
There are a variety of ways that the pro forma worksheet can help guide the evaluation
process including:

   •  A municipality can assess whether a desired reuse is financially viable assuming
       the property is free of contamination.  This "best case" scenario will provide a
       baseline for  estimating the minimum amount of public incentives or other
       assistance that might be needed to make the  property marketable.  Based on that
       analysis, the municipality can begin to make some judgment as to whether certain
       reuse options are impractical, whether additional resources to conduct a Phase II
       ESA would be justified,  how to prioritize information gathering efforts, and so
       forth.
       Even before verifiable information on the environmental conditions is available,
       the municipality can build  on those baseline estimates by making certain
       assumptions regarding the  environment conditions  (such as, that asbestos
       insulation will be present in all or certain buildings). This can help in assessing
       the relative contribution  of those added costs should they prove to be true.

   •  If the Phase  I ESA determines that the property has already been extensively
       investigated and that information is available, or the municipality has conducted
       its own Phase II ESA, the pro forma worksheet can be used to estimate how
       various cleanup alternatives could affect the costs and profitability of reuse
       scenarios should those costs be passed on to the developer of the property.
       Likewise, where cleanup has already occurred, the  financial analysis can take into
       account the associated costs that might be passed on, such as operation and
       maintenance costs, settlement of environmental liens, and any costs to modify the
       existing cleanup if necessary to accommodate a proposed reuse.

   •  Added interest costs resulting from protracted delays in construction,
       rehabilitation, and remediation activities can be considered.

   •  The impact of parceling the property under different scenarios can be evaluated.
       For example, it might be that the revenue generated by selling off portions of the
       property could be used to finance cleanup or property improvements on the other
       portions.

   •  Municipalities can estimate the revenues they would receive from a project. Real
       estate taxes and permit fees can be estimated based on the size and type of the
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   redevelopment project. Retail rents generally reflect sales volume and can be
   interpolated to calculate sales tax revenue.
The pro forma worksheet line items should be recalculated as additional information
becomes available. Used appropriately, thepro forma worksheet can be a useful tool
for developing a preliminary understanding of those factors that are likely to
influence the marketability of a property. As noted, however, it is important to
recognize the limitations of the pro forma worksheet.
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       Community Issues
"In communities that are under economic stress, particularly low-income areas that have experienced long periods
of disinvestment and decay, successful revitalization takes more than a focus on individual properties.
Revitalization requires a hard look at the surrounding area in order to establish a comprehensive area-wide plan
that identifies reuses that both meet the needs of the local community and that incorporate the elements of public
improvements and infrastructure that are necessary to attract private investment."
                                                                         —Mathy Stanislaus
                                                                      Assistant Administrator
                                                   Office of Solid Waste and Emergency Response
                                                              Environmental Protection Agency
9.1   General
Community involvement is a legal requirement in most
federal and state environmental programs.  One of the first
federal environmental statutes — the National
Environmental Policy Act (NEPA) — set out formal
requirements for the public's role in implementing the
statute. The public participation process delineated in
NEPA became the model on which public participation
requirements for state and federal cleanup programs were
based. Over the years, the inherent benefits of public
participation in the cleanup and redevelopment of
contaminated properties have been repeatedly affirmed.

As municipalities consider the financial and
environmental  risks involved in redeveloping
contaminated property,  they must not lose sight of the
central role that community issues play in the risk
management process. By defining and addressing
community issues up front, municipalities establish  realistic goals and build public
support for the project.  This  reduces the potential for unnecessary delays, additional
costs, and other pitfalls  that could undermine the project. In this respect, addressing
                                                                This Chapter:
                                                             Discusses the importance of
                                                             community engagement in
                                                             the risk management
                                                             process

                                                             Outlines some key
                                                             community engagement
                                                             principles

                                                             Describes benefits of area-
                                                             wide planning and
                                                             sustainable development
                                                             practices
 As municipalities consider the financial
 and environmental risks involved in
 redeveloping contaminated property,
 they must not lose sight of the central
 role that community issues play in the
 risk management process.
                                       community issues can be an important way to
                                       reduce or otherwise manage certain project
                                       risks.
                                       Community engagement is the mechanism by
                                       which developers, local authorities, and
                                       regulatory agencies communicate with
                                       community stakeholders during the various
stages of a cleanup and redevelopment project.  Community stakeholders affected by
contaminated and derelict properties include local residents, organizations, and
businesses.  Because they live and work in the area, these stakeholders understand the
needs of the community and will be able to raise potential issues and provide useful
insights regarding the property and the revitalization efforts under consideration.
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Community engagement is also an opportunity for a developer or local government to
educate local residents and learn about their views towards neighborhood planning
concepts such as transit-oriented development, traffic-calming, and low-impact
development.
                        Testimonials:  Benefits of Community Engagement

  The experiences of government and community stakeholders repeatedly confirm the importance and benefits of
  community engagement in revitalizing contaminated and derelict properties and bringing new life to cities and towns.
  These experiences demonstrate that:

  • Involving communities helps "redefine, rebuild, respirit, and recivilize"

  "[0]ut of the devastation of Detroit, we are at the point here today where we can really redefine, rebuild, respirit, and
  recivilize the city... What is harder to see behind the physical devastation is the new spirit that is arising in the city and
  finds its expression chiefly in the explosion of meetings that has taken place... Here in Detroit, we started by building
  a common vision."- Environmental Justice, Urban Revitalization, and Brownfields: the Search for Authentic Signs of
  Hope

  • Early engagement anchors project goals and builds support

  "Brownfields projects have much greater success when the local community first identifies the potential reuse of the
  idled, contaminated property. This end-use approach can help focus the environmental remedial response, attract
  private investors and public resources, and build the community consensus to see the project through." - Unlocking
  Brownfields: Keys to Community Revitalization

  • Inclusion of burdened groups fosters positive relations and avoids delays

  "Engage in meaningful dialogue and you will minimize delays from public misunderstanding and criticism." - Lessons
  Learned about Superfund Community Involvement

  • Dialogue on revitalization, especially with youth, also benefits other initiatives addressing violence,
  substance abuse, and crime

  "When you look at crime and violence in communities, it is all linked.  Yet what it comes down to is the reality of how
  to overcome these things. The psychological impact on young people... must be filtered into our public dialogue as
  we  talk about revitalization." - Environmental Justice, Urban Revitalization, and Brownfields: the Search for Authentic
  Signs of Hope

  See Appendix E for full citations to the above testimonials.
Although the appropriate level of community engagement will vary from project to
project, setting up opportunities to talk with community stakeholders is important even if
the redevelopment project is not expected to be controversial.  Community engagement
can foster productive relationships between the government, community, and the
developer, resulting in partnership-based planning and redevelopment that can benefit all
parties and increase the likelihood of a successful project.

By devoting careful attention to community issues and concerns, a municipality also
creates an atmosphere  of cooperation that can extend to future projects.  Conversely, it
can take years for a municipality  to restore its credibility in a neighborhood that believes
its interests were ignored in previous development projects.  Furthermore, developers are
far more likely to be attracted to an area where the local government and other
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stakeholders have a demonstrated history
of constructive involvement with
redevelopment projects, as this may reduce
a potentially significant source of risk for
them.

EPA recognizes the importance of
community engagement relating to its
cleanup activities at contaminated
properties. A recent EPA effort to promote
and improve the practice of community
engagement is described in the text box on
this page. Other useful resource materials
on community engagement are listed on
page 107 and Appendix E.

9.2    Some Key Principles of
       Community Engagement
  EPA's Community Engagement Initiative
EPA's Office of Solid Waste and Emergency
Response (OSWER), which provides policy,
guidance and direction for the Agency's emergency
response and waste programs,  launched a
Community  Engagement Initiative in 2010.  This
initiative is designed to enhance OSWER and
regional offices' engagement with local
communities and stakeholders (e.g., state and local
governments, tribes, academia, private industry,
other federal agencies, non-profit organizations) to
help them meaningfully participate in government
decisions on land cleanup, emergency
preparedness and response, and the management
of hazardous substances and waste. For more
information on this initiative, please visit
www.epa.gov/oswer/engagementinitiative.
Successful community engagement is often
the result of the municipality's and developer's willingness to work with community
stakeholders to recognize and integrate specific community objectives into a
redevelopment project.  These objectives frequently involve issues of health and safety,
job creation, affordable housing, and community character and identity.  The following
principles should guide a municipality in laying the foundation for a collaborative
relationship with all stakeholders in a project:

    •  Envision the project as a long-term investment in the community
    •  Engage the community early and throughout
    •  Ensure that meetings are accessible and accommodate community needs
    •  Ensure that a community has the information and resources to participate in a
       meaningful way
    •  Establish a transparent and credible process,  and provide timely follow-up
    •  Establish realistic expectations for project goals and community participation

The discussion below explains these principles and suggests ways to put them into
practice.

Envision the project as a long-term investment in the community

The municipality should consider how a specific  project might be part of a broader,
integrated area-wide strategy for eliminating environmental and economic barriers and
supporting the neighborhood's long-term health and vitality.  When municipalities
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           Case Study:  Community Engagement in Dudley Village, Dorchester, MA
                                                 Mixed use project
The Dudley Village is a mixed use, transit-oriented
housing development which has transformed a
previously high crime area into a family-friendly
community.  It consists of five buildings containing
50 units of affordable rental housing and roughly
6,500 square feet of commercial space.  The
Village is the product of a collaborative
development effort between two local nonprofit
organizations, the Dorchester Bay Economic
Development Corporation (DBEDC) and the
Dudley Street Neighborhood Initiative (DSNI).
The $20 million redevelopment initiative required
23 sources of financing and took 5 years to
complete.  Throughout the process, the community
retained substantial control, and even veto power, over the redevelopment plans. The developers kept
costs down while still successfully integrating the community's vision and sustainable design using multiple
strategies. First,  they hired an architecture firm committed exclusively to building low-cost housing.
Second, they worked closely with the state's Department of Neighborhood Design (DND) along with other
state and local agencies. Third, they addressed the community's needs using innovative and efficient
technologies.

The state and local government played a critical role in completion of the project. Both the state and city of
Boston granted DBEDC millions of dollars to be paid back over a period of years. Also, when additional
money for "green" photovoltaic projects became available, state and local authorities identified Dudley
Village as  the appropriate recipient.  Finally, state grant money and clean energy rebates also paid for the
installation of solar photovoltaic panels and a rooftop monitoring system.

The development addresses the  community's needs in variety of ways.  First, in keeping with its transit-
oriented mission, the complex is within a quarter of a mile from a public commuter rail station. Additionally,
it shares community space and resources, including computer and community rooms, a technology training
center, and green space, with an adjacent apartment complex. Third,  most of the units are available at a
price no greater than 60 percent of the median income of the Dudley community. The Village also
addresses the community's health and cost concerns by incorporating efficient and sustainable structures
and appliances such as: dual flush toilets, rooftop solar photovoltaic panels, water conserving fixtures, high-
performance insulation, and high efficiency heating.

In short, the Dudley redevelopment effort is a powerful example of how community engagement has yielded
positive benefits for both the community and local government. Specifically, the community's rejuvenation
has assisted local officials by reducing crime rates, thereby saving on the cost of additional police necessary
to patrol the previously high-crime area.  Thus, Dudley Village serves as a model for a transit-oriented,
sustainable development which can result from collaborative efforts across government,  non-profit, and
community groups to revitalize both a community and its economy.

For additional information on Dudley Village and other transit-oriented developments, see Encouraging
Transit Oriented Development: Case Studies that Work, www. epa. gov/dced/pdf/phoenix-sgia-case-
studies.pdf.
                                                                                              105

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approach the redevelopment project as a way to help revitalize a neighborhood rather
than simply reuse a particular property, they are more likely to be successful at garnering
and retaining community support. An area-wide revitalization strategy signals a
commitment to the future welfare of the community. Area-wide planning also provides
opportunities for integrating large-scale infrastructure systems (e.g., transportation and
utility systems) and creating other synergies and efficiencies.  In addition, developers and
investors will often be more likely to invest in a particular property if it is part of a larger
revitalization effort designed to transform an economically stagnant or deteriorating area.
Municipalities and developers can further demonstrate their commitment to the local
community by providing opportunities for local businesses and residents to obtain work
related to the revitalization project. Such local job creation also helps to build
community support for the project.

For additional discussion of area-wide planning and other community investment
strategies, see the text box on page 110.

Engage the community early and throughout

Early engagement demonstrates that community input is valued and not just an effort to
gain acceptance for the project after key decisions have been made. Early engagement
also reduces project costs and delays by helping to identify community concerns and
issues before the project moves too far forward.  And finally, involving community
stakeholders throughout the process allows parties to work through the issues in a
systematic manner so that all parties are vested in a successful outcome.

Ensure meetings are accessible  and accommodate a community's needs

When planning stakeholder meetings, the  goal must be to provide equal and fair access to
all by eliminating barriers to community participation. The actual measures taken should
be tailored to the individual community's  needs. The municipality  should consider
factors such as appropriate notice, the time of day, the availability of public
transportation and child  care, access for the disabled, and the need for translators for non-
English speakers. Community-based groups are often closely aligned with certain sectors
of the community and can help in mobilizing community members  to participate in the
stakeholder process.

Making extra efforts to reach out to the community and encourage participation sends an
important message that is likely to influence public perception even before the first
meeting is held.

Ensure that a community has the information and resources to  participate in a
meaningful way

Consensus building functions best when all the parties involved have a basic grounding
in the issues and topics being discussed. Taking the time to provide stakeholders with the
information necessary to better understand the key topics and issues will generally lead to
more informed and productive discussions.
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For stakeholder education efforts to be effective, the information must be from a source
that is viewed as trusted and neutral. In addition, this information should be appropriate
for the intended audience and should be
presented in a way that is not
condescending to any group of
stakeholders.  And finally, the
information and resources available to
stakeholder groups should be
                                             Additional Resources for Conducting
                                                   Community Engagement
                                         For an example of a model plan on public participation, see
                                            •   www.qreenlink.org/assess/pdfs/modelplan.pdf
                                         For case studies on engaging communities in the
                                         redevelopment of contaminated properties, see
                                            •  www.epa.gov/evaluate/pdf/eievalcs.pdf
                                            •  www.epa.gov/superfund/programs/reforms/docs/les
                                               lrncomplete.pdf
                                            •  www.epa.gov/brownfields/policY/comben.pdf
                                         Funding:
                                            •  For a list of federal programs supporting
                                               redevelopment in disadvantaged communities, see
                                               www.nemw.org/images/stories/documents/toolboxdi
                                               sadvantagedcommunities.pdf (Appendix 1)
                                            •  For links to current EPA Brownfields Program
                                               grants and funding sources, see
                                               www.epa.gov/brownfields/grant info/index.htm

                                         See Appendix E for additional references on funding and
                                         community engagement
commensurate with the complexity of
the topics and issues being considered.

Environmental cleanup is one topic
area that involves technical and
regulatory issues that can be
challenging to understand and
communicate. To assist stakeholder
groups in addressing complex
environmental issues, EPA offers some
resources to communities and other
stakeholder groups. For example, for
Superfund sites, EPA makes available
Technical Assistance Grants (TAGs) to
provide communities with independent
consultants who can review technical
documents relating to cleanup activities and help communicate that information.
Information on TAGs can be found at www.epa.gov/superfund/accomp/news/tag.htm.
Another important EPA resource is the Technical Assistance to Brownfields (TAB)
Communities Program, which provides a broad range of support services to
municipalities and other stakeholders.  For additional information on TAB, see EPA's
Technical Assistance to Brownfields (TAB) Communities Program (January 2009),
www.epa.gov/brownfields/tools/tab_bifold.pdf.

Establish a transparent and credible process, and provide timely follow-up

While it may not always be possible to arrive at a clear consensus on a given issue or set
of issues, it is very important that the processes for soliciting input and making decisions
be transparent, credible, and understood.

When issuing decisions, municipalities should be sure to communicate to the community
how input was utilized. If community input is not incorporated into the redevelopment
plans, the municipality should explain why. A municipality or developer should also
consider informing all stakeholders of important decisions first so that stakeholders do
not feel blind-sided upon learning of those decisions through the media.

Other efforts to ensure transparency could include providing a note-taker at stakeholder
meetings to document what was discussed and to serve as a reference point in future
discussions.  After the meeting, notes or minutes should be circulated and reviewed for
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accuracy.  Timely and straight-forward responses to any questions raised will help clear
up potentially minor misunderstandings before they escalate into major conflict.

Establish realistic expectations for project goals and community participation

The project goals and vision — whether they originate from the municipality or the
community — must be realistic and ultimately achievable.  It is therefore important to
identify any constraints that might shape the project goals and vision, and communicate
them as early as possible in the community engagement process. Chapter 2 describes
various studies, such as a "market analysis" and "opportunities and constraints analysis,"
that are typically conducted for this purpose.  Among the other constraints that may need
to be considered are regulatory requirements  and available municipal resources. In some
cases, the municipality's or community's ability to influence the nature and timing of a
redevelopment might also be limited if, for example, the property is likely to remain in
private hands.

These underlying realities and competing trade-offs will provide the context in which
final decisions will be made.  They will also help identify opportunities where flexibility
to accommodate reasonable community needs and expectations might be possible — and
minimize the frustration and distraction of pursuing those that are not.

9.3    Meeting  Community  Needs through Sustainable
       Development

A municipality's approach to cultivating a long-term relationship can take many forms.
One approach is to invest in the well-being of a community through sustainable and
equitable development. As used in this manual, the concepts of sustainable development
and equitable development emphasize community engagement in the environmental,
social, health, and economic issues shaping a community's long-term welfare.
Community revitalization and continued stability are natural outgrowths of a healthy
physical environment.

The incorporation of environmentally sustainable and equitable development practices
into redevelopment projects can provide many advantages to a community. For example,
redeveloping an infill site rather than building a new development on open space is a
development practice that is more sustainable and provides positive community benefits.
Additional sustainable practices include using renewable energy; constructing buildings
that are energy-and water-efficient;  utilizing low impact development techniques;
integrating natural  systems with the built environment; reusing existing building
materials and equipment; mixing land uses; improving pedestrian access and linkages to
public transportation systems; and implementing local food production strategies.

Not surprisingly, many of the above examples often align with a community's immediate
goals by encouraging resource sharing, social interaction, affordable housing and local
employment to help retain residents, and community cohesion.  The environmental
improvements will benefit the community as well. For example, redevelopments with
strong pedestrian access and public  transit links reduce air pollution while fostering
community interaction. Building designs which incorporate environmentally responsible
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practices such as waste minimization and recycling, wastewater conservation and reuse,
and chemical/toxic-free building materials both conserve natural resources and serve as
valuable educational opportunities. On-the-ground strategies for implementing
sustainable development should be explored within the context of each community.
Environmental certification programs are one tool for incorporating sustainable design
into redevelopment. These programs can be an effective means of generating community
pride through a community's achievement of certification requirements while generating
local environmental benefits. Further, by providing straight-forward guidance on how to
implement greener design, well-recognized certifications enable communities to
understand and participate in neighborhood improvements.

EPA has several certification programs pertaining to green building design, including
ENERGY STARฎ' WaterSenseฎ and Indoor airPLUS.  Additional information on green
building design can be found at www.epa.gov/greenbuilding/pubs/components.htmtfindoor.
The IndoorairPlus program is described at www.epa.gov/indoorairplus/about.html. Other
environmental certification programs have been developed by non-governmental
organizations, such as the U.S. Green Building Council's internationally-recognized
Leadership in Energy and Environmental Design (LEEDฎ) standards (see
www.usgbc.org). LEED rating systems address a number of sustainable building
practices, including the LEED Neighborhood Development Certification, which
incorporates concepts of green building design, smart growth, and new urbanism. By
evaluating sustainable development practices within the context of a community, the
program enables a municipality to address many common community concerns such as
pedestrian and traffic safety, air and water quality,  and  affordable and accessible housing
options. For information on the LEED  for Neighborhood Development Certification
program, see www.usgbc.org/DisplayPage.aspx?CMSPageID=148 .

In the past decade, many governmental entities have developed a variety of toolkits for
communities committed to sustainable development. EPA's Green Communities
program provides a toolkit based on a five-step environmental planning framework (see
www.epa.gov/greenkit/index.htm).  Massachusetts offers a Smart Growth/Smart Energy
Toolkit containing modules on Brownfields, Environmental Justice, Low Impact
Development (LID), and Transit-Oriented development (See
www.mass.gov/envir/smart_growth_toolkit/pages/SG-modules.html ).

For additional toolkits, see Appendix E.  For EPA programs and resources related to
sustainability, see www.epa.gov/Sustainability/.
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         EPA's Approach to Area-Wide Planning Involving Contaminated Properties
Federal resources for contaminated properties are typically delivered site-by-site to assist with
assessment, cleanup, and the subsequent reuse of properties.  The burden of a single large, blighted
and/or contaminated site, or multiple blighted and/or contaminated sites concentrated within an area (such
as a neighborhood, district, city block, or corridor), can weigh down an entire community.  Using an area-
wide planning approach to identify the assessment, cleanup, and reuse needs of an area can be more
effective than focusing on individual sites in isolation of the adjacent or surrounding community.

EPA's Office of Solid Waste and Emergency Response, which manages Superfund and other federal
environmental cleanup programs, recognizes the benefits of an area wide planning approach. In 2010,
EPA's Office of Brownfields and Land Revitalization created a Brownfields Area-Wide Planning Pilot
Program.  The goal of the pilot program is to work in partnership with local communities (governments,
nonprofits, and other community-based organizations) to help create a shared vision for brownfields-
impacted areas, and to ensure that brownfields assessment and cleanup decisions are  informed by the
planned reuses for the sites and supporting area-wide revitalization strategies. The approach recognizes
that revitalization of the area surrounding the brownfield site(s) is just as critical to the successful reuse of
the property (or properties) as cleanup and redevelopment of an individual site.

Under the pilot program,  EPA is assisting selected applicants with developing an area-wide plan for a
brownfields-impacted area, which includes:

    •   Planning to identify future uses for brownfields properties
    •   Creating a set of area-wide strategies which will help ensure successful assessment, cleanup,
        and reuse of the brownfield site(s) within the  brownfields-impacted area
    •   Developing strategies for facilitating the  reuse of existing infrastructure,  including taking into
        account potential infrastructure investments needed to accommodate alternative future uses of
        brownfields properties
    •   Determining next steps and identifying resources needed to implement the area-wide plan

More information on EPA's Brownfields Area-Wide Planning Pilot Program can be found at
www.epa.gov/brownfields/areawidegrants.htm.  For additional guidance on strategies, programs, and
policies to build a green community, see Appendix E and www.epa.gov/greenkit/index.htm .
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              Managing Project Risk
10.1  General

This chapter discusses some general approaches and tools
for managing project risks.  As indicated in Section 1.3,
risk is a function of the likelihood and consequences of an
adverse event. This is shown graphically in Figure 10.1.
As the figure further illustrates, in assessing risk both
factors need to be considered together. For example,
Point A (high likelihood, high consequence) is a high risk
event, while Point B (high likelihood, low consequence)
and Point C (low likelihood, high consequence) represent
only low risk events.

