The Importance of Independent Environmental Due Diligence at DOD Properties

Department of Defense (DOD) properties including Formerly Used Defense Sites (FUDS) and portions of active installations are increasingly being transferred to the control of private entities for redevelopment and reuse. Prior to realignment or transfer, DOD typically commissions the preparation of a site wide environmental assessment report, commonly referred to as a Baseline of Environmental Conditions Assessment (BECA) or Environmental Baseline Survey (EBS).

The BECA will summarize:

• Installation location and physical description
• Utilities
• Installation history
• Summary of installation use(s) and processes performed at the installation
• Environmental programs in terms of the Installation Restoration Program (IRP) sites with Hazardous Waste Management Units (HWMU), Solid Waste Management Units (SWMUs); active and inactive IRP sites; Areas of Concern (AOCs) that may not yet have been funded for investigation; Military Munitions Response Program Units (MMRPs); RCRA Environmental Sites, including Miscellaneous Units and Site Screening Areas
• Environmental permits (Air, Hazardous Waste, Solid Waste, NPDES, Water Supply, etc.) and the status of those permits
• Additional environmental concerns (petroleum—underground storage tanks, aboveground storage tanks, other bulk storage and use), asbestos, lead, PCBs

The BECA is prepared for the benefit of the Government and is not released until it has been subject to an exhaustive review. Although the BECA is a rigorous environmental assessment, it is not prepared for the developer, and may not constitute a demonstration that the developer has performed All Appropriate Inquiry (AAI) into a property, and therefore may not qualify a developer to utilize the defenses to Superfund liability that are available under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The subject of CERCLA liability protection should be discussed with legal counsel, but for similar transactions, under the advice of legal counsel, developers have contracted with Apex to perform a Phase I ESA subsequent to the preparation of the BECA. Phase I ESA preparation is important to note because failure to perform independent due diligence has the potential to result in exposing a developer to substantial environmental liability. A Phase I ESA performed on the developer’s behalf accomplishes:

• Environmental due diligence is performed in the interest of the developer, thus constituting that they have performed AAI.
• The information in the BECA is evaluated for accuracy and applicability to the development project.
• Although the developer may be indemnified from being the Responsible Party (RP) for contamination known to exist or documented in the BECA, environmental issues may still result in significant development costs for the developer if not identified and planned for before beginning a project. These could include increased demolition costs due to the presence of asbestos, lead or other hazardous material; construction cost increases or delays due to the presence of petroleum or other storage tanks; construction cost increases or delays due to contaminated soil or water management; or other environmental management and health & safety issues.

Preparing an independent Phase I ESA subsequent to the BECA can assist in planning for these potential issues and give the developer time to plan for and resolve these issues prior to beginning a project, thus ensuring budget and timing consistency for delivery of the end product, in a timely and on budget fashion.