By David Lent,
Cleaning up environmentally contaminated property can be expensive — at times prohibitively so — which is why many property owners required by their lender to maintain an environmental reserve don’t always consider remediation a viable option.
This can be a mistake. Sometimes, cleanup can pay off — in more ways than one.
Read on to learn how one property owner restored his site to better environmental health, reduced his liability and recovered more than $1 million in environmental reserves, for a fraction of that figure.
The owner of a suburban shopping center in Westchester County, New York, was required by his lender to carry more than $1 million in environmental reserves for potential environmental impacts.
The issues were related to three areas including a dry cleaner, underground heating storage tanks, and a former gasoline station. As a result of the reserve, the property owner was required to pay interest on funds he could not access.
With the goal of recovering the reserve, the property owner hired an environmental consult to assess the property and address the areas of concern.
The plan required the consultant to conduct a detailed environmental investigation and, if feasible, design a remedial action plan and carry out the cleanup.
Subsurface investigations of soil and groundwater at the former gas station identified petroleum at concentrations below New York State Department of Environmental Conservation (NYSDEC) cleanup standards; consequently no further investigation was warranted. The property owner’s escrow agreement required that a “cased closed” status be obtained from the NYSDEC for the historical gasoline station, which the consultancy subsequently obtained from the state.
The results of the investigation of the underground storage tanks weren’t as favorable. The consultant identified impacts to soil and groundwater exceeding NYSDEC cleanup standards, and recommended cleanup.
The dry cleaner investigation confirmed that chlorinated solvent impacts to the groundwater were low, technically impracticable to remediate, and did not constitute a reportable release. Because of these findings, the consultant recommended no further investigation of the dry cleaning establishment. The owner and lender agreed.
The consultant prepared a Corrective Action Plan (CAP) for cleanup of the fuel oil contamination. The CAP specified removal of the impacted soil and treatment of groundwater. The lender and NYSDEC approved the plan, and remediation began within a few days.
As per the CAP, the consultant directed the removal of the contaminated soil and treatment of groundwater. Since only low concentrations of contaminants were identified in groundwater, cleanup costs were minimized and the remediation limited to product recovery wells during excavation. After soil removal, the wells were determined to be free of residual product. The consultant prepared a summary report documenting the efforts and petitioned for closure of the spill, which the NYSDEC granted.
Within five months of hiring the consultancy, the property was sufficiently remediated to the state’s and the lender’s satisfaction, and the property owner was able to recover $1 million in environmental reserves. The total to investigate and remediate the property — $170,000 — was a fraction of the recovered reserve.
If you are required to maintain an environmental reserve, don’t overlook the potential benefit of having an environmental consultant conduct a phased assessment of the property.
Although cleanup can be cost-prohibitive, it’s not always. Remediation can reduce liability, improve human health and the environment, and let the owner recover money he would otherwise have to stash in an environmental reserve account and pay interest on.