                                                               This Chapter:
                                                           Discusses basic risk
                                                           management principles

                                                           Provides information on the
                                                           application of risk
                                                           management tools and
                                                           approaches
T3
O
O
0)
Risk management is the art of assessing, at least on a
qualitative or comparative level: How likely is it? What could happen if it occurs? And
what can be done to minimize either or both?  Incomplete or unreliable information
complicates these determinations.  As a practical matter, risk management usually comes
                                        down to managing uncertainty.  For
                                        example, when crossing the street, a
                                        pedestrian evaluates the frequency and speed
                                        of the cars, the distance to be traveled, his
                                        own agility, conditions of the road, and other
                                        relevant information before making that
                                        decision.  Put a blindfold and earplugs on
                                        that same person and place him on the side
                                        of a street without any further information,
                                        and the decision to cross becomes a much
                                        different matter.
                                        Uncertainty in the context of redevelopment
                                        can be associated with information that is
                                        potentially available, but unknown  (e.g.,  data
                                        gaps in sampling and analysis),  and with
                                        information that must be inferred or
                                        "guessed at" because it involves an event
                                        that has not yet occurred and is not fully
within one's control (e.g., Will EPA take an enforcement action? Will an abutting
property owner sue?). These categories of uncertainty are often interdependent. For
example, the greater the understanding of the environmental condition at a property, the
easier it will be for the municipality to predict whether EPA or the state might require
further investigation or cleanup of the property.
Section  10.2 discusses various risk management tools and approaches that can be useful
as part of an overall risk management strategy. Some tools, such as insurance products or
contractual provisions, can provide important benefits, but should not be used as a
n r
i i
i \
i \
i \
\ \ High Risk
\ \
\ X
\ \
\ Medium Risk "*-•.-
\
\
X
X
Low Risk ^~--..^__
~~~--


















            Consequence

     Figure 10.1 - Risk Relationship
                                                                               111

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substitute for careful analysis and proactive strategies that reduce uncertainties and get at
the source of potential risks. There are no band-aid approaches to risk management.
It is also important to realize that no one tool or approach will provide absolute
protection.  Employing multiple layers of protection will often be necessary — with
specific tools and approaches reinforcing or building on others. For example,
indemnification agreements can be most effectively negotiated if the parties have a clear
understanding of the risk they are attempting to transfer. Indemnification agreements
may also need to contain specific escrow or insurance provisions that back up the
indemnification provisions.  Similarly, insurance underwriters may be more likely to
provide broad pollution coverage and charge the lowest premiums for environmental
conditions that are well-characterized and controlled.
In addition, each of the tools and approaches has distinct limitations that must be
understood in order to be used effectively. For example, indemnification agreements can
be used to clarify responsibilities between the municipality and another party, such as the
property owner and developer; however, the indemnification agreements will not
necessarily shield the party being indemnified against CERCLA liability (Municipalities
should seek expert legal advice regarding the use of indemnities and should be aware
that, depending on the circumstances  of their use, they may also undercut the
ability to meet the requirements of some CERCLA liability defenses). As another
example, insurance products can limit a municipality's financial exposure with respect to
the specific circumstances defined by the coverage, but may be inappropriate as a long-
term solution and difficult to obtain for smaller-scale projects.  Insurance products may
also be prohibitively expensive in some cases.
Section 10.3 discusses how the evaluation of property recovery actions and preparation of
a risk management strategy might be shaped by whether or not there is a viable property
owner that may be willing to work cooperatively with the municipality.
Worksheets #6 and #7 (see Chapter 11) are provided to help in reviewing potential risk
management tools and approaches that might be useful for a given property recovery
action.

10.2  Risk Management Tools  and Approaches

10.2.1  Types of Tools and Approaches
Determining what risk management tools and approaches to use in any particular
circumstance will depend on the municipality's needs and sensitivity to risk. Risk
management tools and approaches can generally be separated into those that:
Understand/Quantify Risk
Understanding the risks involved in a transaction or a course of action is the foundation
of risk management.  Information gaps can hinder the ability to adequately define and
quantify project risk — and can in themselves introduce risk — and efforts to close the
most significant of those information gaps will often be the first focus in managing risk.
Where significant information gaps exist, the municipality will need to assess whether the
costs and risks  of obtaining that information are justified.
Quantification  of a risk by considering the potential economic costs attributable to that
risk allows that risk to be accounted for in the project pro forma.  Not all risks  can be
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reduced to purely economic terms, however.  In those situations, the risks may need to be
evaluated on a qualitative basis.
Control Risk
Some risks can be controlled by taking actions to eliminate or reduce the source of the
risk. A simple example of risk control is conducting a cleanup action.  Or, a municipality
can control liability risk by ensuring that the municipality meets the criteria for qualifying
for and maintaining statutory liability exemptions.
Transfer Risk.
Risks that the municipality cannot control cost-effectively can sometimes be transferred
to third parties through mechanisms such as indemnification agreements and contracts of
insurance. For example, if the municipality ends up with a statutory obligation to
remediate contamination at a property, these mechanisms can potentially reduce its
financial exposure. But again, it is critical to understand the limitations of the risk
transference mechanisms.
Risk management tools applicable to property recovery actions can generally be further
categorized as relating to:
    •   Property activities
    •   Federal and state regulatory exemptions
       Transactional activities, including contract provisions
    •   Insurance

Some risk management tools and approaches associated with each of these categories that
are available to municipalities are identified in Figure 10.2 and described in Section 10.2.
The uses and limitations of some of these tools are further described on EPA's Insurance
and Brownfields Redevelopment web page (www.epa.gov/brownfields/insurebf.htmtfabout).
This includes the May 2006 web seminar, "Risk Management Tools for Addressing
Environmental Risks in Property Transactions."  Other useful resources available on that
Web site are: "Environmental Insurance and Risk Management Tools Glossary of
Terms" and "Environmental Insurance and Risk Management Tools in Brownfields
Cleanup and Redevelopment"
Figure 10.2 is not comprehensive; nor is the inclusion of a tool or approach intended to
suggest that its use is preferable to other tools and approaches that might be available.
Further, Section 10.2 provides only a basic introduction to these tools and approaches and
should not be relied on to make decisions regarding their use in a particular circumstance.
 ^    ,..      ..     ...    ... .        Before discussing specific risk management
 One of the most important steps that a      4 ,     ,        ,    .4.     ,,, 4      •
     .....      . ,  .  .    r   .. ...      tools and approaches, it is useful to again
 municipality can take is to consult with        ,   •   X *   *u  •     f     *•     j
 __.   j  /.        .     ...       ..      emphasize that gathering mtormation and
 EPA and state agencies with respect to      /  .    , ,    &   ,    ,,,   ,,    . ,
 ..     .       f.  . .    to.        ^.     reducing data gaps should be the risk
 the environmental status of the property.            ,  c  f ,. 4.    ~  iU 4    ,
                             r  r   *    manager s first objective. To that end, one
of the most important steps that a municipality can take is to consult with EPA and state
agencies with respect to the environmental  status of the property. EPA and the states
understand the legal and technical complexities associated with the cleanup and reuse of
contaminated properties, and are sympathetic to the challenges that municipalities face in
                                                                               113

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tackling them. They have developed an excellent track record of working closely with
municipalities to bring properties burdened by environmental issues back to the public
tax rolls. Appendix F identifies various Web sites where useful EPA and state contact
information is available. EPA's State Program Summary provides additional contact
information for state agencies.
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Figure 10.2 - Selected Risk Management Tools and Approaches
   Categories of Risk
    Management Tool
Property Activities
(Section 10.2.2.1)
   Understand and Quantify
              Risk
                             Meeting with EPA and State
                             Regulators (section 10.2.2.1 .1)
                             Due Diligence/Ail Appropriate
                                      (Section 10.2.2.1.2)
                             Environmenta  nvestigation (Section
                             10.2.2.1.3)
                             Cleanup Action Planning (Section
                             10.2.2.1.4)
 Reasonable Worst Case Scenario
 Planning
jSection ..10.2.2.1.5)
 Engaging Stakeholders (Section
 10.2.2.1.6)
                             Financial Analysis (Section
                             10.2.2.1.7)
              Control Risk
                                    Timing Municipal Involvement
                                    (Section 10.2.2.1.8)
Transfer Risk
                                    Interim Cleanup Action
                                    (Section 10.2.2.1.9)
                                    Cleanup Action
                                    [Section 10.2.2.1.10)
                                    Voluntary Cleanup
                                    [Section 10.2.2.1.11)
Monitoring and Maintenance of Remedial
Systems and Structures
[Section 10.2.2.1.12)
                                                                Institutional Controls
                                                                (Section 10.2.2.1.13)
                                    Oversight of the Environmental Contractors
                                    (Section 10.2.2.1.14)
                                                                Following Accepted, Good Commercial
                                                                Practices
                                                                (Section 10.2.2.1.15)	
Statutory/Regulatory
Protections
(Section 10.2.2.2)
                                                                Statutory Exemptions and Defenses
                                                                [Section 10.2.2.2.1)
                                    Prospective Purchaser Agreements
                                    [Section 10.2.2.2.2)
                                    No Action/ No Further Action letters
                                    [Section 10.2.2.2.3)
                                                                Other Determinations of Completion
                                                                (Section 10.2.2.2.4)	
                                                                                                                                                           115

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   Categories of Risk
    Management Tool
Understand and Quantify
            Risk
Control Risk
Transactional Activities
(Section 10.2.2.3)
                                                                    Escrow Accounts
                                                                    [Section 10.2.2.3.1)
                                                                    Purchase Price Adjustment
                                                                    [Section 10.2.2.3.2)
                                                                    Grants
                                                                    [Section 10.2.2.3.3)
                                  Tax Benefits and Credits
                                  [Section 10.2.2.3.4)
                                  Private Investors
                                  [Section 10.2.2.3.5)
                                                                    Specialized Loans
                                                                    [Section 10.2.2.3.6)
                                                                    Redevelopment Authorities
                                                                    [Section 10.2.2.3.7)
                                                                    Land Banks
                                                                    [Section 10.2.2.3.8]
Transfer Risk
                                Indemnification
                                [Section 10.2.2.3.9.1)
                                Representations and Warranties
                                [Section 10.2.2.3.9.2)
                                "As is" Provision
                                [Section 10.2.2.3.9.3)
                                Covenants
                               Isjction10.2.2.3.9.4)
                                Assumption, Retention, and Release Provisions
                                [Section 10.2.2.3.9.5)
                                Schedule of included or Excluded [labilities
                                [Section 10.2.2.3.9.6)
                                Post-Signing and Pre-Ciosing Conditions
                               ..(Section 10.2.2.3.9.7)
                                Fixed Price or Performance-Based Contracts
                                (Section 10.2.2.3.9.8)	
Insurance
(Section 10.2.2.4)
                                                                                 Comprehensive General Liability
                                                                                 [Section 10.2.2.4.1)
                                                                                 Pollution Liability
                                                                                 [Section 10.2.2.4.2)
                                                                                 Errors and Omissions insurance
                                                                                 [Section 10.2.2.4.3)
                                                                                 Cost Cap
                                                                                 [Section 10.2.2.4.4)
                                                                                 Secured Lender
                                                                                 [Section 10.2.2.4.5)
                                                                                 Finite Risk
                                                                                 [Section 10.2.2.4.6)
                                                                                 Institutional Controls and Post Cleanup action
                                                                                 Care Insurance
                                                                                 (Section 10.2.2.4.7)	
                                                                                                                                                                   116

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10.2.2  Selected Risk Management Tools for Property Activities

10.2.2.1  Property Activities

10.2.2.1.1  Meeting with Federal and State Regulators

Unless a municipality is already an owner or responsible party for the property, there is
probably little downside for the municipality in discussing potential property recovery
actions with the regulatory agencies. These discussions can help identify potential
pitfalls and other considerations that might keep the municipality from making costly and
avoidable mistakes. These agencies have considerable expertise in the environmental
laws and programs that might relate to a particular project and, although they cannot
provide specific legal and technical advice, they can help  explain and guide
municipalities through the regulatory process.  If the agencies have had direct
involvement with the property, they should also be able to discuss the nature of that
involvement,  known environmental conditions, the need for additional studies and
cleanup, future plans for the property, potential EPA and state environmental liens, and
so forth. In addition, they may be able to point the municipality towards funding and
other resources that can be used for reuse planning, environmental assessment, and
cleanup. To make the most of these discussions, municipal officials should first carefully
consider the material contained in this workbook and how it might apply to their project.

10.2.2.1.2  Due Diligence and All Appropriate Inquiries

As described  in Chapter 4, due diligence helps a municipality to define the potential
issues, costs,  and risks associated with a property. Eliminating data gaps through  due
diligence can significantly reduce uncertainty.
An all appropriate inquiries investigation is necessary to potentially qualify for certain
liability protections under CERCLA (see Sections 4.7.1 and 7.2.3).

10.2.2.1.3  Environmental Investigation

Under many cleanup programs, Phase I and II Environmental Site Assessments are
conducted to  determine whether serious environmental issues exist or could exist on the
property. Environmental investigations typically go beyond Phase I and II ESAs and
provide the basis for making actual cleanup decisions. As a result, environmental
investigations generally provide a higher level of confidence that the environmental
conditions have been adequately characterized.  This reduces uncertainty regarding the
cost and duration of cleanup activities, the likelihood of unanticipated events
complicating  the cleanup, and other factors that could have an adverse impact on a
redevelopment project.  For these reasons, developers and investors are generally more
willing to consider properties where environmental investigations have been conducted.
Environmental Investigations are discussed in more detail in Section 4.4.
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10.2.2.1.4  Cleanup Action Planning

Cleanup action planning that takes into account reasonably anticipated future land use
often allows the cleanup and private-party property development efforts to be better
coordinated. This can provide a number of risk management benefits, including:

    •  ensuring that future use of the site does not undermine the protectiveness of the
       cleanup

    •  minimizing unnecessary impediments to reuse

    •  reducing the costs of both cleanup and redevelopment by addressing them in the
       same construction event

    •  designing buildings and other planned redevelopment infrastructure to be
       compatible with cleanup activities
The preliminary reuse assessment, described in Section 2.6, can be a useful resource
document to help inform the cleanup action planning process.

10.2.2.1.5  Reasonable Worse Case Scenario Planning

Reasonable worse-case scenario planning is essentially the answer to: "what is the worst
thing that could happen by moving forward with a particular property recovery action?"
This process helps the municipality to better understand the upper limits of its potential
risk and liability.  Further, it helps to focus management efforts on the environmental
issues that could have a large impact on the project schedule and costs. Reasonable worst
case analysis can also help determine appropriate insurance limits.

The worst case scenario should be based on available information with reasonable, but
conservative, assumptions about the risks and liabilities that may be encountered.  In
some cases several scenarios may need to be evaluated to more fully assess potential
risks.

10.2.2.1.6  Engaging Stakeholders

As discussed in Chapter 9, proactive stakeholder engagement will help ensure that
community issues are identified and addressed early in the redevelopment process.
Reuse planning that involves community stakeholders is a primary strategy for
understanding  and addressing neighborhood and environmental justice issues prior to
soliciting requests for proposals from developers. Developers typically want to
understand the interests of the neighborhood so they can determine without great expense
whether their development idea will be acceptable. In addition,  once stakeholders have
bought into a neighborhood or community plan, they can be influential advocates for
achieving that vision.

10.2.2.1.7 Financial Analysis

As discussed in Section 6.3 and Chapter 8, financial risk is an essential consideration for
a municipality involving itself in the cleanup and reuse of a contaminated property.
Some level of financial analysis, commensurate with the magnitude of financial risk,
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should be performed.  That financial risk will likely depend on the property recovery
action and the specific nature of the activities contemplated.

10.2.2.1.8  Timing Municipal Involvement

The timing of municipal involvement is a strategically important determination that can
dramatically impact project risk.  Sometimes a situation necessitates a more immediate
response by the municipality. In other situations, the municipality may have the time to
allow certain events to play out or to take additional steps to identify and manage risks
before proceeding with a potential acquisition or other property recovery action.
Examples of such steps include:

   •   Allowing EPA- or state-mandated assessments or cleanup activities to proceed,
       thereby reducing uncertainty regarding a property's environmental  conditions

   •   Performing comprehensive investigations that more completely characterize risks

   •   Working with the community and other stakeholders to gain consensus around
       future uses of the property

   •   Developing a plan for phased cleanup and redevelopment activities on larger
       properties

   •   Identifying potential funding sources for cleanup, demolition, infrastructure
       replacement, and other  activities

   •   Negotiating partnership agreements with the current owners or potential
       developers
The municipality should also consider the possibility that delaying or foregoing action on
a property,  even if the property is still privately owned, could in itself create unacceptable
risks for the municipality.

10.2.2.1.9  Interim Cleanup Action

In some cases, it may be necessary or beneficial to undertake an interim cleanup action to
address imminent hazards on a property. Examples of these interim actions include the
removal of abandoned drums, the cleanup of spills, and the construction of security
fences.
Performing interim cleanup actions to address the worst environmental problems or
stabilize the environmental conditions at the site will also make the property more
marketable and possibly allow a developer to obtain financing and insurance at more
favorable rates.  Interim actions can also be  used to control cleanup costs (e.g., reducing
the volume of material to be  treated or removed by taking steps to prevent the further
spread  of contamination).  Interim cleanup actions may also  help guard against claims
that a municipality caused  or contributed to  a release through its inaction. For reasons
such as these, a municipality may sometimes consider initiating interim cleanup actions
at a property. Before taking  any interim cleanup actions, however,  a municipality should
ensure  that it understands any risks associated with the action, including the incurrence of
liability. The interim actions must be taken  in a manner that does not worsen the
environmental conditions at the site. Also, the action must be in compliance with federal,
state, and local environmental requirements. To provide proper coordination between
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federal, state, and local authorities, most federal and state environmental cleanup
programs require proper notification prior to conducting interim cleanup actions.
After the completion of an interim cleanup action, additional environmental investigation,
monitoring, and/or further cleanup action may be needed before a comprehensive "final"
cleanup is achieved.

10.2.2.1.10 Cleanup Action

As discussed in Section 4.4, a cleanup action is primarily conducted to reduce or
eliminate real or potential exposures to hazardous substances and other regulated
materials. From a development standpoint, cleanup actions can help manage project risk
by reducing uncertainty associated with the environmental conditions.  The extent to
which this is true will depend on the specific nature of the cleanup action.
If a municipality is contemplating conducting a cleanup action or evaluating a property at
which cleanup actions have already taken place, it is important to consider how those
cleanup actions are likely to influence redevelopment efforts.  Cleanup actions that
remove all contaminants are generally more desirable to developers, but are not always
technically feasible or cost effective.  Long-term management of some waste in place is
therefore often a reality for many properties (See Section 4.7.6, "Are long-term cleanup
action-related treatment systems or other engineered controls in place or planned? ").
With effective planning between the entity conducting the cleanup action and the entity
seeking to facilitate the redevelopment of the property - which in some cases may be the
same entity - potential barriers to redevelopment and therefore project risks can be
minimized.
Many factors can impact how well a cleanup action reduces project risk. Apart from non-
cleanup related issues (e.g., the economy), these may include permanence (e.g., Have
contaminants been completely removed? Have they been converted to a physical or
chemical form that effectively prevents leaching or reduces toxicity?).  Other factors
include the need for long-term operation and maintenance (see Section 10.2.2.1.12), the
need for institutional controls (see Section 10.2.2.1.13), the time it takes to  complete the
cleanup action, and any physical barriers that might limit future uses (e.g., treatment
buildings, monitoring wells).
It should be noted that for CERCLA cleanups, EPA does not have the authority to
conduct or to require responsible parties to conduct actions that are solely intended to
provide enhancements or betterments to the property. An example of a potential
enhancement might be the construction of a parking lot that is not needed to implement
the cleanup. An EPA memorandum titled, Considering Reasonably Anticipated Future
Land Use and Reducing Barriers to Reuse at EPA-lead Superfund Remedial Sites (March
17, 2010), further discusses when actions taken to facilitate reasonably anticipated future
land use may be within the scope of CERCLA authority  (available at:
www.epa.gov/superfund/programs/recycle/pdf/reusedirective.pdf).  With proper  planning it
may be possible for the municipality or developer (if one already exists) to  fund and/or
construct enhancements in coordination with the cleanup activities.
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10.2.2.1.11 Voluntary Cleanup

Many states have voluntary cleanup programs (VCPs) to encourage and facilitate the
cleanup of brownfields properties. The specific details of these programs vary from state
to state, but they are often designed to provide more flexibility to parties performing
investigation and cleanup activities.  This flexibility potentially allows such parties
greater control over the conduct and  scheduling of those activities and helps to reduce the
associated costs.
Further, at certain sites being addressed under a state VCP, the 2002 Brownfields
Amendments provide that EPA may  not take a CERCLA enforcement action against
parties at the site, absent special circumstances (See discussion of "eligible response
sites" in Section 7.2.4.).  This provision creates an important incentive for performing
voluntary cleanups of brownfields under state VCP oversight.
EPA may enter into a non-binding memorandum of agreement (MO A) with individual
states that clarifies the general roles and responsibilities of each agency regarding
cleanups under the state VCP. While an MO A, or absence of an MO A, does not alter
EPA's or a state's legal authority, the MO A may provide the general public and
development community with some confidence that EPA and the state agency are
working in a coordinated manner.

10.2.2.1.12 Maintenance and Monitoring of Remedial  Systems and Structures

Many contaminated properties can have residual contamination after the completion of a
cleanup action. To ensure continued protection of human health and the environment,
engineered controls (such as pavement that acts as a cap over contaminants) and
monitoring (such as measurements of contaminant levels in ground water or indoor air)
are often required.  The engineered controls generally necessitate some sort of
maintenance.  For example, where pavement will be serving as a soil barrier or cap,
periodic inspection for cracks and repaving are common maintenance activities.
