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Leader Professional Services, Inc.

Storage Tank Bill Approved by Senate Environment Committee  Back to the Top

Recently, the USEPA proposed a $102,410 penalty against a Massachusetts-based property management company for failing to notify numerous tenants about lead paint hazards in rental units as required by federal law. This particular property management company failed to include lead paint related information in eight leases that were executed between 2000 and 2001. Two of the eight leases in question involved tenants with children less than six years of age and another of the executed leases had children between the age of six and eighteen on the lease. Children under the age of six are especially vulnerable to the dangerous effects of lead poisoning which can impair their neurological development.

For additional information regarding lead-based paint issues or sampling for lead-based paint, please contact any of Leader's offices. 

With every risk-based number it is important to know the assumptions that were used in the calculation and if they make sense with the conditions at your site and who are potentially exposed to the contaminants. Leader recently reviewed a risk assessment done for a large Department of Defense site where the risk assessors modeled one exposure scenario for residential use, but used exposure frequency values for recreational users. Fortunately, this mistake did not directly affect our client's transaction.

RBCs and risk assessments can be useful tools, but they have limitations. Leader will keep you abreast of the RBC and risk assessment developments.

For further information, contact Pete von Schondorf at (585) 248-2413. 

Environmental Requirements for Siting of HUD-Assisted Projects or Residential Developments Back to the Top

When siting a residential property, whether it may be an apartment complex or multiple family residence, it's important to investigate the surrounding vicinity. For any Housing and Urban Development (HUD)-assisted residential property which is planned near a commercial or industrial area, there are specific guidelines to follow to insure the safety of future residents. HUD staff must prepare an Environmental Assessment (EA; form HUD-4128) for all HUD-assisted projects, in accordance with the National Environmental Policy Act (NEPA) and HUD regulations. Any developer concerned with safe siting of a new residential property might also choose to apply these standards.

Housing projects near stationary facilities which store, handle, or process chemicals or petroleum products in bulk quantities must have acceptable separation distances (ASD). A hazard means any stationary container which stores, handles, or processes hazardous substances of an explosive or fire prone nature. The ASD is determined by applying the safety standards established by 24 CFR Part 51 Subpart C to the guidance set forth in HUD Guidebook, "Siting of HUD-Assisted Projects Near Hazardous Facilities." Phase I and/or Phase II Environmental Site Assessments, which are services provided by Leader, can assist HUD staff or a housing project developer in preparing an Environmental Assessment.

There are certain hazards that are exempt from determining ASDs. The term "hazard" does not include pipelines for the transmission of hazardous substances, if such pipelines are located underground or comply with applicable Federal, State, and local safety standards. Underground storage tanks in compliance with state and federal regulations are not considered a hazard according to the guidebook. Other exceptions include: 1) containers with a capacity of 100 gallons or less which store common industrial fuels, such as gasoline, fuel oil, kerosene, and crude oil, and 2) facilities which are shielded from a HUD-assisted project by the topography since these topographic features effectively provide a mitigating measure already in place.

Please contact Dom DeFazio at (585) 248-2413 or your Leader contact if you have any questions. 

GAO Report Indicates Less FOIA Information Under Ashcroft Back to the Top

Several of Leader's services such as Environmental Site Assessments,  Acquisition/Divestiture, Due Diligence reviews and Cost Recovery Services involve the submittal of Freedom of Information Act ("FOIA") requests to governmental agencies at the Federal, State and Local levels for access to public records. 

The General Accounting Office recently released a report saying that these governmental agencies are limiting public access because of an October 2001 memo from U.S. Attorney General John Ashcroft. The report found that a significant percentage of Freedom of Information Act (FOIA) officers have reduced the amount of information available to the public because the October 2001 memo. The memo instructed agencies to exercise greater caution in disclosing information requested under FOIA.

Almost a full third of the total number of FOIA officials surveyed (31 percent) reported that because of the memo the likelihood that their agencies would make a discretionary release of information was decreased. Additionally, one-fourth of the FOIA officials surveyed reported that the memo has changed the use of specific FOIA exemptions. 

Innovative Environmental M&A Trends Back to the Top

A common part of the due diligence aspect of any Merger and Acquisition ("M&A") transaction is the appropriate evaluation of Environmental regulatory liabilities; with the associated liabilities being routinely incorporated into the transaction contracts. Increasingly, however, there are additional innovative topics in either regulatory or related matters which can provide opportunities for savvy M&A practitioners during due diligence. Evaluation of these topics can provide valuable information on future operational savings and may also provide opportunities for negotiating position in the transaction; consequently, consideration should be given to their evaluation in future M&A transactions.

In an M&A transaction, often only a Phase One Environmental Assessment ("Phase One") is obtained to evaluate environmental liabilities. However, a Phase One provides only a cursory evaluation of current environmental observations and limited historical information. Consequently, use of this approach as the complete due diligence process can miss key Environmental liabilities such as: Off-Site Superfund liabilities; Significant Environmental Compliance Issues; Hazardous Material Transportation and/or OSHA related liabilities.

Implementation of even a rudimentary evaluation of these topics, by a qualified M&A expert, can lead to more comprehensive and accurate compliance representations and warranties being provided in the contract language. Furthermore, information from this additional evaluation can provide a better perspective of the past operational practices of the seller; and can provide an informed listing of corrections needed for the new business, their attendant costs and can also provide negotiating position and/or concessions from the seller.

From an operational perspective, an M&A transaction can include evaluation of other innovative, non-regulatory issues to obtain information on the ability to lower operating costs and future planning. Examples include pollution prevention/energy efficiency (P2E2) issues and future Environmental Sustainability activities.

If a facility can implement a reduction in pollution, or better yet, find methods to prohibit the generation of various pollutants at the start of the process, a significant reduction in operational cost and legacy liability can be attained. Take for example metal plating operations which would typically generate the following wastes: 1) wastewater requiring treatment and a discharge permit; 2) hazardous waste plating sludge; and, 3) air pollution emissions. Replacement with a non-plated product could provide reduction in the following costs:

Any reasonable sized business, even an office building, can be evaluated to determine opportunities for reducing energy expense. Energy consumption costs (lighting, heating, etc.) can be reduced using simple evaluation and implementation methods such as energy efficient lighting replacements or retro-fits. Another example would the replacement of an oil based raw material with a water based alternative thereby reducing waste oil disposal cost.

An increasingly visible voluntary trend is the Environmental Sustainability ("Sustainability") movement which could be evaluated during due diligence. While more prevalent in Europe, Sustainability is becoming more of an issue in our Global economy due to the inherent social and public exposure imposed on US business.

From a manufacturing view, Sustainability can be considered, in part, as the evaluation of manufacturing processes where raw materials are studied to determine if any alternative renewable replacements can be used. Consequently, if an M&A target shows legitimate work in the Sustainability arena, and this fact is determined during due diligence period, it will indicate the company may have conducted some long term strategic planning about their future business activities. This tells us more about the management team than anything else, but it is valuable information nonetheless.

There are a number of trends in regulatory and business due diligence which may provide savvy due diligence practitioners with innovative investigatory tools for upcoming M&A transactions. These include additional scrutiny for Environmental, Hazardous Material and OSHA compliance matters. P²E² and the future challenges of Environmental Sustainability, and how they are integrated with M&A due diligence, will present challenges that will likely require appropriate assessment. While these issues are new and not necessarily a part of the standard M&A process, there are compelling negotiating and business best practice reasons for adding these topics to your due diligence checklists.     

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Copyright © 2003 Leader Professional Services, Inc.
Last modified: November 03, 2003