Site monitoring serves to verify the results of environmental investigations, reveal trends
in contamination levels, and monitor the performance of remedial systems and structures.
Site monitoring may include the collection and analysis of ground water, soil, air, or
other media. Generally, the cleanup  action plan or closure report will identify the
required maintenance and monitoring activities.
Likely and known maintenance and monitoring requirements should be identified early
on in planning for the redevelopment.  This includes determining which parties will be
responsible for fulfilling these requirements.  If a municipality takes on management
responsibilities of a property through acquisition or leasing it should prepare a plan for
meeting any obligations it might have regarding the operation, maintenance, and
monitoring of the remedial systems and structures. This includes establishing a routine
schedule for inspecting engineered controls and conducting monitoring to identify
deficiencies and other  developing problems before they become more serious.
Failure to perform the  required maintenance or monitoring can allow the property
conditions to deteriorate and endanger  human health and the environment, and result in
potential liability (See discussion of continuing obligations under CERCLA in Section
7.2.3). In addition, most post closure environmental insurance policies require
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fulfillment of maintenance and monitoring requirements as a condition of coverage.
Failure to properly conduct maintenance and monitoring can result in denial of insurance
coverage claims.

10.2.2.1.13 Institutional Controls

Institutional controls typically include easements, environmental covenants, or deed
notices, which notify property users and future owners as to the presence of residual
contaminants that remain after the completion of the cleanup action and of any
restrictions on future uses of the land, surface water and ground water (See Section 4.7.7
for further discussion of institutional controls). Generally, the cleanup action plan or the
closure report for the cleanup action will identify the required institutional controls.
As with maintenance and monitoring requirements, considering likely or known
institutional control requirements early in the redevelopment process can help the
municipality anticipate potential issues and plan for effective implementation. This
includes determining which parties will be responsible for fulfilling them.  Municipalities
can play a direct role in ensuring compliance with institutional controls because the
municipality has access to the public records, and regulates zoning and the issuance of
building permits.
Failure to follow the institutional controls can allow exposures that endanger human
health and the environment, and result in potential liability (See discussion of continuing
obligations under CERCLA in Section 7.2.3).  In addition, many post-closure
environmental insurance policies include a requirement to implement and maintain the
institutional controls as a condition of coverage.

10.2.2.1.14 Oversight of the Environmental Contractors

Performing appropriate oversight of the site assessment, cleanup action, and construction
contractors can potentially help reduce the municipality's common law liability should
something go awry with the redevelopment. The municipality can include work out  and
mediation clauses in its contracts if there is doubt as to the contractor's ability to fully
perform the agreed obligations.  Also, the contracts can be staged or drafted with
contingency clauses to reduce uncertainty on complicated development projects.
Forward commitment contracts can sometimes be used to provide the certainty that a
municipality needs to proceed with a project while providing flexibility should conditions
change as the project progresses.

10.2.2.1.15 Following Accepted, Good Commercial Practices

The municipality can minimize the risk of contractual and negligence-based liability by
following accepted good commercial and customary practices and by fulfilling the terms
of the contracts to which it has agreed.
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10.2.2.2  Statutory/Regulatory Protections

10.2.2.2.1 Statutory Exemptions and Defenses

Statutory exclusions and defenses can often be the first layer of protection for
municipalities or other entities considering the acquisition or leasing of a potentially
contaminated property because they are embodied directly into the law. Although
sometimes subject to interpretation and legal challenges, they can provide a solid
foundation for building a risk management strategy. Government enforcement discretion
policies, while they do not carry the same weight as statutory exclusions and defenses
and do not bind private parties, can also provide important protections for the
municipality.
As discussed in Chapter 7, Potential Liability under Federal and State Cleanup Statutes,
liability protections may or may not apply to a specific property depending on the method
of acquisition and other site-specific facts.  A clear understanding of potential statutory
liabilities and the available exemptions and defenses to them is needed for the
municipality to evaluate the various types of acquisition and control options.  It is also
critical to fully understand the threshold conditions and continuing obligations that are
necessary to qualify for and maintain these liability protections.

10.2.2.2.2   Prospective Purchaser Agreements

Since the passage of the Brownfields Amendments in 2002, a person may acquire
property knowing that it is contaminated and not incur liability under CERCLA as long
as the purchaser meets and continues to comply with all of the requirements of a bona
fide prospective purchaser as delineated in  the statute (See Section 7.2.3.2 for further
description of the BFPP provision). As a result of the bona  fide prospective purchaser
provision, most prospective purchasers no longer need to seek prospective purchaser
agreements with EPA.

Since 2002,  EPA will  consider entering into a prospective purchaser agreement only in
very limited circumstances. In a memorandum, Bona Fide Prospective Purchasers and
the New Amendments to CERCLA (May 31, 2002), EPA identifies only two such
circumstances:

   •   Where there is likely to be a significant windfall lien (discussed further in Appendix
       D Section I) and the purchaser needs to resolve the lien prior to purchasing the
       property (e.g. to secure financing)

   •   Where a PPA is necessary to ensure that the property transaction will be completed
       and where the project will provide substantial public benefits to, for example, the
       environment, or to a local community because of jobs created, or revitalization of
       long  blighted, under-utilized property, or promotion of environmental justice

Under those limited circumstances, the Agency will consider the following guidelines in
evaluating whether or  not to enter into an agreement:

   •   Significant environmental benefits will be derived from the project in terms  of
       cleanup, reimbursement of EPA response costs, or new use, and there is a significant
       need for a PPA in order to accomplish the project's goals.
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    •   The facility is currently involved in CERCLA litigation and there is a very real
       possibility that a party who buys the facility would be sued by a third party.

    •   There are unique, site-specific circumstances not otherwise addressed by the
       guidance when a significant public interest would be served by the property
       transaction and the transaction will not otherwise occur without issuance of a PPA.

The May 31, 2002 EPA memorandum is available at:
www.epa.gov/compliance/resources/policies/cleanup/superfund/bonf-pp-cercla-mem.pdf.

A BFPP may sometimes want to perform cleanup work  at a contaminated site which
exceeds the "reasonable steps" required in order to maintain its BFPP status. For sites of
federal interest, under certain limited circumstances, EPA and the U.S. Department of
Justice may be willing to enter into an agreement with a BFPP to perform a cleanup
action.  This agreement is generally referred to as a "BFPP doing work" agreement.  A
BFPP may choose to perform cleanup rather than to wait for a potentially responsible
party or government to do it for a variety of reasons including:
    •   Providing better coordination of cleanup activities and redevelopment plans
    •   Negotiating a lower purchase price from the seller by undertaking cleanup work
       that the seller would otherwise be responsible for
    •   Conducting the cleanup more cost-effectively
    •   Settling a Windfall Lien by agreeing to perform all or part of a necessary cleanup
    •   Recovering costs from responsible parties under appropriate circumstances

EPA and the U.S. Department of Justice issued a memorandum describing these BFPP
Work Agreements titled, Issuance of CERCLA Model Agreement on Consent for Removal
Action by a Bona Fide Prospective Purchaser  (November 27, 2006), available at:
www. epa. gov/compliance/re source s/policies/cleanup/superfund/bfpp -ra-mem .pdf.
If there are concerns about state environmental liability, the appropriate state regulators
should be contacted to determine the availability of prospective purchaser agreements
under state law.

10.2.2.2.3   No Action/ No  Further Action Letters and Comfort Letters

Frequently, the fear of potential CERCLA liability is cited as an obstacle to the
redevelopment of contaminated sites. EPA often receives requests from landowners and
other parties interested in a particular contaminated property asking that the Agency
provide assurance that the party is not liable under CERCLA or that the Agency will not
take an enforcement action against the party. Since the passage of the 2002 Brownfields
Amendments to CERCLA, which provide  explicit liability protections to landowners not
responsible for the contamination, EPA has considered responding to such requests only
in very limited circumstances.

Two types of letters frequently sought by prospective purchasers are comfort letters and
no action assurance  letters.  It is very rare for the Agency to issue a no action assurance
letter.  Comfort letters may be considered for site-specific reasons supporting Agency
policy and initiatives.
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No Action Assurance Letters:  EPA has long had a policy against giving definitive
assurances outside the context of a formal enforcement proceeding that the government
will not proceed with an enforcement response for a specific individual violation of legal
requirements.  However, the Agency has recognized two general situations in which no
action assurances may be appropriate:

   •   When it is expressly provided for by an applicable statute (e.g., CERCLA
       107(a)(3) and recent guidance on no action assurance letters for property owners);
       or
   •   In extremely unusual circumstances, when an assurance is clearly necessary to
       serve the public interest AND no other mechanism can address the public interest
       adequately.

Comfort Letters /Status Letters: In November,  1995, EPA issued a general policy on
the use of comfort/status letters (commonly referred to simply as "comfort letters") for
parties interested in cleanup and reuse. Comfort letters are provided solely for
informational purposes and do not resolve issues of liability at the site.
The comfort letter policy does not change EPA's long-standing practice of not becoming
involved in typical private real estate transactions.  Comfort letters relate only to EPA's
intent to exercise its response and enforcement authorities under CERCLA at a specific
property based upon information known to EPA at the time of the issuance of the letter.
EPA will consider issuing a comfort letter under the following circumstances:

   •   There is a realistic perception or probability of incurring Superfund liability;
   •   The comfort letter will facilitate the cleanup and redevelopment of a brownfield
       property;
   •   There is no other mechanism to adequately address the party's concerns; and
   •   EPA has sufficient information about the property to provide a substantive basis
       for the comfort letter.

Sample comfort letters are provided in EPA's Policy on the Issuance of Comfort / Status
Letters dated November 8, 1995
(www.epa.gov/compliance/resources/policies/superfund/comfort-let-mem.pdf).  EPA has
also issued guidance, a model settlement document, and a sample comfort/status letter on
windfall liens (www.epa.gov/compliance/resources/policies/cleanup/superfund/interim-
windfall -lien .pdf).

EPA policy materials demonstrate that the agency has consistently limited assurances
under section 107(q)(3) to contiguous property owners who meet the criteria of section
107(q)(l)(A).  See 2004 Interim Enforcement Discretion Guidance Regarding
Contiguous Property Owners at page 10
(www.epa.gov/compliance/resources/policies/cleanup/superfund/contig-prop.pdf ) and the 2009
Model CERCLA  Section 107(q)(3) Contiguous Property Owner Assurance Letter
(www.epa.gov/compliance/resources/policies/cleanup/superfund/cpo-assure-mod-ltr-mem.pdf).
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10.2.2.2.4  Other Determinations of Completion

A number of states provide certificates or other documents to verify when cleanup
requirements under voluntary cleanup programs or other regulatory programs have been
adequately met. Each state will impose its own limitations on the scope of the document
and in the nature of any disclaimer and re-opener language; however, in general these
determinations can provide some level of "closure" and comfort to the various parties
with a potential financial stake  in the property and its redevelopment (e.g., lenders,
insurers, investors, tenants).  State determinations of compliance do not resolve issues of
federal liability at the site.

10.2.2.3  Transactional Activities

10.2.2.3.1  Escrow Accounts

Escrow accounts can be used to cover issues not resolved in the purchase and sale of a
property.  Whatever purpose the escrow agreement has usually occurs after the closing.
This may include escrow funds for remediation, long-term  monitoring, fees associated
with closure, and so forth.

10.2.2.3.2  Purchase Price Adjustments

If the buyer agrees to complete remediation or meet  some other obligation in the future
related to the remediation or other activity identified during the due diligence, the seller
can offer an adjustment to the purchase price rather than pay for that expense directly.

10.2.2.3.3  Grants

Although not normally thought of as a risk management tool, grants can reduce the
municipality's financial exposure or provide the funds necessary to the successful
completion of the project.  Municipalities may be eligible for certain types of EPA
brownfields grants, including property-specific grants for Phase I and Phase II ESAs,
even though they are not the owners of a property.

10.2.2.3.4  Tax Benefits and  Credits

Federal and state tax incentives exist to help reduce the financial risk associated with
redeveloping brownfields properties.  The Federal Brownfields Tax Incentive (BTI)  is
one such example.  The BFI was passed as part of the Taxpayer Relief Act of 1997
(Public Law 105-34) and codified through Section 198(a) of the Internal Revenue Code.
The incentive allows a taxpayer to fully deduct the costs of environmental cleanups in the
year the costs were incurred rather than spreading them over a period of years.
Additional information on the BTI,  including fact sheets and case studies, is available at:
www.epa.gov/brownfields/tax/.  A number of states have also created tax incentives
specifically targeted to brownfields properties. State brownfield program coordinators
should be contacted for information regarding those  incentives.
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10.2.2.3.5   Private Investors

Investors put money into a redevelopment project in return for a share of the profits from
the project.  Because their money is fully at risk, private investors carefully consider the
risks associated with redeveloping contaminated properties. Many private investors
understand that it is generally in their best interests to work with municipalities to help
ensure a successful outcome and, therefore, may help the municipality identify areas of
potential risk that the municipality had not anticipated or fully understood.  At the same
time, the interests of the private developers and the municipality may not always be
aligned, so the municipality should be cautious of overly relying on that advice and
assistance.
Private investors also often provide the initial, partial financing that provides enough
certainty that other more traditional financing sources can feel comfortable financing the
remaining amount.

10.2.2.3.6   Specialized Loans

Loans  are generally secured by collateral that the lender can seize if the borrower defaults
on the  loan. Redevelopment projects for contaminated properties have historically been
perceived as too risky for traditional bank loans but there are lenders that have
established expertise in these projects. They are often familiar with the governmental and
private grants that can help fund  a project and they understand contaminated properties
and cleanup action projects.  Like the private investors discussed in 10.2.2.3.5, some of
the specialized lenders can help guide the municipality's evaluation process because of
their experience with these types of projects.
In some cases, these specialized lenders will provide early, partial financing that gives
enough certainty that other more traditional lenders can feel comfortable financing the
remaining amount.

10.2.2.3.7   Redevelopment Authorities

In general, redevelopment authorities are public administrative units charged with
redeveloping blighted areas within a particular jurisdiction.  Many were created initially
in response to the post-World War II housing shortage and the availability of federal
money to address urban renewal. The specific powers of a redevelopment agency are
spelled out in the  enabling legislation from which it derives its authority. Examples of
specific powers include buying and selling property, acquiring property through the
exercise of eminent domain,  granting tax concessions to encourage commercial and/or
residential development, receiving loans and grants from the federal government,
borrowing money, and entering into contracts.

It is not unusual for a municipality to transfer property that it owns to the redevelopment
authority for that same jurisdiction. Based on the enabling legislation, there can be
important legal and policy reasons to make such a transfer. However, if a municipality is
liable under CERCLA as an owner/operator at the time of disposal or as a generator or
transporter, it does not lose its status as a liable party by transferring the property to a
redevelopment authority. Similarly, the redevelopment authority may not be able to
qualify as a bona fide prospective purchaser if it is found to be affiliated with a liable
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party (for example, the municipality transferring the property) through any corporate,
contractual, or financial relationship other than the relationship created by the mechanism
transferring title to the property.

Under CERCLA, a redevelopment authority may also be liable as the current owner of
contaminated property, or as the owner/operator at the time during which hazardous
substances were disposed of at the property, or as the generator or transporter of the
hazardous substances disposed of at the property.

A redevelopment authority may also find itself liable under CERCLA if EPA concludes
that the redevelopment authority and a liable municipality are one and the same entity. In
reaching that conclusion, EPA will look closely at the enabling legislation creating the
redevelopment authority as well as at other factors specific to the situation including the
level of control the municipality exerts over the redevelopment authority. See Section
7.2.3 and Appendix D for an explanation of potential liability protections under
CERCLA.

10.2.2.3.8  Land Banks

An increasing number of states and municipalities are passing legislation to develop land
banks. Land banks may be an  effective tool in redeveloping and reusing properties in
areas suffering from abandonment and blight. Land banks differ from redevelopment
authorities. Generally speaking, redevelopment authorities are created to use significant
governmental powers to develop or redevelop particular properties for a particular
purpose.  In contrast, land banks are created to acquire the growing number of privately
or public-owned urban parcels that are not being reclaimed or redeveloped by market
forces.

Land banks are governmental  or non-governmental entities created to assemble,
temporarily manage, and develop vacant, abandoned and tax-delinquent properties in
order to convert them to a productive use. While most land bank properties may not be
contaminated,  municipalities should be aware of the potential for contamination prior to
acquiring the property.

Whether a municipality acquiring a land bank property qualifies for liability protection
under the CERCLA involuntary acquisition exemption, bona fide prospective purchaser
provision, third party defense, or other statutory provisions will be determined on  a case-
by-case basis depending on the specific facts at issue. See Section 7.2.3 and Appendix D
for an explanation of the liability protections under CERCLA.

Additional information on land banks can be found on the U.S. Department of Housing
and Urban Development Web site at
www.hud.gov/offices/cpd/about/conplan/foreclosure/landbanks.cfm.

10.2.2.3.9  Contractual Provisions

Reducing exposure to  common law liability begins with following the accepted, good
commercial practices of due diligence. Performing proper oversight of contractors can
also help reduce the municipality's common law liability. Representations, warranties,
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indemnification agreements, and other specific contractual language between the
responsible parties, redevelopers, cleanup action contractors, and the municipality can
sometimes further reduce the municipality's financial exposure when conducting due
diligence, environmental investigations, cleanup action, and construction.  This
contractual language can, for instance, define conditions for taking possession of the
property by the municipality, describe schedules, and identify and assign liability
responsibilities. Municipalities can be either a buyer or a seller depending on the property
recovery action selected. The following are examples of contractual provisions that may
apply to contaminated properties.  These provisions are most commonly included in
transactional agreements (e.g., lease, purchase and sales agreement, etc); although some
may also be applicable to other agreements. For example, indemnifications are often
found in service contracts for conducting due diligence,  cleanup action, or the operation
and maintenance of equipment.  Private contracts may transfer financial responsibilities
between parties but do not affect statutory liability. Additional information on some
relevant contractual provisions can be found at:
www.epa.gov/brownfields/insurance/insurebf.htmtfabout.  The municipality should consult
with legal counsel when evaluating the uses and benefits of contractual provisions. The
following descriptions are intended to better inform discussions with legal counsel, and
should not be relied upon to make decisions regarding their applicability to a given set of
circumstances.

10.2.2.3.9.1   Indemnification

An indemnification in a contract can sometimes be used to obtain a release from liability
for certain future legal claims, liabilities, and lawsuits, and also for compensation for any
loss it may incur.  This can include liabilities associated with known environmental
conditions or possibly an unknown environmental condition that may have been
associated with prior use of the property. As with many contractual agreements, the
value of the indemnity is only as good as the financial viability and longevity of the party
giving the indemnity. Municipalities should seek expert legal advice regarding the use
of indemnities and should be aware that, depending on the circumstances of their use,
they may undercut the ability to meet the requirements of some CERCLA liability
defenses.

10.2.2.3.9.2   Representations and Warranties

Representations and warranties can be used to define certain facts and provide assurances
about the property or its environmental condition (e.g., all underground storage tanks
have been removed and no further action is warranted).  Specific remedies or
consequences can be included if the representations and warranties are not accurate or not
fulfilled (e.g., the seller or responsible party will remove an underground storage tank
discovered subsequent to the property transfer and conduct any corrective action required
by the regulatory agency). Again, as with many contractual agreements, the value of the
representations and warranties is only as good as the financial viability and longevity of
the party giving the indemnity.
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10.2.2.3.9.3    "As Is" Provisions

An "as is" provision can sometimes be used to avoid liability by the seller for defects in
the land and liability for potential contamination.  In this case, the buyer could be
accepting liability for known, or possibly unknown, contamination on a property. The
use of an "as is" provision requires a good understanding of the risks and liabilities
associated with the property.  This provision is typically used where the buyer determines
that the potential risk and liabilities are well defined, acceptable, and economically
feasible.
In accepting an "as is"  provision, the municipality is relying on the representations and
warranties of the seller. It is important to note that an "as is" provision does not always
completely relieve the seller of its duty to disclose defects in the property to the buyer.
Under many state laws, the seller is required to disclose known facts that may adversely
affect the value of the property.

10.2.2.3.9.4    Environmental Covenants

A covenant can sometimes be used to obligate one party to engage in or refrain from
specific actions, such as a deed restriction prohibiting certain types of activities or
construction on a property by the property owner or lessee. Many states have
implemented environmental covenants, which are agreements between the regulatory
agency and a responsible party that define responsibilities for long-term stewardship of
engineering and institutional controls (See Institutional Controls, Section  10.2.2.1.13).
These covenants may include property owners or lessees of a property.  Additional
information on environmental covenants and the Uniform Environmental Covenants Act
is: www.environmentalcovenants.org/ueca.

10.2.2.3.9.5    Assumption, Retention, and Release Provisions

The buyer and seller of a property can allocate risk or liability for certain conditions
through a provision where the buyer accepts, or the seller retains, responsibility for
known or unknown environmental conditions and releases the other party from liability
for current and future claims arising from the specified conditions.  This approach is
typically used to allocate risk of future liability for a currently existing but unknown
condition.  The provision should be  structured to ensure that the seller is protected from
risk or liability caused by future buyers of the property or tenants of the property.

10.2.2.3.9.6   Schedule of Included or Excluded Liabilities

Where the buyer and seller have agreed to the transfer or retention of certain liabilities,
the contract should include a schedule or list of liabilities that are going to be assumed by
the buyer or retained by the seller.

10.2.2.3.9.7    Post-Signing and Pre-Closing Conditions

Post-signing and pre-closing conditions are agreements between the parties of a property
transfer that allow certain actions to be taken or certain  conditions prior to closing or
during some pre-determined timeframe after signing an intent to purchase.  Typically
these provisions can provide an opportunity for the buyer or seller to back out of deal,
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adjust the purchase price, or other remedies if conditions are not met. These provisions
can be used to allow a buyer to conduct environmental investigations or other activities
and terminate or modify a transaction if certain unacceptable conditions or thresholds are
found. These conditions can also include cost sharing provisions for environmental
investigations and property access agreements.

10.2.2.3.9.8   Fixed Price or Performance Based Contracts

Fixed price and performance based contracts can be used to control financial risk by
reducing uncertainty in the  cost of assessment and cleanup action activities. For
example, fixed price and performance based contracts with environmental cleanup
contractors can help clearly define the costs of assessment and cleanup  action activities.
These types of contracts are routinely used in the construction industry  and increasingly
in the environmental field.

10.2.2.4  Insurance

Obtaining insurance coverage for certain risks may be worth considering if a municipality
is actively managing the property or leading the redevelopment effort.  Alternatively, or
in addition, the municipality can  ask to be named as an additional insured on developers'
and cleanup action contractors' environmental liability policies.
The following are examples of insurance provisions that may apply to contaminated
properties.  These and other insurance products are discussed in more detail at:
www.epa.gov/brownfields/insurance/insurebf.htmtfabout.  The underwriting of contaminated
properties is a specialized and evolving area of insurance and municipalities should
consult with a qualified expert and legal counsel to discuss the benefits and limitations of
these products for a given set of circumstances.

10.2.2.4.1  Comprehensive General Liability Insurance

Comprehensive general liability insurance generally provide broad protection against
situations in which an entity must defend itself against lawsuits or pay damages for
bodily injury or property damage from third party claims.  These claims are enforced and
interpreted based on state law.  Comprehensive general liability insurance can be used to
address general redevelopment issues and other potential liabilities; however, it has
become more restrictive over time and rarely covers environmental liabilities.

10.2.2.4.2  Pollution Liability Insurance

Pollution liability insurance can sometimes be used to protect the municipality against
third party claims for bodily injury, property damage,  and off-site and on-site cleanup
costs. In addition, it can be used to provide some protection against newly discovered
contaminants, natural resource damage claims,  regulatory reopeners, and other
contamination-related costs. These policies are typically short-term, averaging one to
five years and often not more than ten. Regulatory reopener coverage usually begins
when the project has achieved a "No Further Action"  status and extends coverage for ten
years.
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A specialized form of pollution liability insurance is contractor's pollution liability
insurance.  This type of insurance covers contractors against the possibility that their
activities on the property will make the pollution worse or cause third parties to be
harmed.  It is usually purchased on an annual basis by the contractors providing cleanup
action services. For large, complex projects, contractor's pollution liability insurance can
be purchased on a project basis, with limits dedicated to the specific project. It is
important for the municipality to make sure that all of the contractors and subcontractors
involved in the project have adequate pollution liability insurance limits and that they
maintain this coverage throughout the project and  for some period after completion.

10.2.2.4.3   Errors and Omissions Insurance

Errors and  omissions insurance can sometimes be  used to protect the municipality from
errors in professional services. Generally, this insurance is purchased on an  annual basis
by the consultant or attorney providing services to the redevelopment project.  The
municipality should make sure that the professionals involved in a project have adequate
errors and omissions  insurance coverage that is maintained throughout the project and for
some period after completion.

10.2.2.4.4  Cost Cap Insurance

Cost cap insurance can sometimes be used to reduce financial risk by providing the
insured an upper limit on the costs of cleanup action.  Costs over budget are  paid by the
insurer, with limitations.  Cost cap insurance can addresses issues such as cost overruns
for cleanup action expenses, changes in regulatory standards/laws, and newly discovered
contaminants.  Policies are based on the cleanup action  cost plan and terms typically
based on the anticipated length of the cleanup action.

10.2.2.4.5  Secured Lender Insurance
A secured lender insurance policy can sometimes be used to provide coverage to the
lender for the outstanding loan balance in the event of a default on projects where
environmental contamination exists.  Typically,  a  secured lender policy allows the insurer
to either pay off the outstanding loan balance or pay for cleanup action costs and certain
other damages.

10.2.2.4.6  Finite Risk Insurance

Finite risk insurance can sometimes be used to transfer broad financial liabilities from the
insured to the insurer. Typically, the insured pays the insurer the entire expected cost of
the cleanup action — plus a risk premium to cover potential cost overruns, unanticipated
cleanup action, and third party liability — before redevelopment begins and  the insurer
assumes financial responsibility for the cleanup action.  In many finite risk policies, the
insurer also provides oversight of the cleanup action program. This type of insurance is
generally applied to longer-term and  more costly cleanup actions. These policies can also
be negotiated in a manner that allows the return of unspent monies at the end of the
project.
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10.2.2.4.7 Institutional Controls and Post Remedial Care Insurance
These insurance provisions may potentially be used to reduce financial risk associated
with institutional controls (see Section  10.2.2.1.13) and post-remedial maintenance and
monitoring activities (see Section 10.2.2.1.12). The insurance would typically cover cost
overruns related to the design and establishment of the institutional control and damages
resulting from an error in the design or establishment of the institutional control, an error
or omission on the part of the parties maintaining the control,  or failure  of the control.
The policy terms are typically renewable in multi-year increments, based on the
anticipated length of the post cleanup action monitoring and maintenance. See Section
4.7.7 for a general discussion of institutional controls.

10.3  Cooperating vs. Non-Cooperating or Defunct  Owners - Some
       Risk Management Considerations

Facing potential cleanup and other property preparation costs  that could exceed the fair
market value of the property, owners will often abandon or mothball properties.  Many
buildings and other structures are allowed to deteriorate, creating health and safety issues
and casting blight on the surrounding area.  For these reasons, redeveloping these
properties or,  at a minimum, removing  deteriorating structures is in many cases a priority
for municipalities. As discussed below, the property recovery actions and risk
management strategy for addressing these properties could differ somewhat depending on
whether or not there is an existing owner who may be willing to work cooperatively with
the municipality.

Properties with Cooperating Owners

Owners of mothballed properties may have an incentive to improve the  property or
remove unusable structures in order to reduce their maintenance costs or insurance
premiums, improve their "corporate image," or reduce liability from potential fires or
other safety hazards. For many owners, however, a variety of concerns  may trump these
potential benefits. These concerns include:

   •  Prohibitive demolition or property preparation costs.

   •  Environmental investigations might identify contamination issues and trigger
       action to address those issues under federal, state, or local laws.

   •  Lack of expertise in dealing with environmental liability and cleanups.

   •  Transferring the property could lead to uses that aggravate existing environmental
       conditions and cause the owner to incur greater liability and expense.

By recognizing that these types of concerns exist, it may be possible for the municipality
and property owner to work collaboratively to advance the interests of both parties.  This
cooperation could enable the municipality to gain access for conducting due diligence,
avoid a contentious and time consuming eminent domain taking, or avoid altogether the
burden and risk of acquiring the property or taking on the demolition and cleanup
activities.  It may even be possible to fashion an agreement or structure  financial
incentives so that the municipality has some control over the future use  and timing of
property development. A comprehensive plan with clear benefits to the municipality can
                                                                              133

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help build support among those within the community and town administration
concerned with using public resources to bring about improvements on private property.
A cooperative arrangement with the property owner, along with the property access that
may entail, may also help the municipality and property owner become eligible to receive
federal and state brownfields funding to offset the environmental investigation and
cleanup costs.
Parceling or subdividing a property is an option that can sometimes help address some of
the property owner's concerns and provide other strategic benefits in facilitating
redevelopment. These benefits may include:

   •   Freeing up areas of the property for earlier development.

   •   Creating a source of revenue through the sale of a portion of the property, which
       can then be used to clean up other contaminated areas or improve the safety,
       appearance, or marketability of the remaining areas (e.g., by demolishing
       buildings or making other improvements).

   •   Helping to ensure that the components of a "permanent" cleanup remedy (e.g., an
       area capped with a protective cover)  remain  protective by retaining control over
       the use of those areas.  In some cases, it may be possible to utilize these areas in a
       manner that ensures protectiveness while supporting the reuse of the surrounding
       properties (e.g., by installing a parking lot or pocket park over the areas).

Evaluating the potential use of parceling requires not only the knowledge of the
environmental conditions for the entire property, but also its affect on legal liability,
which may differ depending on the applicable statutes.  Appendix D discusses parceling
on a statute-specific basis.
Where the municipality agrees to conduct or participate in environmental investigations,
building demolitions, cleanup, or undertake  other activities on the property, the
municipality will need to assess whether that involvement could subject it to
unacceptable legal, financial, and other risks. The municipality should also consider
whether risk management tools, such  as those outlined in this chapter,  might be
appropriate.

In conducting these types of activities, the municipality must be careful that doing so
does not worsen conditions and subject it to  liability under environmental laws, or
negligence and other common law liabilities. Even  building demolition can carry some
environmental liability risk if not carefully planned  and executed.  For example,
demolition may release asbestos from insulation into the air or surrounding soils.  The
removal of building foundations or slabs could alter ground water flow or allow
contaminants in the underlying soil to leach  into ground water or migrate to the surface.
Burying demolition debris and other materials on the property could create additional
sources of contamination or create a pathway for volatile contaminants to migrate to the
surface. Other issues could arise from the temporary placement of contaminated
demolition debris, which if not conducted properly could create a contaminant release.
Before proceeding with on-site activities, the municipality will need to have sufficient
understanding of the property's environmental conditions in order to develop measures to
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minimize the potential for causing or contributing to a release. Keeping the building slab
or foundation in place might be one way to avoid releasing underlying contaminants or
altering ground water flow. Placing demolition debris on an impermeable surface and
covering the debris piles to control airborne releases could also help prevent releases.
Other measures could include analyzing soils below areas that will be used for debris
storage to support a defense against potential future claims that the storage activities
caused or contributed to a release.

Properties without Owners or with Non-Cooperating Owners

Gaining access at abandoned properties or those with an uncooperative owner in order to
assess environmental conditions, let alone conduct demolition and cleanup, can be
problematic.  In situations where a fire or other public safety threat exists, most
municipalities and  states have the authority to enter the property to address those specific
issues, but these authorities may be limited and not extend to other areas of the property.
Unfortunately, very few states have laws in place to  enable municipalities to access a
property to perform an environmental assessment or conduct cleanup, or to allow it to
seek cost recovery  for those activities. The May 2008 report by the Northeast-Midwest
Institute referenced in Section 4.7.4 identified only a few states where this is currently the
case.  Again,  where access is available, the municipality needs to consider the
environmental liability and other project risks associated with undertaking any activities
on the property.
If, after conducting a Phase I Environmental Site Assessment on an abandoned property
there is reason to believe that significant contamination  issues do exist, it is advisable to
notify EPA or the state.  This may be necessary to protect the health and safety of the
community and could potentially help the municipality avoid legal and political risks.
There may be other advantages, as well.  If EPA or the state believes that there is a
sufficient basis for these concerns, the Agency may initiate its own investigation into the
environmental conditions. These agencies can use various  authorities to obtain
information relevant to that investigation and, if necessary, to gain access to the property.
Further, should the situation dictate, they may be able to take steps to address these issues
or compel the responsible parties to do so. While this may not always occur in the
timeframes desired by the municipality due to federal and state resource constraints,
procedural issues, and other reasons, the end result might be that the cleanup and
revitalization of the property moves forward with less direct involvement by the
municipality.
If the property is a  high priority for the municipality, and obtaining access for
investigation, building demolition, or cleanup is not  a viable option, acquisition may be
the only available means of dealing with abandoned properties. There are no absolute
guidelines for making this decision. It will depend on how much information is known
about the environmental conditions and other pertinent factors, how risk averse the
municipality  is, whether the potential project risks can be adequately managed, and other
considerations specific to that situation.
As has been discussed throughout this workbook, it is important to consider which
federal and state environmental statutes may apply.  For example, under certain state and
federal environmental statutes  and state property transfer laws, some level of
environmental investigation and, if necessary, cleanup might be automatically triggered
                                                                                135

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and transferred to the municipality upon acquisition or leasing. Even if the primary intent
of the municipality is to acquire the property so as to demolish buildings or make other
improvements, the municipality may find that it must then address other areas of the
property as well. Remember, too, that the type of acquisition (e.g., eminent domain
taking, property tax foreclosure, direct acquisition) may affect liability protections under
federal and, possibly, state environmental  statutes (Discussed further in Chapter 7 and
Appendix D).
Acquiring a property that has already been investigated or remediated will reduce the
uncertainty and therefore make the project risks more predictable.  A property where
these activities have occurred, even where some contamination remains on the property
as part of the permanent remedy, can often be a preferable option for acquisition than one
where the environmental conditions are largely unknown. This will also depend on
whether the investigation and cleanup was comprehensive and occurred under the proper
level of oversight. It must again be emphasized that some long-term "continuing
obligations" will often need to be met in order to preserve liability protections under
CERCLA and other applicable statutes that are discussed in Chapter 7 and Appendix D.
A municipality considering the acquisition of a property may be able to access federal
and state funds or other resources to cover some of the costs of environmental assessment
and cleanup. EPA's Brownfields Web site (www.epa.gov/brownfields/index.html) is a great
starting point for identifying potential sources of assistance. Contact information for
EPA's national and regional  offices is also provided in Appendix F.
A municipality may also want to consider whether parceling the property after acquisition
could offer some of the advantages  discussed above.
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11  Selecting a Property Recovery Action
11.1  General

 As discussed in Section 1.5, a selected property recovery
action generally should affirmatively answer four core
questions:

    •   Will it achieve the project goals?

    •   Is the project financially viable and realistic?

    •   Are the necessary resources available?

    •   Are the risks acceptable?

This begins with a consideration of the redevelopment
obstacles associated with a given property recovery
action.
       This Chapter:
•  Summarizes the process
   for evaluating property
   recovery action
•  Describes worksheets for
   documenting the property
   recovery action evaluation
•  Describes information to be
   included in a final Project
   Summary
As the examples in Chapter 5 suggest, redevelopment obstacles are often the result of
inadequate information.  Reducing this uncertainty will often eliminate the obstacle or at
least minimize the risk that it presents to a project.  The selection of a property recovery
action will, therefore, typically include an evaluation of redevelopment obstacles in an
iterative process consisting of three key steps:

    1)  Identify redevelopment obstacles for that property recovery action.

    2)  Identify potential risks associated with each redevelopment obstacle and take
       actions to resolve information gaps to minimize uncertainty.

    3)  Identify risk management tools to address the uncertainty and other risks that
       remain.

The results of this redevelopment obstacle evaluation process, combined with the
appropriate financial analysis, will form much of the bases for addressing the four core
questions noted above.

11.2  Evaluating Redevelopment Obstacles

Figure 11.1 depicts a decision flow diagram for evaluating redevelopment obstacles. The
decision process is dividing into three sections — each differentiated by a unique color
— that are linked to these three key steps. A separate worksheet is associated with each
section (i.e., Worksheets # 5, 6, & 7). This chapter describes how these three worksheets
can be used to guide the  evaluation process.
Blank worksheets and instructions for Worksheets 6 & 7 are provided at the end of this
chapter (available for download at www.epa.gov/region 1/brownfields/prepared).  To

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illustrate how Worksheets # 5, 6, & 7 might be utilized, Appendix C includes partially-
completed worksheets for a hypothetical scenario.  A set of worksheets would be
completed for each property recovery action being considered. It is also advantageous to
evaluate "no action" option against which the risks and benefits of the other property
recovery actions can be compared. In some circumstances, "no action" may carry more
project risks and other drawbacks than taking a more proactive property recovery action.
          Identify
       Redevelopment
         Obstacles
                                                      IV o
        Identify risks
       associated with
        each obstacle
Action needed
to obtain more
 information?
Are risks from
 the action
 acceptable?
                                                                          Adequate
                                                                         information to
                                                                          understand
                                                                            risk?
                                                           JVes
                                    Risk
                                 management
                                   Continue until all
                                 obstacles are evaluated
                                 or until a risk cannot be
                                  acceptably managed
                                    No
Figure 11.1 - Redevelopment Obstacle Evaluation Process


11.2.1   Worksheet #5:  Identification and Prioritization of
          Redevelopment Obstacles associated with a Property Recovery
          Action [Blue Section]

Worksheet #5 (described in Chapter 5) serves to document the redevelopment obstacles
associated with a property recovery action and other useful information needed to
understand and describe each obstacle. In most cases, the process of identifying
redevelopment obstacles begins after the Phase I Environmental Site Assessment since
this usually  represents the first systematic effort to gather and evaluate information on the
property.
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Worksheet #5, as with the other worksheets described in this section, are dynamic
documents that will be revised as new information is obtained. For example, actions
taken to address key information gaps (as depicted in the green section of Figure 11.1),
may result in certain redevelopment obstacles being resolved and new ones being
identified. These new redevelopment obstacles would then be cycled through the
evaluation process.

11.2.2    Worksheet #6:  Identification of Potential Risks and Actions to
          Resolve Information  Gaps [Green Section]

Additional information is often needed to clarify or, in some cases, eliminate or minimize
the risks associated with a redevelopment obstacle.  In many cases, actions taken to
obtain this information, such as a Phase II Environmental Site  Assessment or Phase III
Environmental Investigation, may in themselves  present potential risks to the
municipality (e.g., significant costs, environmental liability, contractual liability).
Worksheet #6 is provided to help the  municipality document potential risks associated
with each redevelopment obstacle, evaluate actions that could be taken to resolve
information gaps, and identify tools and approaches to manage the risks associated with
taking those actions (e.g., insurance provisions, third party indemnification, access
agreements).

11.2.3    Worksheet #7:  Identification of Risk Management Tools
          [Cranberry Section]

Once all planned actions  have been taken to resolve information gaps and better define
risks, a determination should be made by the municipality as to whether the remaining
risks for each redevelopment obstacle are acceptable. Worksheet #7 can be used to
document those remaining risks and identify any risk management tools and approaches
that could be utilized to address them.

11.3  Factoring in the Financial Analysis
The financial analysis (see Chapter 8) is also an iterative process that is integral to and
should be conducted concurrent with  the redevelopment obstacle evaluation process. The
financial analysis will help define the potential costs to the municipality and financial
risks associated with the project. In addition, risk management tools and approaches,
such as insurance products, can further add to the project costs and will need to be
included in the financial analysis.

11.4  Project Summary
Once a property recovery action has been selected, a project summary may be needed to
document key information and help educate municipal decision-makers and the
community about the project.  The format, size, and content could vary depending on the
needs and preferences of the municipality.  The following is an example format that
reflects the approach outlined in this workbook and addresses the four core questions
identified in Section 1.5:
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    •   Project goals
       Describe the project goals — including key parameters (e.g., budgetary
       constraints, time frames) — and the process used to establish them.  Provide a
       brief overview of the preliminary reuse assessment findings that relate to the
       feasibility of these goals.

    •   Property recovery action selected
       Describe the property recovery action selected for the project.  If more than one
       property recovery action was deemed to be acceptable, provide a basis for the
       selection of the preferred  action.  Describe how the selected property recovery
       action will achieve the project goals.

    •   Project viability
       Describe the results of the financial analysis; including an assessment of the
       current value of the property and financial viability of any redevelopment projects
       planned or intended for the property.

    •   Cost to the municipality
       Identify the significant cost items and estimated total cost to the municipality of
       implementing the project. Describe potential sources of revenue and other
       funding to balance these costs.

    •   Risk issues
       Identify the potential short- and long-term liabilities that the municipality may be
       exposed to.

    •   Risk mitigation strategy
       Describe the risk management tools and approaches selected to address the
       identified liabilities.

    •   Project benefits
       Describe the benefits to the municipality of proceeding with the project. This
       could include a summary of any financial benefit (e.g., income, cost savings) to
       the municipality.

Information presented on the worksheets prepared during the evaluation process will
serve as backup information for the property recovery action selection.
                                                                                140

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Worksheet #6:  Identification of Potential Risks and Actions to Resolve
Information Gaps

First column: List the obstacles identified on Worksheet #5.
Second column: List the corresponding priorities.
Third column: Describe the potential uncertainties and other risks that are associated
with each redevelopment obstacle based on the municipality's current understanding of
the property.  More than one risk may be associated with a redevelopment obstacle and
each should be listed separately. Where the same risk is associated with several different
redevelopment obstacles, the risk should be listed with each obstacle.
Fourth column: Indicate whether any actions are needed to resolve information gaps or
better define a risk (e.g., Phase I or Phase II Environmental Site Assessment,  additional
site investigation, negotiations with owners or responsible parties). Enter "No" if no
additional actions are needed or "Yes" if additional actions are needed.
Fifth column: If "Yes" is entered into the fourth column, describe the potential actions
needed or planned.
Sixth column: Describe any risk management tools or approaches (e.g., access
agreements, insurance instruments) that may need to be considered before the required
action is implemented.
Seventh column: Enter any comments or additional information concerning the
implementation of the action.

Once planned actions to resolve information  gaps and better define the risks are taken,
Worksheet #5 and Worksheet # 6 should be reviewed and updated to include  additional
or revised obstacles, risks, causes and contributing factors, or other changes that might be
appropriate based on that new  information.

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Worksheet #6:  Identification of Potential Risks and Actions to Resolve Information Gaps

Property Recovery Action:	
    List the
 redevelopment
 obstacles (from
 Worksheet #5.
Priority
  Identifv oroiect risks    Are actions                                 Identify potential risk
    associated with       Panned to   ldentifV Potential actions Planned    management tools &
redevelopment obstacles,   resolve data        to resolve data gaps.        approaches needed to
                         gaps?                                 implement these actions
                                                                                                 Comments

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Worksheet #7:  Identification of Risk Management Tools

Worksheet # 7 is provided to help the municipality document the potential risk
management tools for each identified redevelopment obstacle.
First column: List the obstacles identified on Worksheet # 6 for which no additional
actions to obtain information are needed or planned (i.e., a "No" is entered into the fourth
column of Worksheet # 6). Upon completion of the evaluation, all obstacles identified on
Worksheet # 5 and Worksheet # 6 should be identified on Worksheet # 7.
Second Column:  List the priorities (as identified in the second column of Worksheets
# 5 and # 6).
Third column: List the potential uncertainties and other risks that are associated with
each redevelopment obstacle (as identified in the third column of Worksheet # 6).
Fourth column: Provide a brief description of the risk management tools or approaches
available to address the identified risks for each redevelopment obstacle. The description
should be concise but include sufficient information to describe the risk management tool
or approach. When identifying risk management tools and approaches:

   •   One risk management tool/approach may address several obstacles or risks. In
       these cases, the risk management tool/approach should be identified with each
       redevelopment obstacle or risk.

   •   More than one risk management tool/approach may be required to address an
       individual redevelopment obstacle or risk. In these cases, each tool/approach
       should be identified.
Fifth column: Indicate whether the risks associated with that redevelopment obstacle
have been adequately addressed.  Enter "Yes" if the risk, considering selected risk
management tools/approaches, is acceptable or "No" if the risk, considering selected risk
management tools/approaches, is not acceptable.
Sixth column: Enter any comments or additional  information concerning the
redevelopment obstacle or risk management tool/approach selected.

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                               Worksheet #7: Identification of Risk Management Tools
   Property Recovery Action:
 List redevelopment obstacles for
 which no further action is planned
to resolve data gaps (Indicated by a
"no " in column 4 of Worksheet # 6).
          Identify potential risks associated with      Identify potential risk
Priority    redevelopment obstacles (from column   management tools or actions
                 3 of Worksheet #6)            to address potential risks
 Are Risks
Acceptable?
Comments

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     Appendix A
Pro Forma Worksheet

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   Step-by-Step Approach to Preparing the Pro Forma Worksheet
A.  The purchase price is inserted in cell Al. This can be the offered sales price, a
    negotiated amount, or it may be based on an appraisal. It is also possible that the
    underlying land title will not change, thus there may be no purchase price and this
    cell will be zero. In addition, liens or defaults may exist which need to be remedied.
B.  Environmental cleanup action costs are input into cells Bl through B3. These costs
    may be defined already as part of the cleanup plan or they may need to be estimated.
    Cell B4 will add these three lines together.
C.  If new construction is involved in the project, complete lines Cl through C5.
    Estimate the square feet to be constructed and the cost per square foot by building
    type.  Leave unused building categories blank or delete those lines.  Worksheets
    detailing costs will likely be needed to  identify and support the various cost elements
    in the pro forma. Costs can include site clearing and preparation, foundation work,
    structural and exterior work, mechanicals, and interior finishing. Ongoing
    maintenance costs and upfront infrastructure costs may require funding prior to
    construction or during the development phase before there are revenues to cover
    them.  Two such examples are fencing  and mowing.
D.  Existing buildings are more complicated. Asbestos removal and other preparation
    may be required. Costs can include demolition or partial demolition with
    renovations. These projects generally have more unknown or hidden costs and are
    therefore riskier. Estimated demolition costs are input in cells Dl and D2. Insert
    renovation costs per square foot by building type into lines D3 through D6.
E.  This particular pro forma shows two separate development areas. The project may
    have one or several distinct areas requiring data.  Thus, development areas can be
    added or subtracted. Cell El totals the hard costs for all building types.
F.  Soft costs are calculated as a percentage of hard costs. These are shown in line Fl.
    Additional due diligence is required on these types of projects, thus there may be
    more  investigative  costs.  These can include: reuse analysis, negotiating access rights
    and project visioning. By this point in  the overall evaluation process, some of these
    soft costs and cleanup action costs have been incurred, thus estimating 20% for  soft
    costs  overall for the developer is not an unreasonable estimate.  Soft costs for all
    standard  development projects include  site plans, engineering, legal, soil testing,
    architectural plans  and marketing plans. A detailed breakdown between disciplines
    is not needed at this point.
G.  Carry costs represent interest calculated on cash invested or borrowed for
    development of the property. Interest on the initial purchase will be calculated from
    the date of transfer, whereas interest on development is calculated based on an
    average over time.  The interest rate should reflect current rates with some
    adjustment based on the overall risk of the project.
H.  What are the sources of financing? Who is going to cover the costs, especially the
    earlier costs? How much cash will be needed to  promote redevelopment and who
    will bear the burden of this cost?  There may be different levels of financing in
    different phases. Ensure that these questions are considered.

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I.   The purchase price, cleanup action, hard and soft construction costs and carrying
       costs are totaled at HI. This cell should represent the total anticipated cost of
       development.
J.   The other half of analyzing the financial viability of a project involves determining
    its end value. One approach to this is to use the property's appraised value; this can
    be based on market comparisons or the property's potential reuse.  Note that this
    type of valuation can be impacted by environmental conditions, decreasing accuracy
    or making it altogether impossible to compare to other properties.  The second
    approach is to determine the property's anticipated revenue stream. Rents, for
    example, can be estimated per square foot and projected with escalations over time
    by type of building.  This information is gathered and input in lines Jl through J4.
K.  Net operating income can be derived by subtracting operating expenses from rental
    rates. Obtain operating expenses and management fees on a per square foot basis
    using industry standards by building type. Vacancy rates are figured by building type
    and local market conditions as well as type of tenants anticipated.  In some cases, it
    may be necessary to include amounts for longer term cleanup action expenses,
    ongoing special cleanup action and maintenance costs, reserves and/or
    environmental insurance. If these are necessary, the J6 cell will calculate an adjusted
    net operating income. Otherwise, cell J5 will serve this function.
L.  The capitalization  rate is used to calculate a rough project valuation.  The rate used is
    based on the market and risk involved.  Consult with industry professionals.
M.  Cell Kl calculates the project's estimated completed value less development costs. A
    cash return on investment is also calculated.
Draft - Do Not Cite or Distribute - 6/2/2009                                                  147

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                                                              Pro  Forma Worksheet
Real Estate Pro Forma for Redevelopment Project
Directions:

PROJECT COSTS
                                  Enter information in cells outlined in red, as appropriate!
Purchase Price
Remedial Action Costs For Project
Hard Costs
Development Araa 1
Hew Construction
Retail
Industrial
Office
Residential
Parking

Square feet 0
Square feet 0
Square feet 0
Square feet 0
Parking Soots 0


Remedial Action (Area 1}
Remedial Action (Area 2)
Remedial Action {Area 3)
Total for Remedial Action
Cost/sf $60 $0
Cost/sf S50 SO
Cost/sf S100 SO
Cost/sf S60 SO
Cost/unit S1.200 SO
Total Hard Costs {Development Area 1}
Development Area 2
Existing Building
Asbestos Removal abatement of materials n building SO
Demolition Square feet[ ol Cost/sf $25 SO
Renovation Costs
Retail
Industrial
Office
Residential
New Construction
Retail
Industrial
Office
Residential
Parking
Square feet 0
Square feet 0
Square feet 0
Square feet 0

Square feet 0
Square feet 0
Square feet 0
Square feet 0
Parking Spots 0
Cost/sf S50 SO
Cost/sf S30 SO
Cost/sf S80 SO
Cost/sf $50 SO
Cost/sf $60 SO
Cost/sf 550 SO
Cost/sf S100 SO
Cost/sf $60 $0
Cost/unit S1 200 SO
Total Hard Costs {Development Area 2)
Total Hard Costs for Oevelopment Areas 1 and 2
Soft Costs
% of hard costs and remediation costs 20%
CARRY COSTS
Purchase Price SO SO
Months 24
Rate 8.50%
Soft + Hard Costs + Remediation SO SO
Months 24
Rate 850%
TOTAL dEVELOPMEHT COSTS
PROJECT VALUE
Net Operating Income
Capitalization Rate
Industrial Sq Feet 0
Office Sq Feet 0
Retail Use Sq Feet 0
Residential per 2000 sf 0
Net Operating Income
Less Vacancy 5%
SS / sf S5.50 SO
SS/sf 518.00 SO
SS/sf S16.50 $0
SS/sf S21.600.00 SO
$0
$0
Less Long Term Remediation Operating Expenses SO
Less Environmental Insurance
Adjusted Net Operating Income
so
ป
8.00%
$0|A1

$0 B1
$0 B2
$OB3
•$OB4
C1
C2
C3
C4
C5
$0 C6
D1
D2
D3
D4
D5
D6
D7
D8
DO
D10
D11
$0 D12
ME1
$0 F1
$0 G1
JDH1
J1
J2
J3
J4
J5
J6
PROJECT VALUE COMPLETED AND OCCUPIED


PROFIT

Cash on Cash Return
  $0 K1
  $0

00%
                                                                                                                          Acquisition Price, may be based on appraised value minus remediation

                                                                                                                          Cost of implementing remedial action (e.g , soli or water cleanup}
                                                                                                                          Cost of implementing remedial action (e g.. soil or water cleanup)
                                                                                                                          Cost of implementing remedial action (e.g.. soil or water cleanup)
                                                                                                                          Total Remedial Action Cost  (BHB2+B3)
                                                                                                                          Cons ruction cost per sf for retail
                                                                                                                          Cons ruction cost per sf for industrial
                                                                                                                          Cons ruction cost per sf for office
                                                                                                                          Cons ruction cost per sf for residential
                                                                                                                          Cons ruction cost for parking per space
                                                                                                                          Total Construction Cost Area 1 (CHC2+C3^C4-fC5)
                                                                                                                          Lump sum cost of asbestos removal
                                                                                                                          Demolition cost per sf
                                                                                                                          Renovation cost per sf of retail
                                                                                                                          Renovation cost per sf of industrial
                                                                                                                          Renovation cost per sf of office
                                                                                                                          Renovation cost per sf of residential
                                                                                                                          Cons ruction cost per sf of retail
                                                                                                                          Cons ruction cost per sf of industrial
                                                                                                                          Cons ruction cost per sf of office
                                                                                                                          Cons ruction cost per sf of residential
                                                                                                                          Cons ruction cost per parking space
                                                                                                                          Totai Rehab and Construction Cost Area 2 (Total D1 thru D11)
                                                                                                                          Total Construction Costs Areas 1 + 2 (C6*D12)
                                                                                                                          Softs costs 20% of construction costs (20% of E1}

                                                                                                                          Interest costs on land acquisition for two years
                                                                                                                          (A1 X % per year X 2 years)
                                                                                                                          Interest Costs on construction, rehab and remediation
                                                                                                                          (B4*E1-*-F1 X% per month X# of months
                                                                                                                          Tots! of all development costs (A1+B4+E1-fF1+G1)
                                                                                                                          Total industrial sf X estimated net (ease rate per year
                                                                                                                          Total office sf X estimated net lease rate per year
                                                                                                                          Totai retail sf X estimated net tease rate per year
                                                                                                                          Total residential units  X estimated annua! rent

                                                                                                                          Total of annual net rental income (J1+J2-f-J3+J4)
                                                                                                                          Net Operating cincorne minus vacancy %.
                                                                                                                           minus cost of ongoing remdiation. minus cost of environmental insujrani
Adjusted NO! divided be capitalization rate reflecting yieid and risk


Project completed value minus lota! of ali development costs (K1  - H1]

Profit as % of Total Development Cost

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          Appendix B
Example Sources-and-Uses Chart

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                          Sources-and-Uses Chart (Sample)

                  USES OF FUNDS                                   SOURCES OF FUNDS
Acquisition                                $250,000
Transaction Costs                            $35.000
Total Acquisition Costs                       $285,000

Hard Costs
Construction                               $1,300,000
General Conditions                          $150,000
Profit and Overhead                         $400,000
Demolition/Property Improvement              $50,000
Remediation                                $250,000
Hard Cost Contingency                 10%   $215,000
Total Building Loan Hard Cost               $2,365,000

Project's Soft Costs
Borrower's A/E Fee                          $285,000
Bank Engineer                               $20,000
Developer Owner's Representative              $65,000
Bank Legal                                 $50,000
Developer Legal                             $65,000
Accounting                                 $35,000
Environmental Phase I                        $8,000
Environmental Phase II and III                  $60,000
Other Environmental Professional Fees           $30,000
Survey                                     $10,000
Title Insurance                               $7,000
Appraisal                                   $9,000
Bank Commitment Fee                        $20,000
Construction Interest                          $86,000

Insurance                                   $30,000
Real Estate Taxes1                            $24,000
Building Permits                             $20,000
Other                                      $15,000
Letter of Credit/Bond Fee                      $ 18,000
Soft Cost Contingency                 10%    $85,700
Other                                      $5,000
Total Building Loan Soft Costs                $947,700

Developer Fee                              $100,000

Operating and Lease-up Reserve                $60,000
                       Construction Sources of Funds

              1st Construction Loan                  $720,000
              2nd Construction Loan                    $0
              Developer Equity                      $ 125,000
              Equity from Federal Tax Credits1         $230,000
              Equity from State Tax Credits1            $75,000
              Grant Source #1                        $15,000
              Grant Source #2                          $0
              Other                                $1,165,000
              Deferred Developer Fee                  $35,000
              TOTAL CONSTRUCTION SOURCES    $2,365,000

                        Permanent Sources of Funds

              1st Permanent Mortgage                 $2,700,000
              2nd Permanent Mortgage               $465,000
              Developer Equity                      $ 125,000
              Equity from Federal Tax Credits1         $230,000
              Equity from State Tax Credits1            $75,000
              Grant Source #1                        $15,000
              Grant Source #2                       $147,700
              Other                                $3,757,700
              Deferred Developer Fee                    $0
              TOTAL PERMANENT SOURCES       $3,757,700
              Note: 1 Applicable to private
              development projects
TOTAL USES OF FUNDS
$3,757,700

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               Appendix C
Examples of Completed Worksheets #5, 6 &7
                                        151

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            Examples of Partially Completed Worksheets 5, 6 &7

Overview

The following exercise is intended to illustrate how a municipality might utilize the
worksheets for a particular project. The assumptions, issues, and other considerations
presented have been simplified and in practice there may be considerably more
complexity involved. Worksheets 1 through 4 have not been completed for this scenario;
although, a general discussion of the goals and some key findings of the due diligence
process are described in the scenario summary. Also, the Sources-and-Uses Chart and
the Pro Forma worksheet — which would be used concurrently with Worksheets 5, 6,
and 7 — are not factored into this exercise.

The amount and type of information that a municipality includes on the worksheets will
depend on how the municipality intends to use them and may differ from that shown on
the completed worksheets. Some may choose to add only the most essential findings and
information, while others may also find it useful to document additional background
information.

It is important to remember that the use of the worksheets is an iterative process in which
each of the worksheets would be updated and revised as new information is obtained and
decisions are made by the municipality as to next steps. This exercise shows how the
first pass through that process might play out.  Also, only one property recovery action is
being evaluated—in this case, collaboration with the current property owner.  In
practice, a municipality might evaluate two or more property recovery actions at the same
time.

Scenario Summary

Local officials have been long concerned with the deteriorating condition of a 3-acre
property located on the fringe of its commercial district. The buildings are in serious
disrepair and represent a potential fire and safety threat, and also have a detrimental
effect on the economic vitality of the surrounding district.  The municipality would like
to have the property returned to productive use or, if that is not practical, for the buildings
to be demolished.

The municipality attempted to conduct a Phase I Environmental Site Assessment of the
property; however, the extent of the Phase IESA was limited by the owner's refusal to
provide access.

Some key findings of the Phase I ESA are:

   •   The property is currently assessed for $800,000 without taking into account any
       environmental cleanup costs, building demolition, and other costs to prepare the
       property for redevelopment.
                                                                              152

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   •   Property taxes are in arrears for $540,000.  No other liens have been recorded
   •   Based on visual examination from the property boundary, the buildings may be
       structurally unsound and beyond rehabilitation.
          -   The status of the fire protection system is unknown.
          -   The perimeter fence is not adequately maintained and has been breached
              in several locations.
   •   Environmental conditions/status:
          -   Based on the age of the buildings and statements from former employees,
              asbestos is expected to be present in the boiler plant and on heating pipes
              throughout the property.
          -   Above ground and underground tanks were historically used for heating
              oil, lubricating oil, and gasoline.  Information provided by the state's
              Department of Environmental Protection (DEP) indicates that a heating oil
              tank is still present on the property; however, other tanks were closed in
              accordance with the regulatory requirements.
          -   The facility is registered as a RCRA small quantity generator (primarily
              solvents, lubricating and other waste oils, cleaning solutions, paints).  The
              last state RCRA inspection was in November 2002.  Paperwork violations
              were noted and resolved.
          -   No other outstanding compliance issues were reported by EPA and the
              DEP.
   •   Other general findings:
          -   The access road to the facility is in  serious disrepair.
          -   Sewer service was brought to the property in 1934 when
              industrial/commercial use of the property began.

Property Recovery Action(s) Being Considered

The property recovery action that will be evaluated is collaboration with the current
property owner. Although the owner did not allow access for the Phase IESA or agree
to be interviewed regarding property conditions, municipal officials think it may be
possible to work out a mutually-beneficial strategy for moving the property toward
redevelopment. At this point, municipal officials view this approach as preferable to
property recovery actions that could involve property acquisition.
                                                                               153

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Worksheet #5: Identification and Prioritization of Redevelopment Obstacles associated with a Property
               Recovery Action
 Property Recovery Action:  Collaboration with the Property Owner
Identify redevelopment obstacles and other key n. .. AJJ-X- ,• t *•
considerations Pnonty Additional information
Lack of clear title
Environmental conditions are not fully known
Environmental status is not fully known
Access road to the property is in serious disrepair and
may require resurfacing
Buildings are seriously deteriorated
High
High
High
Medium
Medium
Owner still exists, but property taxes in arrears for $540,000
Phase 1 ESA conducted, but property access not allowed.
Asbestos is expected to be present in boiler plant and on heating pipes
throughout facility.
No releases or outstanding environmental compliance issues reported to EPA
or State DEP.
A 10,000 gallon tank containing heating oil may be in use. Other above ground
and underground tanks used for lubricating oil and gasoline were closed in
accordance with regulatory requirements in 2005.
Notified as a RCRA small quantity generator (primarily solvents, waste oils,
cleaning solutions, paints). Last state inspection was November 2004.
Paperwork violations noted and resolved.
Facility subject to RCRA hazardous waste requirements as a small quantity
generator
Subject to UST regulations.
Building demolition could be subject to asbestos NESHAPs
Phase I ESA was incomplete and did not include a visual property inspection to
identify other potential regulatory issues.
DPW estimates $200,000 for road upgrade.
Unlikely to be acceptable for renovation. Status of fire protection systems is
not known. Potential for fire, or release of asbestos if collapse occurs. Need
access to evaluate building condition.
                                                                                                      154

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                      Strategy for Proceeding with this Action

The primary issues mostly stem from inadequate information on the environmental conditions and
physical condition of the buildings.  The municipality's initial strategy depends on getting the owner to
provide additional information on the environmental conditions and allowing access for additional Phase
IESA activities, structural analysis of the buildings, and, if necessary, a Phase IIESA.  To do this, the
municipality may need to demonstrate how it would be in the owner's best financial interest to work
with the municipality, including possible cost-sharing or other incentives (See Section 10.3, Properties
with Cooperating vs. Non-Cooperating or Defunct Owners - Some Risk Management Considerations).
In addition, depending on the sophistication and resources of the owner, the municipality and its
consultants may need to help educate the owner with respect to potential environmental regulatory
issues,  risk management options, potential for federal or state brownfields program assistance, and so
forth.  Since the completion of the Phase I ESA would not involve intrusive environmental investigation
activities (e.g., soil borings,  installation of ground water wells), the cost and risk to the owner and
municipality would generally be low. The decision to proceed with a Phase II ESA would likely be
made after the additional Phase I ESA activities are performed.

Before committing too many resources to this project, the municipality and property owner may want to
discuss future plans for the property to ensure that they have the same general expectations. If not, there
may be an opportunity to finding common ground.  For example, while the two parties may have
different views  on the type of reuse preferred, they may be able to at least agree on the necessity of
demolishing the buildings. A preliminary financial analysis of the viability of potential redevelopment
options and costs to implement this property recovery action may help inform those discussions.
                                                                                            155

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Worksheet #6:  Identification of Potential Risks and Actions to Resolve Information Gaps

Property Recovery Action:  Collaboration with the Property Owner
    List the
 redevelopment
obstacles (from
 Worksheet #5.
           Identify project risks
Priority       associated with
         redevelopment obstacle.
Are actions
planned to
  resolve
information
  gaps?
 Identify potential
actions planned to
resolve information
      gaps.
 Identify potential risk
 management tools &
 approaches needed to
implement these actions
Comments
Lack of clear
title







Environmental
conditions are
not fully known







High








High









Disincentive for
developers due to
potential delays to
resolve tax lien and to
1 4-'4-l
clear TiTie



(1) Unable to estimate
cleanup costs and impact
on redevelopment.
(2) Potential for
unexpected costs and
project delays
(3) Higher insurance
premiums (increased
financial risk)
(4) More difficult to get
financing and attract
investors
No
\
\
\
\
N/A




N/A




Redevelopment obstacles with a "no" in this
column would be added to Worksheet #7.



Yes











Contact owner about
on-property access for
completion of Phase I
ESA and potential
Phase II ESA








Obtain verbal or written
permission for access to the
property to complete the Phase
I ESA and agree on use and
distribution of information
collected. Delineate respective
responsibilities.






Recorded liens
have been
identified. No
past
. 1
environmeniai
response actions
have been
reported by EPA
and state DEP.
Develop a case
(with possible
City incentives)
on how this would
be in the owner's
best interests.






                                                                                                                      156

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    List the
redevelopment
obstacles (from
Worksheet #5.
            Identify project risks
Priority        associated with
          redevelopment obstacle.
Are actions
planned to
  resolve
information
  gaps?
 Identify potential
actions planned to
resolve information
 Identify potential risk
 management tools &
 approaches needed to
implement these actions
Comments
Environmental
regulatory
status is not
fully known



Access road to
the property is
in serious
disrepair and
may require
resurfacing


High






Medium







Town could potentially
take on liability for
environmental cleanup.




Potential disincentive for
developers. Cost of
resurfacing public access
road adds to financial risk
for the city.



Yes









No




Contact owner about
on-property access for
completion of Phase I
ESA and potential
Phase II ESA





N/A




Obtain verbal or written
permission for access to the
property to complete the Phase
I ESA and agree on use and
distribution of information
collected. Delineate respective
responsibilities.



N/A




(See above)






A preliminary
cost estimate
prepared by the
DPWis
considered
adequate to
assess potential
financial risk.
                                                                                                                                   157

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    List the
 redevelopment
obstacles (from
 Worksheet #5.
Buildings are
seriously
deteriorated
             Identify project risks
Priority        associated with
           redevelopment obstacle.
Medium   (1) Demolition costs add
          to financial risk for city
          or developer.
          (2) Potential for legal
          liability and political risk
          if the city allows buildings
          to deteriorate and catch
          fire and release asbestos.
          (3) Potential for
          environmental and civil
          liability due to release of
          asbestos and other
          hazardous substances
          during demolition and on-
          site staging of
          construction debris.
Are actions
planned to
  resolve
information
  gaps?
    Yes
   Identify potential
  actions planned to
  resolve information
(1)  If owner agrees,
conduct analysis of
building integrity,
rehab potential,
extent of asbestos,
etc.
(2)  Evaluate potential
legal liability and
political risks if city
does not intervene.
(3)  To be determined
as part of demolition
planning.
     Identify potential risk
     management tools &
    approaches needed to
   implement these actions
(1) Obtain verbal or written
permission for conducting
analysis and agree on use and
distribution of information
collected. Delineate respective
responsibilities.
(2)  City Law Department
review.
(3)   Obtain  consultants with
appropriate  environmental and
legal expertise.
Comments
                                                                                                                                            158

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                              Worksheet #7:  Identification of Risk Management Tools
  Property Recovery Action:  Collaboration with the Property Owner
 List redevelopment obstacles for
which no further action is planned
   to resolve information gaps
(Indicated by a "no " in column 4 of
       Worksheet # 6).
Priority
 Identify potential risks associated with
redevelopment obstacle (from column 3
         of Worksheet #6)
   Identify potential risk
management tools or actions    Are Risks
 to address potential risks    Acceptable?
                                                                                     Comments
Lack of clear title
Access road to the property is
in serious disrepair and may
require resurfacing.
High
Medium
Disincentive for developers due to
potential delays to resolve tax lien
and to clear title
Potential disincentive for
developers. Cost of resurfacing
public access road adds to financial
risk for the city.
None
None
Yes
Yes
Assumes the owner and
municipality will resolve
the property tax lien as
part of an overall
agreement between the
municipality and the
property owner.
Assumes road repair will
be addressed as part of
an overall agreement
between the municipality
and the property owner.
                                                                                                                              159

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                 Appendix D
Assessing Regulatory Liability: Key Questions
                                                   160

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                                    Section I
                    CERCLA 42 U.S.C. ง9601 et seq. (1980)
        Assessing CERCLA (Superfunch Liability - Key Questions

Below are some key questions that a municipality might ask relating to its potential
liability under CERCLA.  It is not a comprehensive listing of all the questions that should
be considered. Nor should the responses be taken as legal advice for a specific set of
factors that might apply in a given situation. Please refer to additional disclaimers on
page vi of this document.
 Could the municipality incur legal liability under CERCLA by acquiring or leasing a
property?

 There are several key statutory provisions under which a municipality may acquire
 property without incurring CERCLA liability (Also described in EPA's fact sheet titled
 CERCLA Liability and Local Government Acquisitions and Other Activities (December 2010)
 (www.epa.gov/compliance/resources/publications/cleanup/brownfields/local-gov-liab-acq-fs.pdf).

 1.   Involuntary acquisition of property  by a municipality (CERCLA ง101(20)(D))

 The definition of an owner or operator in  CERCLA excludes states or municipalities
 acquiring property involuntarily.  Involuntary acquisitions include bankruptcy, tax
 delinquency, abandonment, or other circumstances in which the municipality is acquiring
 title by virtue of its sovereign function.  The exclusion does not apply to any municipality
 that has caused or contributed to the release or threatened release of hazardous substances
 before or after acquisition of the property. Property donated to  a municipality and
 property acquired by eminent domain are not considered involuntary acquisitions.
 It is not necessary to conduct all appropriate inquiries to receive the benefit of the
 definitional exclusion from liability. However, it is highly recommended that some level
 of due diligence be performed prior to property acquisition, leasing, or taking any other
 property recovery actions.  For example, due diligence will reveal encumbrances on the
 property, including the existence of any Superfund liens that run with the land.
 Involuntary acquisition is discussed further in Section EL C.I of EPA's Revitalization
 Handbook  (www.epa.gov/compliance/resources/publications/cleanup/brownfields/handbook).

 2.  Bona Fide Prospective Purchaser Provision (CERCLA ง107(r) & 101(40))

 The BFPP  provision was added to CERCLA through the 2002 Brownfields Amendments
 and applies even to purchasers who knew or had reason to know of contamination on the
 property. The BFPP provision protects parties from CERCLA liability as long as they
 meet certain threshold conditions and continuing obligations. The threshold conditions
 are:

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    •   The purchaser must conduct appropriate Inquiries prior to acquiring the property;

    •   The property must be acquired after January 11, 2002;

    •   All disposal of hazardous substances must have occurred prior to the acquisition;
       and

    •   The purchaser must not be potentially liable or have an affiliation with a party that
       is potentially liable for response costs at the facility.

The purchaser also must meet certain continuing obligations:

    •   Not impeding the performance of a response action or natural restoration;

    •   Complying with land use restrictions and not impeding the effectiveness and
       integrity of institutional controls;

    •   Taking reasonable steps to prevent releases and to limit exposure to previous
       releases;

    •   Providing cooperation, assistance and access;

    •   Complying with information requests and administrative subpoenas; and

    •   Providing legally-required notices.

As long as the acquisition occurs after January 11,  2002, the BFPP provision is available
to municipalities to provide CERCLA liability protection for acquisition methods that are
not considered involuntary acquisitions.
The BFPP provision is  described further in Section III.A.3 of EPA's Revitalization
Handbook. Appendix A ("Common Elements Guidance") of the handbook provides  a
detailed discussion of the threshold conditions and continuing obligation requirements.
The Common Elements Guidance is available at:
www. epa. gov/compliance/re source s/publications/cleanup/brownfields/handbook.
Because of the important role that leasehold interests can play in facilitating the cleanup
and reuse  of contaminated properties, EPA also has issued guidance explaining the
applicability of the BFPP liability protection to tenants.  The guidance addresses those
circumstances in which EPA may exercise its enforcement discretion not to enforce
against two categories of tenants.  The guidance also discusses how EPA will treat those
tenants if the landlord loses its BFPP status during the tenancy. The two categories of
tenants are:

    •   A tenant whose lease gives sufficient indicia of ownership  to be considered an
       "owner" and who meets all of the statutory requirements regarding BFPPs

    •   A tenant of an owner who is a BFPP

EPA's decision not to enforce CERCLA liability does not preclude the risk of a third
party suit.
The guidance titled Enforcement Discretion Guidance Regarding the Applicability of the
Bona Fide Prospective Purchaser Definition in CERCLA ง101(40) to Tenants (January
                                                                               162

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2009) (www.epa.gov/compliance/resources/policies/cleanup/superfund/bipp-tenant-mem.pdf).
A frequently asked questions factsheet titled Enforcement Discretion Guidance
Regarding the Applicability of the Bona Fide Prospective Purchaser Definition in
CERCLA Section 101(40) to Tenants:  Frequently Asked Questions (November 2009)
(www.epa.gov/compliance/resources/publications/cleanup/superfund/tenant-bfpp-guide-ref.pdf

3.  Third-Party Defense (CERCLA ง107(b) (3) &101(35)(A))

CERCLA includes three statutory defenses to liability for cleanup costs: an act of God,
an act of war, and an act or omission of a third party — the so-called third-party defense.
Among other things, the third-party defense protects municipalities acquiring property
through escheat (i.e., the reversion of property to the state upon the death of the owner
when there are no heirs), or through the exercise of eminent domain authority.
The third-party defense is a somewhat complicated legal concept. To take advantage of
the third-party defense, an owner must demonstrate that:

    •   The release of hazardous substances has been caused solely by an act of a third
       party who is not an employee or agent of the owner; and

    •   The act resulting in the release of hazardous substances has not occurred in
       connection with a contractual relationship between the owner and third party (the
       term contractual relationship is defined below).
There are two additional requirements that then must be demonstrated:

    •   The owner has exercised due care with respect to the contamination; and

    •   The owner has taken precautions  against foreseeable acts of the party that caused
       the contamination and against foreseeable consequences of those acts.

For the purpose of the third-party defense, CERCLA defines contractual relationship to
include documents transferring title or possession of real property.  Thus, in general, a
purchaser of property is not entitled to use the third-party defense.  However, there are
several key exceptions to this definition that a municipality should be aware of (see
following paragraph). For properties acquired after January 11, 2002, the BFPP
provision generally is an easier standard  to meet since it applies to purchasers who
knowingly acquired contaminated property.
There are three exceptions to that general definition of contractual relationship.  In order
to meet any of these exceptions, the property on which the facility is located must have
been acquired after the disposal or placement of the hazardous substances on,  in, or at the
facility. Then, the "defendant" making the third-party defense must establish  one of the
following:

    •   At the time the defendant acquired the facility the defendant did not know and had
       no reason to know that any hazardous substance which is the subject of the release
       or threatened release was disposed of on, in, or at the facility;

    •   The defendant is a government entity which acquired the facility by escheat, or
       through any other involuntary transfer or acquisition, or through the exercise of
       eminent domain authority by purchase or condemnation; or

    •   The defendant acquired the facility by inheritance or bequest.
                                                                                163

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For the abovementioned defenses to liability, there are additional requirements that must
be met similar to those for a BFPP.  Although a municipality might qualify for any of
those three defenses, in practice it is the second defense related to certain types of
government acquisitions that is most likely to be available to a municipality.
The third-party defense may be important to municipalities because it applies to eminent
domain takings that are not identified as involuntary acquisitions under the exclusion
found in the owner/operator definition. If the municipality acquires the property through
eminent domain after the disposal or placement of hazardous substances at the facility, it
does not have to show that it had no knowledge of the contamination at the time of
acquisition. However, it does have to meet the other statutory requirements of the
defense.
To protect certain parties from liability, CERCLA contains both liability exemptions and
affirmative defenses to liability. A party who is exempt from CERCLA liability with
respect to a specific act cannot be held liable under CERCLA for committing that act. A
party who believes that it has an affirmative defense to CERCLA liability must prove that
defense by a preponderance of the evidence. A municipality that acquires contaminated
property involuntarily may be exempt from CERCLA liability as an owner/operator; that
municipality may also have the somewhat redundant option of arguing the third part
defense as an affirmative defense.
Additional discussion of the third-party defense can be found in Section III.A.2 and
Appendix A (Common Elements  Guidance) of EPA's Revitalization Handbook.  Due to
the complexity of the third-party defense, a municipality should seek legal counsel in
interpreting whether it applies to the  acquisition being considered.

Could the municipality be liable under CERCLA for contamination that originates
from an off-property source?

The 2002 Brownfields Amendments offer limited liability protection to contiguous
property owners whose property is impacted by off-site sources.  EPA's "Contaminated
Aquifer" Policy also addresses liability associated from contamination in ground water
originating solely from an off-site source.
Contiguous Property Owner Provision
The contiguous property owner provision was added to CERCLA through the 2002
Brownfields Amendments. It provides another exemption from owner/operator liability
under CERCLA.  The liability protection applies to owners of land contaminated by a
release or threatened release of hazardous substances from property owned by someone
else.  The landowner cannot qualify for this protection if the landowner knew or had
reason to know at the time of acquisition that the property was or could be contaminated
by releases of hazardous substances from property owned by someone else. Again,  to
benefit from the liability protection, threshold conditions and continuing obligations are
applicable. The following conditions must be met:

    •   The landowner does not own the property from which there is a release or
       threatened release:
                                                                              164

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    •   The landowner's property is contiguous to or otherwise similarly situated with
       respect to the property from which there is a release or threat of release of
       hazardous substances;

    •   The landowner did not cause, contribute or consent to the release or threatened
       release;

    •   The landowner is not liable or affiliated with any other person potentially liable
       for the response costs at the site. An affiliation includes any direct or indirect
       familial relationship or any contractual, corporate, or financial relationship (other
       than one that is created by a contract for the  sale of goods or services).  An
       affiliation may also be created by the reorganization of a business entity that was
       potentially liable;

    •   The landowner takes reasonable steps to stop any continuing releases, to prevent
       any future releases, and to prevent or limit exposure to any hazardous substances;

    •   The landowner provides full cooperation and access to those authorized to
       conduct response actions at the site including the access necessary to install,
       operate, and maintain any partial or complete response action;

    •   The landowner complies with any land use restrictions established in connection
       with the response action at the site;

    •   The landowner does not impede the effectiveness or integrity of any institutional
       controls established in connection with the response action at the site;

    •   The landowner complies with any information requests or administrative
       subpoenas;

    •   The landowner provides all legally required  notices with respect to the discovery
       or release of hazardous substances at the site; and

    •   The landowner conducted all appropriate inquiries as it is defined under CERCLA
       with respect to the property at the time at which the landowner acquired the
       property.

Note that this defense differs from the BFPP defense because a BFPP may know of
contamination at the time of acquisition of the property.  In contrast,  if a landowner
discovers or knows through all appropriate inquiries or otherwise that contamination has
migrated onto the property, and has this information at the time of acquisition, the
contiguous property owner defense is not available.  However, CERCLA ง 107(q)(l)(C)
explicitly recognizes that the landowner may still qualify as a BFPP even if they do not
meet all of the requirements for a contiguous property owner.
EPA believes that Congress did not intend for this provision to be limited only to
properties located immediately adjoining the source property. Therefore, through the
exercise of its enforcement discretion, EPA will consider extending this liability
protection on a case-specific basis to otherwise eligible non-adjoining properties.
EPA's Revitalization discusses the Contiguous Property Owner provision in Section
III. A.4.ii and  in the "Common Elements Guidance"  included as Appendix A. Two other
useful EPA resource documents, "Interim Enforcement Discretion Guidance Regarding
Contiguous Property Owners'" (January 13, 2004) and the "Contiguous Property Owner
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Guidance, Reference Sheet" are available online at:
www.epa.gov/compliance/resources/policies/cleanup/superfund/contig-prop.pdf and
www.epa.gov/compliance/resources/policies/cleanup/superfund/contig-prop-faq.pdf.
respectively.  In addition, an EPA memo, Model CERCLA Section 107(q)(3) Contiguous
Property Owner Assurance Letter., dated November 9, 2009, discusses the factors that
EPA will consider in issuing assurance letters and provides a model assurance letter
(www.epa.gov/compliance/resources/policies/cleanup/superfund/cpo-assure-mod-ltr-mem.pdf).

Contaminated Aquifer Policy
If at the time of acquisition the landowner was aware of releases from property owned by
someone else affecting his property, the landowner is ineligible for protection as a
contiguous property owner under CERCLA 107(a). However, if the contamination
affecting his property is found only in ground water, the landowner may be  covered by a
different enforcement discretion policy addressing contaminated aquifers that was issued
by EPA in May, 1995.
Known formally as the "Final Policy Toward Owners of Property Containing
Contaminated Aquifers" the policy applies to hazardous substances contained in ground
water solely as the result of subsurface migration from a source located on another
property.  As with the contiguous property owner provision, for this policy to apply, the
owner cannot otherwise be a liable party under CERCLA; cannot have had certain
delineated relationships with the person causing the release; and cannot have caused,
contributed to, or made the contamination worse.  The threshold criteria to qualify for this
enforcement are discussed more completely in Section III.A.4.1 of EPA's Revitalization
and in the May 1995 memo available at:
www.epa.gov/compliance/resources/policies/cleanup/superfund/contamin-aqui-rpt.pdf.
The May 1995 memo also discusses the circumstances under which EPA might enter into
a settlement agreement with the landowner to protect him from third parties seeking
contribution for response costs. Because such settlements are resource intensive for EPA,
the Agency will only consider doing them when compelling reasons exist.

How does sub-dividing or parceling a CERCLA site affect legal status under
CERCLA?

Typically, CERCLA sites are defined by the extent of contamination and do not
necessarily conform to property boundaries.  Therefore, subdividing or parceling a
specific portion of a site would not change the legal status of those parcels under
CERCLA, i.e., the subdivided parcels would continue to be part of the CERCLA site. A
municipality or other party acquiring such parcels would be liable as the current owner
under CERCLA unless the municipality met the requirements of one of the liability
protections such as the bona fide prospective purchaser provision.

While completing the cleanup of a site may take decades, many National Priority List
(NPL) sites include substantial areas that have been cleaned up more quickly.  Also, in
some cases, particularly  sites that were placed on the NPL in the earlier days of
Superfund, the site boundary may have included areas that were later found to be
uncontaminated. EPA has developed a process that allows requiring no further cleanup
action to be deleted from the definition of the NPL site (i.e., "partial deletion").  In
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general, to implement that process, EPA makes a determination that all appropriate
response actions at the site have been implemented; and the appropriate state must concur
with that determination.

Any person including individuals, businesses, entities, states, local governments, and
other federal agencies may submit a petition requesting a partial deletion from the NPL
site. EPA will evaluate the request and make a determination whether to proceed.  A
partial deletion of a portion of a Superfund site from the NPL can help to increase the
site's marketability since it indicates that that portion of the site has been properly
addressed under CERCLA.

Partial site deletion does not affect cost recovery efforts or the ability of EPA to take
future enforcement actions. Superfund liens and windfall liens may still apply to
property that has been subdivided or delisted.

Even if the municipality is not liable under CERCLA for a particular property, could it
be responsible for maintaining institutional controls, engineered controls, or operating
ongoing treatment systems if the municipality acquires or leases the property?

Because the all appropriate inquiries investigations would have identified the presence of
contamination, the municipality would not qualify for liability protection as an innocent
landowner or contiguous property owner.  For the purposes of this question, it will be
assumed that the municipality did meet the statutory requirements at the time of
acquisition that apply to a BFPP. For the BFPP provision, continuing obligations include
compliance with land use restrictions and institutional controls and taking "reasonable
steps" with respect to hazardous substance releases. As discussed in Section III.B. 1 of
the Common Elements Guidance, EPA believes that the 2002 Brownfields Amendments
require bona fide prospective purchasers to "implement institutional controls even  if the
restrictions or institutional controls were not in place at the time the person purchased the
property." This  could include recording deed notices or giving notice of any institutional
controls to a subsequent purchaser of the property. The Common Elements Guidance
provides further clarification of those potential  obligations.
As previously discussed, a municipality or other party acquiring (or leasing) a property
must take "reasonable steps" with respect to hazardous substances affecting the property
to qualify as a bona fide prospective purchaser. EPA believes that in enacting the bona
fide prospective  purchaser provision and other landowner liability protections, Congress
did not intend to create, as a general matter, the same types of response obligations that
exist for a CERCLA  liable party; however, it appears clear that the new landowner does
have a responsibility  to address  potential dangers associated with these hazardous
substances.
The Common Elements Guidance provides examples of what might constitute
"reasonable steps," including, in one example, the responsibility for potentially
maintaining a "cap" or other containment system and to conduct repairs in the event of a
breach, deterioration, or other situation affecting its performance. There are a number of
factors that could affect the specific nature of the municipality's obligations, such as
whether EPA or the state has entered into a consent decree with other parties regarding
the operation  and maintenance of engineering controls, contractual agreements between
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the landowner and other parties, and whether the responsible party still exists or is
capable of carrying out those obligations. Refer to the Common Elements Guidance,
Appendix B, for further discussion.
It is recommended that municipalities exercise appropriate care with respect to property
that they have acquired "involuntarily."

Even if the municipality is not liable under CERCLAfor a particular property, could it
be responsible for reimbursing EPA for "unrecovered" response costs if liens have
been placed on the property?

CERCLA provides for two types of liens to help EPA recover its costs of addressing
contaminated property: traditional "Superfund liens" pursuant to CERCLA ง  107(1) and
"windfall liens" pursuant to CERCLA ง 107 (r). CERCLA provides that EPA has a
Superfund 107(1) lien for all costs and damages for which a party is liable on property
owned by that liable party which is the subject of a Superfund cleanup. A windfall lien
applies only to property that is or may be owned by a bona fide prospective purchaser.
The windfall lien is designed to prevent an entity from realizing an unfair windfall from
the ownership of a property that has been cleaned up using federal taxpayer dollars.
EPA's potential cost recovery from a windfall lien is limited either to the increase in fair
market value of the property attributable to the cleanup or to the United States'
unrecovered response  costs, whichever is less.
Both the Superfund lien and the windfall lien can be released or waived upon satisfaction
before the purchase of the site.  The satisfaction amount may be negotiated with EPA.
EPA may seek cash consideration, performance of work, or  a combination of such
consideration in connection with the lien releases and waivers.  In situations where a
BFPP has acquired property subject to a perfected Superfund 107(1) lien, EPA expects
that the 107(1) lien will be resolved with EPA as part of the transaction between the liable
party and the BFPP through a direct payment to EPA.  If the Superfund 107(1) lien is not
resolved and the BFPP purchases the property at a reduced price due to the lien
encumbrance, EPA may attempt to recover its costs through an in rem action against the
property or through a settlement with the BFPP.

BFPPs should contact the appropriate EPA regional office regarding the existence of a
Superfund lien or windfall lien  on the property or, if no lien  currently exists, EPA's intent
to perfect a lien on the property.

In those situations where EPA is likely to pursue a windfall lien, EPA has the authority to
settle the windfall lien with the  BFPP at the time of the transaction. A model settlement
agreement has been developed by EPA and the U.S. Department of Justice (DOJ) to
facilitate the resolution of windfall liens. Where, based on its guidance, EPA is unlikely
to pursue a windfall lien, it is EPA policy not to become involved in private real estate
transactions. However, for certain site-specific reasons, EPA may be willing to address
the windfall lien concerns of BFPPs through the issuance of comfort/status letters.

EPA has prepared the  following guidance in connection with Superfund  107(1) liens:
Guidance on Federal Superfund Liens, September 22,  1987
(www.epa.gov/compliance/resources/policies/cleanup/superfund/fed-sflien-mem.pdF) and
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Supplemental Guidance on Federal Superfund Liens, July 29, 1993
(www.epa.gov/compliance/resources/policies/cleanup/superfund/guide-liens-rpt.pdf).
EPA has issued guidance, a model settlement document, and sample comfort/status
letters on windfall liens available at:
www.epa.gov/compliance/resources/policies/cleanup/superfund/interim-windfall-lien.pdf  EPA
guidance and a model notice letter on the timing and administrative procedures for filing
notice of a windfall lien on a property can be found at:
www.epa.gov/compliance/resources/policies/cleanup/superfund/wf-admin-mem.pdf.

Could the municipality incur liability under CERCLA by performing environmental
investigations, cleanups, building demolition or physical improvements on a property it
does not own or lease?

A party that performs an activity that results in the release or threat of release of any
hazardous substance, pollutant, or contaminant runs the risk of incurring operator liability
under CERCLA.  For example, done improperly, building demolition  could release
asbestos and lead into the air and soil; physical improvements could disturb soil, which
may result in the release of contaminants. If a municipality is contemplating such
activity on property it does not own, it should first contact state and federal authorities to
determine whether regulatory programs cover the activity  and whether government
oversight is  required.
CERCLA does provide liability protection for municipalities acting in emergency
situations. CERCLA Section 107(d)(l) excludes from  liability any person (including
municipalities) rendering care, assistance, or advice in  accordance with the NCP with
respect to an incident creating a danger to public health or the environment as the result
of the release or threat of release of hazardous substances. An exception arises if the
person acts negligently. CERCLA Section 107(d)(2) also exempts from liability any
local government taking action in response to an emergency created by the release or
threatened release of hazardous substances generated by or from a facility  owned by
another person. The only exception arises if the costs are a result of gross  negligence or
intentional misconduct on the part of the local government.

Are municipalities protected from third parties seeking to recover costs they spent to
perform CERCLA environmental investigations and cleanup involving the property?

If a municipality is not liable under CERCLA for the costs of the cleanup of a property,
then the municipality should not be vulnerable to a third-party suit for contribution to the
costs of a cleanup under CERCLA.  Being able to defend against third party suits is one
more reason for a municipality to acquire contaminated property in a manner that confers
CERCLA liability protection and then to perform the continuing obligations necessary to
maintain the specific liability protection.
If a municipality is potentially liable for the costs of the cleanup  at a property, it may be
possible for the municipality to enter into a settlement agreement with EPA.  Settlement
agreements are negotiated contractual agreements in which the parties exchange
consideration of value. Where the law allows for contribution protection, a person
(including a municipality) who has resolved its liability to the United States through an
administrative or judicial settlement is not liable for claims for contribution for matters
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addressed in the settlement document. Settlement agreements under CERCLA generally
include contribution protection language for "matters addressed" in the settlement.
Prospective purchaser agreements are one form of settlement agreement.  However, EPA
believes that the Brownfields Amendments in 2002 granting liability protection to bona
fide prospective purchasers eliminated the need for most prospective purchaser
agreements.  EPA has since identified a narrow range of circumstances serving a public
interest in which it will consider entering into prospective purchaser agreements. See
Bona fide Prospective Purchasers and the New Amendments to CERCLA, Memorandum
from Barry Breen, dated May 31, 2002.  The memo is found at
www.epa.gov/compliance/resources/policies/cleanup/superfund/bonf-pp-cercla-mem.pdf.
Under EPA's Environmentally Responsible Redevelopment and Reuse (ER3) initiative,
prospective purchaser agreements may be considered if the liable party is willing to take
green/sustainable actions at the site. A fact sheet titled Environmentally Responsible
Redevelopment and Reuse (ER3): Frequently Asked Questions and Answers (December
2005) (www.epa.gov/compliance/resources/policies/cleanup/superfund/er3-faqs-05.pdf).
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                                   Section II
                     RCRA 42 U.S.C. ง6901 et. Seq. (1976)
            Subtitle C:  Hazardous Waste Management
          Assessing RCRA (Subtitle C) Liability - Key Questions

Below are some key questions that a municipality might ask relating to their potential
liability under RCRA (Subtitle C). It is not a comprehensive listing of all the questions
that should be considered. Nor should the responses be taken as legal advice for a
specific set of factors that might apply in a given situation.  Please refer to additional
disclaimers on page vi of this document

The follow ing responses are based only on the requirement of the federal RCRA (Subtitle
C) program.  A municipality should also consult with the appropriate state agency to
determine how state requirements might apply.  In addition, it is important to recognize
that there are circumstances where EPA may use CERCLA authorities at a RCRA
facility. The same CERCLA liability considerations relevant to any CERCLA site also
apply to the property.
 Could the municipality incur legal liability under RCRA (Subtitle C) by acquiring or
 leasing a RCRA (Subtitle C) facility?

 There are a variety of RCRA statutory authorities that can be used to require investigation
 and cleanup at a RCRA (Subtitle C) facility.  As discussed previously, some of these
 authorities are triggered automatically, as is the case with closure/post-closure and
 corrective action at permitted TSD facilities, while other authorities are more
 discretionary and can be used by EPA or authorized states to require investigation or
 cleanup if necessary and appropriate. To understand potential RCRA (Subtitle C)
 liability it is important to distinguish between closure/post-closure and corrective action:

 1.  Closure/Post-Closure

 If a facility operated a hazardous waste management unit (HWMU) to treat, store or
 dispose of hazardous waste, the owners/operators are required to "close" and, if
 necessary, conduct post-closure care of that HWMU.  If closure/post-closure has not been
 completed prior to the transfer of the property, the new owner and operator may be
 required to complete closure/post-closure.
 Assuming that it is not the intention of the new owner to continue operating the HWMUs,
 which would require a hazardous waste management permit (or "operating" permit), a
 post-closure permit may still be required. As a new owner, the municipality would need
 to apply for the post-closure permit or, if one already exists, have it transferred to the
 municipality.
 In some cases, the municipality may decide to enter into a separate agreement with
 another entity regarding the implementation of closure/post-closure and financial
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assurance responsibilities.  The municipality and the other entity should first discuss with
EPA or the authorized state how best to address the issuance or implementation of the
closure/post-closure permit.  For example, if the owner and the operator are different
entities the discussion may be about whom the closure/post-closure permit should be
issued to.  In this situation, if the previous owner agrees to conduct the closure/post-
closure activities and maintain the financial assurances required under RCRA, the
closure/post-closure permit could be issued to the municipality as the owner and the
previous owner as the operator. As the owner of the property, however, the municipality
would be responsible for completing the requirements of an owner should the previous
owner default or cease to exist. In another scenario, the municipality could lease a
portion of the property that contains a HWMU undergoing closure/post-closure (e.g., a
landfill), thereby potentially making the municipality an "operator" of that unit and
requiring them to become a co-signatory on the closure/post-closure permit. Or, if the
municipality is considering acquiring the property and "simultaneously" transferring title
to a third party, it may be necessary to work out whether the municipality needs to be a
co-signatory to the closure/post-closure permit.
Alternatively, EPA or the authorized state may at their discretion issue an "enforceable
document" as defined in 40 CFR ง270.1(c)(7) in lieu of a post-closure permit as
appropriate. This provides the regulatory agencies greater latitude in selecting an
enforcement mechanism that is most appropriate for a given set of circumstances.

2.  Corrective Action

Section 3004(u) of RCRA requires that when corrective action cannot be completed at a
TSD facility prior to the issuance of a hazardous waste management permit, the permit
must contain a schedule of compliance for conducting necessary corrective action.
Section 3004(v) of RCRA extends those requirements to releases extending beyond the
facility boundaries.  The permit would also include  closure and, if necessary, post-closure
requirements. If a municipality acquires or leases a property with plans to  operate the
HWMUs, a somewhat unlikely situation, the municipality would generally be required to
have the permit transferred to it as the  new owner or operator.
More commonly, the municipality would acquire  or lease a property with the intention of
closing the HWMUs if that has not already been done.  In this situation, EPA or the
authorized  state may, as described above, determine that a post-closure permit is required
or utilize an "enforceable document" such as a Remedial Action Plan in lieu of the post-
closure permit.  The post-closure permit or enforceable document would also require that
corrective action be conducted if necessary.

RCRA also contains other provisions that can be used to require corrective action at any
facility where hazardous waste has been treated, stored, or disposed, including
transporters and interim status TSD facilities. A brief summary of relevant RCRA
authorities  is included below. In some  cases, other authorities, such as CERCLA or  state
statutes, may also be used at RCRA facilities.

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Could the municipality be legally liable under RCRA (Subtitle C) for contamination
that originates from an off-site source?

Generally, the owner/operator would not be responsible under the federal RCRA (Subtitle
C) program for contamination that originates from an off-site source or can be
demonstrated to be a background condition. As a practical matter, however, it can
sometimes be difficult to demonstrate that certain contaminants originated from an off-
site source or are solely the result of naturally-occurring conditions, especially if those
chemicals may have been used at the property. In other situations, there may be a
commingling of ground water plumes that makes it technically difficult to distinguish the
source of the contamination.  The burden to demonstrate that these contaminants are not
present as the result of facility operations rests with the owner/operator. Regardless of
the source of the contamination, all unacceptable health and environmental risks should
be addressed prior to making use of the property.
The municipality should also ensure that its use and management of the property would
not contribute to the environmental problems associated with off-site sources by, for
example, altering the flow of ground water through the use of a ground water extraction
well.  Contributing to environmental problems associated with  off-site sources could
affect a municipality's liability under RCRA (Subtitle C).

Could the municipality be liable under RCRA (Subtitle C) for hazardous waste or
hazardous constituents that migrate off the property?

Section 3004(v) of RCRA specifies that RCRA permits require corrective action to be
taken beyond the facility boundary where necessary to protect human health and the
environment unless the owner/operator demonstrates to EPA or the authorized state that,
despite their best efforts, they are unable to obtain the necessary permission to undertake
such actions. The owner/operator is not relieved of all responsibility to clean up a release
that has migrated beyond the facility boundary where off-site access is denied. Onsite
measures to address such releases will  be determined on a case-by-case basis.  Likewise,
for non-permitted facilities, EPA can issue orders to require corrective action beyond
facility boundaries in certain circumstances. EPA and the authorized state will typically
apply a similar standard when using other RCRA authorities.

How does sub-dividing or parceling a RCRA (Subtitle C) facility affect legal liability
under RCRA (Subtitle C)?

For the purposes of implementing corrective action, a facility is defined as, ".. .all
contiguous property under the control of the owner or operator seeking a permit under
Subtitle C of RCRA. This definition also applies to facilities implementing corrective
action under RCRA section 3008(h)." See 40 CFR ง260.10.  This means that a facility
would consist of the entire area contained within the contiguous parcels, even if the
HWMUs only occupied a portion of the total area.  So, for example, if a manufacturing
company owned a 100-acre parcel and operated a hazardous waste storage area within a
building on that parcel, the entire 100 acres would be considered part of the RCRA
(Subtitle  C)  facility. If the company also owned a contiguous 20-acre parcel, that parcel
would also be included.
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There are occasions where subdividing the RCRA facility into separate parcels is
desirable from the standpoint of facilitating reuse or expediting cleanup of one or more
parcels (or, as described in the example above, a facility may already be comprised of
separate parcels). This might involve the title transfer or leasing of existing parcels, or
the subdivision of an existing parcel, to another party. Generally, where cleanup under
RCRA (Subtitle C) for a parcel or parcels is completed for unrestricted use, EPA or the
authorized state may modify an enforcement order or permit to no longer require
corrective action or the maintenance of financial assurances for those parcels. Where
cleanup is not completed or the cleanup is completed for restricted use, it may be
permissible for EPA or the authorized state to modify the order or permit such that the
respective responsibilities of the parties for completing corrective action and maintaining
financial assurance are clearly defined.  It is advisable that the parties involved in the
transfer or leasing transactions discuss the regulatory implications with EPA or the
authorized state before proceeding.  Further discussion of parceling at RCRA corrective
action facilities can be found in EPA's Final Guidance on  Completion of Corrective
Action Activities at RCRA Facilities., dated February 13, 2003
(www.epa.gov/epawaste/hazard/correctiveaction/resources/index.htm).

Could a municipality be responsible for reimbursing EPA or the state for
"unrecovered" response costs if they acquire or lease a RCRA (Subtitle C) facility?

If an owner/operator is unwilling or unable to conduct monitoring, testing, and analysis in
order to ascertain the nature and extent of contamination, RCRA Section 3013 provides
EPA the authority to conduct those activities and to seek reimbursement for those
incurred costs.  If the municipality were to become an owner/operator through
acquisition, leasing or other means, they could be required to conduct those activities and
reimburse EPA for unrecovered costs that EPA incurs or incurred on those activities.
There are, however, only a limited set of circumstances where EPA or the state would
rely solely on RCRA authorities and resources to conduct cleanup or other response
actions at a RCRA (Subtitle C) facility that is not being adequately addressed by the
owner or operator or where the property has been abandoned.  In part, this is because,
unlike CERCLA, the federal RCRA program does not have access to a dedicated federal
fund comparable to "Superfund."
In order to carry out these response actions, EPA or the state would typically first look to
access any financial assurance funds that were required of the owner/operator. If
available funds are insufficient, EPA might utilize CERCLA authorities to accomplish
cleanup or defer to the state's use of other authorities when that would be more
appropriate.  If CERCLA funds are involved, EPA would seek PRP contribution or
reimbursement for those expenditures as it would for any other CERCLA site.

Could the municipality incur legal liability under RCRA(Subtitle C) by performing
environmental investigations, cleanups, building demolition or physical improvements
on a RCRA (Subtitle C) facility they do not own or lease?

This question arises from a situation where the municipality secures permission from the
facility owner to access the property to conduct such actions, or utilizes some other
authority (such as public safety laws) to gain that access. If the municipality causes or
contributes to the contamination through its handling, storage, treatment or disposal of
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solid or hazardous waste, the municipality could be liable for any "imminent and
substantial endangerment" presented by the contamination.  See RCRA Section 7003(a).

Are municipalities protected from past owners/operators or third parties seeking to
recover costs they spent to perform environmental investigations and cleanup involving
a RCRA (Subtitle C) facility?

There are no provisions in RCRA for a party filing suit against another party to recover
costs or require contribution for RCRA (Subtitle C) cleanups.  While it is conceivable
that a third party could assert a claim under CERCLA, the municipality would be eligible
for any liability protections under CERCLA for which they qualify. A municipality
could also be liable under tort or contract theories.
            Excerpts of Some Key RCRA Statutory Provisions

Section 3013(a)

"If the Administrator determines, upon the receipt of any information that (1) the
presence of any hazardous waste at a facility or site at which hazardous waste is, or has
been, stored, treated, or disposed of; or (2) the releases of any  such wastes from such
facility or site may present a substantial hazard to human health or the environment, he
may issue an order requiring the owner or operator of such facility or site to conduct such
monitoring, testing, analysis, and reporting with respect to  such facility or site as the
Administrator deems reasonable to ascertain the nature and extent of such hazard."

Under certain circumstances, EPA can use RCRA Section 3013 to issue orders to the
"most recent previous owner or operator... who could reasonably be expected to [have]
knowledge of the presence of hazardous waste at the facility or site]."

Section 7003(a)

"Notwithstanding any other provisions of this Act, upon receipt of any information that
the past or present handling, storage, treatment, transportation, or disposal of any solid
waste or hazardous waste may present an imminent and substantial endangerment to
health or the environment, the Administrator may bring suit on behalf of the United
States in the appropriate court against any person (including any past or present
generator, past or present transporter,  or past or present owner or operator of a treatment,
storage, or disposal facility) who has contributed or who is contributing to the alleged
disposal to restrain such person from such handling, storage, treatment, transportation, or
disposal to order such person to take such other actions as may be necessary, or both."

Section 3004(u)

"Standards promulgated under this section shall require, and a permit issued after the date
of enactment of the Hazardous and Solid Waste Amendments  of 1984 by the
Administrator or a State shall require corrective action for all releases of hazardous waste
or constituents from any solid waste management unit at a treatment, storage, or disposal
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facility seeking a permit under this subtitle, regardless of the time at which such waste
was placed in such unit. Permits issued under section 3005 shall contain schedules of
compliance for such corrective action (where such corrective action cannot be completed
prior to the issuance of the permit) and assurances of financial responsibility for
completing such corrective action."

Section 3004(v)

"As promptly as practicable after the date of enactment for the Hazardous and Solid
Waste Amendments of 1984, the Administrator shall amend the standards under this
section regarding corrective action required at facility for the treatment, storage, or
disposal of hazardous wastes listed or identified under section 3001 to require that
corrective action be taken beyond the facility boundary where necessary to protect human
health and the environment unless the owner or operator of the facility concerned
demonstrates to the satisfaction of the Administrator that, despite the owner's or
operator's best efforts, the owner or  operator was unable to obtain the necessary
permission to undertake such action."

Section 3008(h)(l)

"Whenever on the basis of any information the Administrator determines that there is or
has been a release of hazardous wastes into the environment from a facility authorized to
operate under section 3005(e) of this subtitle, the Administrator may issue an order
requiring corrective action or other such other response measures as the Administrator
deems necessary to protect human health or the environment or the Administrator may
commence a civil action in the United States district court in the district in which the
facility is located for appropriate relief, including a temporary or permanent injunction."

This authority is commonly used to compel "interim status" facilities to investigate and
remediate contamination.
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                                  Section III
                     RCRA 42 U.S.C. ง6901 et. Seq. (1976)
                Subtitle D:  Solid Waste Management
          Assessing RCRA (Subtitle D) Liability - Key Questions

Note: Below are some key questions that a municipality might ask relating to their
potential liability under RCRA (Subtitle D).  It is not a comprehensive listing of all the
questions that should be considered. Nor should the responses be taken as legal advice
for a specific set of factors that might apply in a given situation. Please refer to
additional disclaimers on page vi of this document

The follow ing responses are based only on the requirement of the federal RCRA (Subtitle
D) requirements. A municipality should also consult with the appropriate  state agency to
determine how state requirements might apply. In addition, it is important to recognize
that there are circumstances where EPA may use other RCRA statutory authorities to
address releases of solid or hazardous wastes or CERCLA authorities if hazardous
substances are involved. The same liability considerations relevant to any RCRA
hazardous waste facility or CERCLA site also apply to the property.
 Could the municipality incur legal liability under RCRA (Subtitle D) by acquiring or
 leasing a property containing a solid waste management facility?

 A municipality that becomes the owner or operator of a solid waste management
 facility through acquisition or leasing would be responsible for ensuring compliance with
 the applicable requirements in Parts 257 and 258. A facility or unit not meeting these
 requirements is considered an open dump, which is prohibited under RCRA section 4005.

 Could the municipality be legally liable under RCRA (Subtitle D) for contamination
 that originates from an off-site source?

 Generally, the owner/operator would not be responsible under the federal RCRA (Subtitle
 D) program for contamination that originates from an off-site source or can be
 demonstrated to be a background condition. As a practical matter, however, it can
 sometimes be difficult to demonstrate that certain contaminants originated from an off-
 site source or are solely the result of naturally-occurring conditions, especially if those
 chemicals may have been used at the property.  In other situations, there may be a
 commingling of ground water plumes that makes it technically difficult to distinguish the
 source of the contamination.  The burden to demonstrate that these contaminants are not
 present as the result of facility operations rests with the owner/operator.
 The municipality must also ensure  that its use and management of the property would not
 contribute to the environmental problems associated with off-site sources by, for
 example, altering the flow of ground  water through the use of a ground water extraction
 well.

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Could the municipality be liable under RCRA (Subtitle D)for releases from solid waste
disposal facilities that migrate off the property?

The owner/operator of a non-municipal non-hazardous waste disposal unit and a MSWLF
would be responsible for addressing all regulated releases from that unit, including those
that migrate off the property.

How does subdividing or parceling a property affect legal liability under RCRA
(Subtitle D)?

If a property is subdivided and a municipality then acquires a parcel, the municipality
would become an owner/operator with respect to the solid waste disposal facilities
located on the parcel acquired by the municipality. If the municipality instead leases the
parcel, it could become an operator with respect to the solid waste disposal facilities
located on the parcel if it is "responsible for the overall operation of the facility or part of
the facility." See 40 CFRงง257.2  and 258.2.
If the municipality were to acquire property on which a solid waste disposal facility is
located, and then subdivide the property and lease the parcel that contains the solid waste
disposal facility to another party, the municipality would still be an owner with  respect to
that disposal facility. If the municipality were to sell the parcel to another party, that
party would generally become the  "owner" of the solid waste disposal facility within the
meaning of 40 CFR Parts 257 and  258.

Could a municipality be responsible for reimbursing EPA or the state for
"unrecovered" response costs if they acquire or lease a property at which past cleanup
involving solid waste disposal facilities was conducted?

EPA could potentially undertake response actions at a solid waste disposal facility under
RCRA statutory authorities or CERCLA (if hazardous substances are involved), but
generally regulation of Subtitle D facilities is implemented at the state or local level.  If
CERCLA funds  are involved, EPA would seek PRP contribution or reimbursement for
those expenditures as it would for  any other CERCLA site.

Could the municipality incur legal liability under RCRA (Subtitle D) by performing
environmental investigations, cleanups, building demolition or physical improvements
on a property it does not own or lease?

This question arises from a situation where the municipality secures permission from the
facility owner to access the property to conduct such actions, or utilizes some other
authority (such as public safety laws)  to gain that access. Generally, the municipality
would not be considered an owner/operator within the meaning of 40 CFR Parts 257 &
258; however, if the municipality  causes or contributes to the contamination through, for
example, its handling of solid or hazardous waste, the municipality could potentially be
liable under other RCRA authorities or federal statutes.
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Are municipalities protected from past owners/operators or third parties seeking to
recover costs they spent to perform environmental investigations and cleanup involving
solid waste disposal facilities or releases from those facilities?

There are no provisions in RCRA for a party filing suit against another party to recover
costs or require contribution for RCRA (Subtitle D) cleanups. While it is conceivable
that a third party could assert a claim under CERCLA if hazardous substances are
involved, the municipality would be eligible for any liability protections under CERCLA
for which they qualify. A municipality could also be liable under tort or contract
theories.
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                                  Section IV
                     RCRA 42 U.S.C. ง6901 et. Seq. (1976)
              Subtitle I:  Underground Storage Tanks
          Assessing RCRA (Subtitle I) Liability - Key Questions

Note: Below are some of the key questions that a municipality might ask relating to its
potential liability under RCRA (Subtitle I).  It is not a comprehensive listing of all the
questions that should be considered. Nor should the responses be taken as legal advice
for a specific set of factors that might apply in a given situation.  Please refer to
additional disclaimers on page vi of this document

The follow ing responses are based only on the requirement of the federal RCRA (Subtitle
I) program.  A municipality should also consult with the appropriate state agency to
determine how state requirements might apply. In addition, it is important to recognize
that there are circumstances where EPA may use CERCLA authorities to address
releases of hazardous substances from an UST system. The same CERCLA liability
considerations relevant to any CERCLA site also apply to the property.
 Could the municipality incur legal liability under RCRA (Subtitle I) by acquiring or
 leasing a property containing VST systems?

 A municipality that acquires the property would become an owner for the regulated UST
 systems in use at the time of acquisition, and also an operator if it has control of, or
 responsibility for, the daily operation of the UST system.  The municipality could also
 potentially be an operator of the UST system if it leases the property. As an owner or
 operator, it would need to comply with the relevant requirements contained in 40 CFR
 Part 280 or the requirements of an approved state.
 The question of liability for UST systems  and releases from those USTs that have been
 closed or abandoned prior to acquisition or leasing can be more complex. Generally
 though, in this scenario a municipality would not normally be an owner/operator under
 the federal UST regulations and would not be required to conduct closure, or corrective
 action for releases as long as the abandoned UST is empty (consistent with 40 CFR
 280.70) prior to November 8, 1984 and is, therefore, not "in use." A previous owner or
 operator could be required to comply with the closure  and corrective action requirements
 if that person can be found.  It must be emphasized, however, that States are not
 constrained by the federal definition of owner/operator. Some States, for example, hold
 landowners as well as current and previous tank owners responsible for proper closure
 and removal of old tanks, as well as any contamination discovered.
 Specific scenarios and questions regarding potential responsibilities under UST are
 discussed at EPA's Office of Underground Storage Tanks Web site:
 www.epa.gov/oust/compend.

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Could the municipality be legally liable under RCRA (Subtitle I) for releases from VST
systems that originate from an off-site source?

Responsibility for such releases under the federal UST program would generally rest with
the owners and operators of the UST system that was the source of the release.  The
municipality might incur liability under CERCLA (if hazardous substances are involved)
or other environmental statutes if they cause or contribute to the contamination by for
example, altering the flow of
groundwater through the use of a
groundwater extraction well.
                                          Who is an Owner or Operator under RCRA
                                                        (Subtitle I)?
                                       Owner means "(a) In the case of an UST system
                                       in use on Novembers, 1984, or brought into use
                                       after that date, any person who owns an UST
                                       system used for storage, use or dispensing of
                                       regulated substances; and (b) In the case of any
                                       UST system in use before November 8, 1984, but
                                       no longer in use on that date, any person who
                                       owned such UST immediately before the
                                       discontinuation of its use."

                                       Note: EPA interprets the term "in use" to mean
                                       the presence of regulated substance in the
                                       underground storage tank. To determine whether
                                       regulated substance is present, EPA would use
                                       the definition of empty described in 40 CFR
                                       280.70 (see Memorandum from Carolyn
                                       Hoskinson to UST/LUST Regional Division
                                       Directors, "Clarification of LUST Eligibility and
                                       Grant Implications," March 17, 2010
                                       (www.epa.gov/oust/oust eligibility letter 031710
                                       finalsigned.pdf).

                                       Operator means "any person in control of, or
                                       having responsibility for, the daily operation of the
                                       UST system."

                                       Source:  42 U.S.C. ง9001 and 40 CFR ง280.12
 Could the municipality be liable under
 RCRA (Subtitle I) for releases from
 VST systems that migrate off the
 municipality's property?

 A municipality meeting the definition
 of an owner/operator would generally
 be responsible for all releases from an
 UST system, including any releases
 that extend beyond the property
 boundary. The UST regulations also
 include specific requirements for
 owners and operators  of UST systems
 to investigate whether the UST system
 is the source of off-site impacts, when
 directed to do so by the implementing
 agency. These impacts include the
 discovery of regulated substances (such
 as the presence of free product or
 vapors in  soils, basements, sewers and
 utility lines, and nearby surface  and
 drinking waters) that have been
 observed by the implementing agency
 or brought to its attention by another
 party (See 40 CFR ง280.51).

 How does subdividing or parceling a property affect liability under RCRA (Subtitle I)
for VST systems or releases from VST systems?

 If a property is subdivided and a municipality then acquires a parcel, the municipality
 would become an owner, and potentially an operator, with respect to any UST systems
 located on the acquired parcel that are in use at that time. The municipality leasing the
 parcel could be an operator if it has control of, or responsibility for, the daily operation of
 the UST system.
 If the municipality were to acquire a property on which an UST system is located and
 then subdivide the property and sell or lease the portions that contain the regulated UST
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systems to another party, the municipality would still be liable for releases and regulatory
violations that occurred while it was an owner/operator.

Can a municipality be responsible under RCRA (Subtitle I) for reimbursing EPA or the
state for "unrecovered" response costs if they acquire or lease a property at which past
cleanup under VST was conducted?

Congress created the federal LUST Fund to: (1) oversee and enforce corrective action
taken by a responsible party who is the owner or operator of the leaking UST systems,
and (2) finance cleanups of UST releases in certain circumstances, including where the
owner or operator is unknown, unwilling, or unable to respond, or which requires
emergency action.  To receive money from the Trust Fund, States must enter into a
cooperative agreement with EPA stating how the fund will be used and administered.
This includes a requirement to seek cost recovery from the owners and operators of the
UST systems. A municipality that is not an owner or operator would generally not be
liable for those costs. EPA's cost recovery guidelines are summarized in the document,
Cost Recovery Policy for the Leaking Underground Storage Tank Trust Fund (May 24,
1994) (www.epa.gov/oust/directiv/d96101 Oa.htm ).
Currently about 36 States have established separate state UST cleanup funds that are not
funded through the federal  LUST Fund and are therefore not subject to the federal cost
recovery requirements.  Each State establishes its own conditions for using its state fund
and seeking cost recovery;  which can vary considerably by State. The Association of
State and Territorial Solid Waste Management Officials has summarized these state-
specific funds on its Web site (www.astswmo.org/publications_tanks .htm).

Could the municipality incur legal liability under RCRA (Subtitle I) by performing
environmental investigations, cleanups, building demolition or physical improvements
on a property it does not own or lease?

Responsibility under RCRA (Subtitle I) generally applies to the owner or operator of the
UST systems. If the municipality causes or contributes to a release as the result of its
actions at the property, it could, however, be potentially liable under CERCLA (if
hazardous substances are involved) or other environmental  statutes.

Are municipalities protected under RCRA (Subtitle I) from past owners/operators or
third parties seeking to recover costs they spent to perform environmental
investigations and cleanup involving  VST systems or releases from those systems?

There are no provisions in RCRA (Subtitle I) allowing a party to sue another party to
recover costs or require contribution for UST system closure or cleanups. While it is
conceivable that a third party could assert a claim under CERCLA (if hazardous
substances are involved), the municipality would be eligible for all of the liability
protections provided for under CERCLA for which they qualify.
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                                  Section V
                            TSCAl5U.S.C.ง2605
                Title I: Control of Toxic Substances
                      (Provisions Applicable to PCB )
      Assessing PCB Liability under TSCA (Title I) - Key Questions

The following questions represent some of the key questions that a municipality might ask
relating to their potential PCB liability under TSCA (Title I). It is not a comprehensive
listing of all the questions that should be considered.  Nor should the responses be taken
as legal advice for a specific set of factors that might apply in a given situation. Please
refer to additional disclaimers on page vi of this document
The follow ing responses are based only on the requirements of TSCA (Title I). A
municipality should also consult with the appropriate state agency to determine how state
PCB requirements might apply. In addition, it is important to recognize that PCBs can
be regulated under other federal statutes, such as CERCLA andRCRA.  The municipality
should also consider their liability under those statutes.
Could the municipality incur liability under TSCA (Title I) by acquiring or leasing a
property containing PCBs or PCB remediation waste?

Depending on the circumstances, a municipality could be liable for the cleanup of PCB
waste on property that it acquires or leases. A spill or other release of PCBs at regulated
levels is considered to be "disposal" of PCBs, which is prohibited on land under TSCA.
Persons "responsible" for cleaning up an unlawful disposal of regulated levels of PCBs
may include, among others, the party who caused the contamination as well as any new
owner or lessee who fails to take steps to address continuing releases. The cleanup
responsibility might also extend to other environmental media affected by the spill or
other release, such as surface and ground water. A municipality also could be liable for
the "use" of property contaminated with regulated levels of PCBs or PCB-containing
equipment without first complying with the PCB "use" provisions of 40 C.F.R. 761.30,
which generally require disposal, decontamination or containment of PCBs.

Could the municipality be liable under TSCA (Title I) for PCB remediation wastes that
originate from a source outside the affected property's boundary?

Generally, the person "responsible" for illegal disposal of regulated levels of PCBs would
be liable for cleaning up PCB remediation wastes that originate from an off-site source.
Under certain circumstances, the "responsible" person could include a new owner. Once
again, the municipality would need to ensure that it does not worsen or aggravate the
contamination through the use of the property that it owns or occupies. It can sometimes
be difficult to demonstrate that the PCB contamination originated from an off-property
source, particularly if PCBs have historically been used at the property.  Note that
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regulations restricting the "use" of PCB-contaminated surfaces, materials, and equipment
would apply regardless of whether the municipality caused or contributed to PCB
contamination that originated off-site.

Could the municipality be liable under TSCA (Title I) for PCBs and PCB remediation
waste that migrate off the property?

A municipality that acquires or leases a property which is the source of PCB
contamination could be responsible for the cleanup of continuing releases that migrate off
the property (see discussion above).  A municipality might also become liable if it causes
or contributes to a release by, for example, altering the ground water flow through the use
of ground water wells or by damaging a protective cap put into place to contain the PCB
contamination.

How does sub-dividing or parceling a property affect liability under TSCA (Title I) for
PCB remediation wastes?

Generally, if the property is subdivided and a municipality acquires or leases a parcel that
is not contaminated with PCBs, it would not be liable under TSCA (Title I) for PCB
contamination occurring only on the other portions of the original property.
Under a different scenario,  if the municipality were to acquire a property contaminated
with PCBs, and then subdivide the property and sell or lease the contaminated portions to
another party, such a sale or lease would not necessarily shield the municipality from
TSCA liability for the contaminated portions.

Could a municipality be responsible under TSCA (Title I) for reimbursing EPA or the
state for "unrecovered" response costs if it acquires or leases a property at which PCB-
related cleanup was conducted?

Where a property contaminated with PCBs is abandoned, or a responsible person lacks
the resources to do required cleanup work, and EPA then conducts a cleanup under
CERCLA at that property, under certain circumstances EPA may seek to recover
response costs from a subsequent owner.  However EPA does not have dedicated TSCA
funds for conducting an investigation or cleanup of PCBs comparable to the CERCLA
"Superfund."

Could the municipality incur liability under TSCA (Title I) by performing
environmental investigations, cleanups, building demolition or physical improvements
on a property it does not own or lease?

A municipality could become a responsible person under TSCA if, for instance, it causes
or contributes to PCB contamination in the course of conducting cleanup, building
demolition or other activities involving the property.
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Are municipalities protected from past owners/operators or third parties seeking to
recover costs they spent to perform environmental investigations and cleanup involving
PCBs or PCB remediation waste?

There are no express provisions in TSCA allowing a party to sue another party to recover
costs or require contribution for TSCA (Title I) cleanups. While it is conceivable that a
third party could assert a claim under CERCLA, the municipality would be eligible for
any liability protections under CERCLA for which they qualify.  Also, a municipality in
this situation potentially could be subject to civil or tort liability under statutes or
common law of the State where it is located; TSCA does  not have any effect on such
cases.
                                                                              185

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                                  Section VI
                Clean Air Act 42 U.S.C. ง7401 et seq. (1970)
                            Asbestos NESHAP
     Assessing Asbestos Liability under the Asbestos NESHAP - Key
                                   Questions

The following questions identify some of the key questions that a municipality might ask
relating to its potential liability under the asbestos NESHAP.  They are not a
comprehensive listing of all the issues that should be considered.  They should not be
construed as legal advice applicable to any specific facts associated with a particular
situation. Please refer to additional disclaimers on page vi of this document
The follow ing responses are based on the requirements of the federal asbestos NESHAP.
A municipality should also consult with the appropriate state agency to determine how
state or local asbestos requirements might apply. In addition, it is important to recognize
that asbestos  is regulated under other federal statutes such as CERCLA, RCRA, and
TSCA Title II (pertaining to asbestos in schools). In the context of a particular property,
then, the municipality should also consider potential asbestos-related liabilities under
those laws, among others.
Could the municipality incur legal liability under the asbestos NESHAP if it acquires
or leases a property containing asbestos or asbestos-containing material?

A municipality is most likely to become subject to the asbestos NESHAP as the result of
demolition or renovation activities or through the disposal of regulated asbestos-
containing materials (RACM) on the property.  Other activities regulated by the asbestos
NESHAP include the manufacture, fabrication, spraying, milling and other uses of
asbestos or asbestos-containing products and materials, activities in which a municipality
would not ordinarily be involved.  A municipality may, however, become involved in the
redevelopment of properties where such regulated industrial activities previously had
taken place and may, as a result, become exposed to current liability relating to RACM
on the site.
In the case of demolition and renovation activities, a municipality would be responsible
for ensuring compliance with the asbestos NESHAP if it is an owner or operator of a
demolition or renovation activity. This means any person who owns, leases,  operates,
controls or supervises a regulated facility, or the demolition or renovation operation itself,
is responsible. A person may also be responsible as an owner or operator through its
affiliation with another entity that, itself, is an owner or operator. As an owner/operator, a
municipality would be responsible for compliance including, among other things, the
prevention of any release of asbestos from regulated demolition or renovation activities
and the proper disposal of RACM. Although the asbestos NESHAP requirements do not
expressly prohibit onsite disposal of asbestos, most states severely restrict or prohibit the
practice.  Even where onsite disposal is a possibility, the long-term operational and
                                                                              186

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management obligations that follow often will make this an unattractive option at most
properties.
Occasionally, a municipality may acquire or lease a property with an asbestos waste
disposal site already located on it.  If this disposal site is regulated under the asbestos
NESHAP, a survey plot and record of the location and quantity of asbestos-containing
waste should be on file with the EPA or the delegated state or local authority.  The
municipality would become an owner or operator of the waste disposal site and be subject
to the requirements of 40 CFR ง61.151.  In general, the owner or operator would be
responsible for, at a minimum, the following:

•  Taking steps to prevent emissions, including maintenance of any required  protective
   cover;
•  Posting warning signs and fencing around the perimeter of the site;
•  Notifying EPA or the delegated agency at least 45 days prior to excavating or
   otherwise disturbing any asbestos-containing material; and

•  Maintaining a notice in the deed describing the presence and location of the RACM.

If asbestos-containing materials are found on the site in areas other than in an  asbestos
NESHAP compliant disposal site, the municipality should notify the EPA, state and local
agencies to determine what asbestos requirements could apply.  Unless the origin of the
asbestos-containing materials is known (e.g., from a regulated demolition operation), it
may by difficult to determine whether the materials currently are regulated under the
asbestos NESHAP.  It is very likely, however, that even if the materials are not covered
by the asbestos NESHAP, they could be regulated under state and/or local requirements
which frequently are more stringent than federal requirements and applicable to much
smaller quantities of asbestos.

It is worth noting that, in unusual situations where EPA finds that circumstances
involving asbestos present (or may present) an imminent and substantial endangerment to
human health or the environment, EPA can exercise certain authority (as applicable under
the CAA, TSCA, CERCLA, RCRA and other statutes) intended to address such threats.
Under an imminent and substantial endangerment scenario, EPA could order a party to
address conditions causing or contributing to the endangerment by, for example,
requiring the abatement of asbestos-containing materials that are or may be releasing
dangerous levels of airborne asbestos fibers.

Could the municipality be legally  liable under the asbestos NESHAP for asbestos that
originates from an off-property source?

Although determining liability under the asbestos NESHAP is highly fact specific, EPA
is generally less likely to take enforcement action for asbestos releases that originate from
an off-property source when the municipality is  not an owner or operator of any of the
asbestos NESHAP-regulated activities that permitted the release.  The municipality
would still be responsible for properly managing RACM on the property generated from
a regulated activity even if it originated from an off-property source (e.g., demolition
debris brought in from another property).
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As a practical matter, it may be difficult for a municipality to demonstrate that asbestos
originated entirely from an off-property source, especially if asbestos is present on the
property owned or leased by the municipality.

Could the municipality be legally liable under the asbestos NESHAPfor asbestos
releases that extend beyond the property boundaries?

A municipality that is an owner or operator of a demolition or renovation activity or any
other regulated activity under the asbestos NESHAP would generally be responsible for
all asbestos releases from those activities that occur while it is an owner or operator,
including any releases that extend beyond the property boundaries.

How does subdividing or parceling a property  affect legal liability under the asbestos
NESHAPfor asbestos or asbestos-containing materials?

Two scenarios will be discussed:

Scenario 1:   The property is subdivided prior to acquisition or leasing by the
              municipality
If a property is subdivided and a municipality acquires or leases a parcel, the municipality
would become an "owner or operator" with respect to  any asbestos-NESHAP-regulated
activities that take place on that parcel while the municipality owns or leases the parcel.
This would include regulated asbestos waste disposal sites or continuing releases that
existed at the time that the parcel was acquired or leased by the municipality.

Scenario 2:   The property is subdivided by the municipality after acquisition

If the municipality acquires a property and then subdivides  and sells a parcel, the
municipality would not generally be responsible under the asbestos NESHAP for
regulated activities that take place on the parcel sold, provided the municipality is not
otherwise an owner or operator for those regulated activities (for example, by leasing the
parcel from the new owner when a renovation or demolition operation occurs).  The
municipality could still be potentially responsible for RACM that was not properly
disposed of while it owned or operated the property and for any continuing releases that
existed while it owned or operated the property.
If the municipality retains ownership and leases the  property to a party who then conducts
regulated activities, the municipality would still be an  owner or operator under the
asbestos NESHAP for those activities.
In imminent and substantial endangerment situations, EPA  could use federal authority to
require a municipality to take action such as conducting an  asbestos cleanup if, for
example, the municipality caused or contributed to conditions at the site.
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Could a municipality be responsible under the asbestos NESHAPfor reimbursing EPA
or the state for "unrecovered" response costs if it acquires or leases a property at which
asbestos-related cleanup was conducted?

EPA does not have dedicated funds under the Clean Air Act for conducting investigations
or cleanups of asbestos releases comparable to the CERCLA "Superfund."  If a property
contaminated with asbestos is abandoned or the responsible persons lack the resources to
do the work, EPA and the state would likely consider using other statutory authorities and
resources, such as CERCLA, and seek to  recover their response costs under those
statutes, as deemed appropriate.

Could a municipality incur legal liability under the asbestos NESHAP by performing
environmental investigations, cleanups,  building demolitions or physical improvements
on a property it does not own or lease?

The asbestos NESHAP would apply to owners  or operators of those activities specified in
40 CFR Part 61, Subpart M, which include demolition or renovation activities involving
regulated facilities. A municipality could become an owner or operator of demolition or
renovation activities if it owns, leases, operates, controls or supervises the facility being
demolished or renovated or the demolition or renovation operation, or both.  Even for
those activities not specifically regulated under the asbestos NESHAP, the municipality
could still potentially incur liability under Clean Air  Act or other federal statutes as a
result of any actions that, for example, cause or contribute to an asbestos release.
In some cases, a state or local government agency may issue an order to demolish a
building or other structure because the facility is structurally unsound and in danger of
imminent collapse. Generally, the  issuance of the order, by itself, would not cause the
State or local government to become an owner  or operator for demolition or renovation
activities under the asbestos NESHAP.

Are municipalities protected under the asbestos NESHAP from past owners/operators
or third parties seeking to recover costs they spent to perform environmental
investigations and cleanup involving asbestos  or asbestos-containing materials?

There are no provisions in the Clean Air Act allowing a  party to sue another party to
recover costs or require contribution for asbestos cleanups. While it is conceivable that a
third party could assert a claim under CERCLA, the municipality may be able to take
advantage of applicable liability protections under CERCLA for which they qualify.
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     Appendix E
Additional Resources
                                 190

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Conducting Due Diligence (Chapter 4)
ASTM El 527-05 - Standard Practice for Environmental Site Assessments: Phase I
Environmental Site Assessment Process, November 2005 (www.techstreet.com/cgi-
bin/detail?product id=1246825)
ASTM ฃ1903-97(2002) Standard Guide for Environmental Site Assessments: Phase II
Environmental Site Assessment Process, January 2002 (www.techstreet.com/cgi-
bin/detail?product id= 10925641
EPA Fact Sheet on Guidelines for Hiring an Environmental Professional
(www.epa.gov/brownfields/aai/HiringEP_Addendum_factsheet.pdf).
Institutional Controls: A Guide to Implementing, Monitoring, and Enforcing Institutional
Controls at Superfund, Brownfields, Federal Facility, UST and RCRA Corrective Action
Cleanups, February 2003 (www.epa.gov/superfund/policy/ic/guide/index.htm).
Institutional Controls Bibliography: Institutional Control, Remedy Selection, and Post-
Construction Completion Guidance and Policy, OSWER 9355.0110, December 2005
(www.epa.gov/superfund/policy/ic/guide/index.htm).
Institutional Controls: A Citizen's Guide to Understanding Institutional Controls at
Superfund, Brownfields, Federal Facilities, Underground Storage Tank, and Resource
Conservation and Recovery Act Cleanups, EPA-540-R-04-003, OSWER 9355.0-98,
February 2005 (www.epa.gov/superfund/policy/ic/guide/index.htm).
Institutional Controls: A Site Manager's Guide to Identifying, Evaluating and Selecting
Institutional Controls at Superfund and RCRA Corrective Action Cleanups, EPA 540-F-
00-005, OSWER 9355.0-74FS-P, September 2000
www.epa.gov/superfund/policy/ic/guide/index.htm).
The International City/County Management Association Web site on land-use controls
(www.lucs.org/).
State Programs and Policies to Encourage Local Government Actions to Address
Brownfields: How State Liability Protections, Eminent Domain Reforms, and Cost
Recovery Authority can Spur Local Government Action to Acquire and Redevelop
Brownfields, May 2008, Northeast-Midwest Institute (www.nemw.org).

Potential Liability under Federal and State  Cleanup  Statutes
(Chapter 7)
A Primer for Local Governments on Environmental Liability
(www.lgean.org/documents/primer.pdf).
EPA Revitalizing Contaminated Sites: The Revitalization Handbook Addressing
Liability Concerns (www.epa.gov/compliance/resources/publications/cleanup/brownfields/).
State Brownfields and Voluntary Response Programs: An Update from the States,
September 2008, Publication Number: EPA-560-R-08-004
(www.epa.gov/brownfields/pubs/st_res_prog_report.htm).

CERCLA Liability and Local Government Acquisitions and Other Activities, December 2010,
Publication Number: EPA-330-F-10-002
(www.epa.gov/compliance/resources/publications/cleanup/brownfiels/local-gov-liab-acq-fs.pdf).
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Community Issues (Chapter 9)

General

EPA, Building Vibrant Communities: Community Benefits of Land Revitalization (2009)
(www.epa.gov/brownfields/policy/comben.pdf).

EPA, Lessons Learned about Superfund Community Involvement: EPA Superfund
Response Staff Tell How Public Involvement Has Helped Clean Up Sites (October 2009)
(www.epa.gov/superfund/programs/reforms/docs/leslrncomplete.pdf) .

EPA, Office of Solid Waste and Emergency Response, Community Engagement
Initiative Proposed Action Plan (Draft) (www.epa.gov/oswer/docs/cei_action_plan_12-09.pdf
EPA, Toward an Environmental Justice Collaborative Model: An Evaluation of the Use
of Partnerships to Address Environmental Justice Issues in Communities, Evaluation
Report (January 2003) (www.epa.gov/evaluate/pdf/ej evalrpt.pdf ) .

EPA, Toward an Environmental Justice Collaborative Model: Case Studies of Six
Partnerships Used to Address Environmental Justice Issues in Communities (January
2003) (www.epa.gov/evaluate/pdf/ejevalcs.pdf).

National Association of Local Government Environmental Professionals and Northeast-
Midwest Institute, Unlocking Brownfields: Keys to Community Revitalization
(www.csu.edu/cerc/documents/UnlockingBrownfields.pdf) .

National Environmental Justice Advisory Council, Environmental Justice, Urban
Revitalization, and Brownfields: the Search for Authentic Signs of Hope, A Report on the
"Public Dialogues on Urban Revitalization and Brownfields: Envisioning Healthy and
Sustainable Communities" (1996)
(www.epa.gov/compliance/resources/publications/ej/nejac/public-dialogue-brownfields-
1296.pdf).

National Environmental Justice Advisory Council, The Model Plan for Public
Participation (November 1996) (www.greenlink.org/assess/pdfs/modelplan.pdf) .

Northeast-Midwest Institute, Brownfields Redevelopment Toolbox for Disadvantaged
Communities (December 2008)
(www.nemw.org/images/stories/documents/toolboxdisadvantagedcommunities.pdf ).

Northeast-Midwest Institute, Community Involvement in Brownfields Redevelopment
(March 2003) (www.nemw.org/images/stories/documents/CommunitvInvolve.pdf) .

Sustainability and Green Design

American Planning Association, Policy Guide on Planning for Sustainability (April 17,
2000) (www.planning.org/policy/guides/pdf/sustainability.pdf).
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DSIRE: Database of State Incentives for Renewables and Efficiency (www.dsireusa.org/) .

EPA, Green Building (www.epa.gov/greenbuilding/)

EPA, Green Communities (www.epa.gov/greenkit/index.htm).

EPA, Mid-Atlantic Brownfields & Land Revitalization, Sustainable Cleanup and
Redevelopment (www.epa.gov/reg3hwmd/bf-lr/sustainablereuse.htm).

EPA, Smart Growth Implementation Assistance (www.epa.gov/smartgrowth/sgia.htm).

EPA, Sustainability (www.epa.gov/Sustainability/).

Massachusetts Executive Office of Energy and Environmental Affairs, Smart
Growth/Smart Energy Toolkit Modules
(www.mass.gov/envir/smart growth toolkit/pages/SG-modules.html).

Massachusetts Executive Office of Housing and Economic Development, Smart Growth
Initiatives
(www.mass.gov/?pageID=ehedterminal&L=3&LO=Home&Ll=Community+Development&L2=
Communitv+Planning&sid=Ehed&b=terminalcontent&f=dhcd cd smartgrowth smartgrowth&c
sid=Ehed).

U.S. Green Building Council, LEED Project Certification
(www.usgbc.org/DisplayPage.aspx?CMSPageID=64).

Area-Wide Planning

EPA, Office of Brownfields and Land Revitalization, Brownfields Area-wide Planning
Pilot Program (www.epa.gov/brownfields/areawide_grants.htm).

Peter B. Meyer, Accounting for Differential Neighborhood Economic Development
Impacts in Site-Specific or Area-Based Approaches to Urban Brownfield Regeneration
(1998) (http://cepm.louisville.edu/Pubs_WPapers/PDF_Docs/site-vs-area.pdf).

Funding Sources

EPA, Brownfields Grants (www.epa.gov/brownfields/grant info/index.htm).

EPA, Community Action for a Renewed Environment (www.epa.gov/care).

EPA. Educational Campaign on Policy Barriers to Redevelopment of Vacant Properties
(www.epa.gov/dced/grants/opei0703.htm).

EPA, Environmental Education Grants (www.epa.gov/enviroed/grants.html).
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EPA, Environmental Justice Small Grants
(www.epa.gov/oecaerth/environmentaljustice/grants/ej-smgrants.html).

EPA, Healthy Communities Grant Program (www.epa.gov/regionl/eco/uep/hcgp.htmO.

EPA, Superfund Technical Assistance Grants (TAGs)
(www.epa.gov/superfund/accomp/news/tag.htm).

EPA, EPA's Technical Assistance to Brownfields (TAB) Communities Program
(www.epa.gov/brownfields/tools/tab_bifold.pdf) .
Managing Project Risk (Chapter 10)
EPA Web site, About Environmental Insurance and Brownfields
(www.epa.gov/brownfields/insurance). This Web page has links to numerous documents
and training materials on risk management and insurance, including:

Environmental Insurance Research
State Brownfield Insurance Programs, 2006. Northern Kentucky University.
December 2006.

Environmental Insurance Products Available for Brownfields Redevelopment,
2005 Northern Kentucky University. February 2006.

Update: State Brownfield Insurance Programs, 2005 Northern Kentucky University.
February 2006.

Brownfields Insurance for Public Sector-Led Development Projects: Experience and
Methods. Northern Kentucky University/University of Louisville.
May 2005.
State Brownfield Insurance Programs, 2004. Northern Kentucky University/University of
Louisville. December 2004.
Models of Government-Led Brownfield Insurance Programs. Northern Kentucky
University/University of Louisville. October 2002.
Environmental Insurance and Public Sector Brownfields Programs: Factors Affecting
Pursuit of Insurance as a Redevelopment Tool. Northern Kentucky University/University
of Louisville. November 1999.
Environmental Insurance Products Available for Brownfields Redevelopment.
Northern Kentucky University. November 1999.

Long-Term Management and Insurance

   •   Environmental Insurance and Risk Management Tools in Brownfields Cleanup
       and Redevelopment.

   •   Environmental Insurance Helps Ensure Redevelopment, Success Story Fact Sheet
       July 2003.
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Environmental Insurance Policy Coverage and Terms.
Environmental Insurance and Risk Management Tools. Glossary of Terms.
Environmental Insurance for Brownfields Redevelopment: A Feasibility Study.
Department of Housing and Urban Development
July 2000.
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                            Appendix F - EPA Contacts
Land Revitalization Coordinators
Headquarters:  www.epa.gov/oswer/landrevitalization/contactus.htm
Regional Offices:  www.epa.gov/oswer/landrevitalization/contactus.htm

Brownfields
Headquarters:  www.epa.gov/brownfields/hqcntct.htmtfanchorll
Regional Offices:  www.epa.gov/brownfields/corcntc.htm
States/Tribes:  www.epa.gov/brownfields/state tribal/state map .htm

Superfund Redevelopment
Headquarters:  www.epa.gov/superfund/programs/recycle/contact/index.html
Regional Offices:  www.epa.gov/superfund/programs/recycle/contact/redevelopment.html

Underground Storage Tanks
Headquarters (General):  www.epa.gov/brownfields/hqcntct.htmtfanchorlOb
Headquarters (Program Areas):  www.epa.gov/swerustl/oustcont.htm
Regional Offices:  www.epa.gov/swerustl/regions/index.htm
States/Territories:  www.epa.gov/oust/states/statcon 1 .htm
Tribes: www.epa.gov/oust/pubs/ustindiancountrvdirectoryll09.pdf

RCRA Corrective Action (Hazardous Waste)
Headquarters:  Contact regional office
Regional Offices:  www .epa. gov/epawaste/hazard/correctiveaction/contacts/index.htm
States/Tribes:  www.epa.gov/epawaste/wyl/stateprograms.htm

TSCA (PCBs only)
Headquarters:  www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/contactus.htm
Regional Offices:  www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/coordin.htm

NESHAP (Asbestos only)
Headquarters:  www.epa.gov/asbestos/pubs/contactus.htmlHO
Regional Offices:  www.epa.gov/asbestos/pubs/regioncontact.html
States/Tribes:  www.epa.gov/asbestos/pubs/regioncontact.html
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Developed by U.S. EPA New England
Find this document and more at www.epa.gov/region1/brownfields/prepared
&EPA

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