October 18, 2011

The universe of liability assurances available to buyers of commercial and industrial property and their lenders in Minnesota has expanded. Liability protections now cover soil gas releases or vapor conditions. In the past the Minnesota Pollution Control Agency (MPCA) Voluntary Investigation and Cleanup (VIC) Program limited coverage of identified releases to hazardous substances detected in either soil or groundwater. The addition of soil gas or vapor as a covered environmental media provides parties with broader liability protections.

Details about the changes to the type of assurances can be found in a Program Update at:http://www.enviroattorney.net/articles/MPCA_VIC_Soil_Vapor_Guidance_Update.DOC

What are the implications of this policy change for parties involved in real estate transactions?

First, the available liability assurances (No Association Determination or a No Action Letters) will be more comprehensive. This provides a greater degree of certainty to buyers and lenders.

Second, parties may expect to continue to see requests from the MPCA for comprehensive tests for soil gas in site investigations conducted under the VIC Program. There is some incremental cost to collect soil gas samples. There is also an expense associated with MPCA review of the information prior to issuance of the requested liability assurances. The MPCA charges VIC applicants fees on an hourly basis.

Finally, where soil gas levels may accumulate under building slabs, parties seeking liability assurances can expect the MPCA to require the installation of engineered controls, including polyethylene sheeting and other means to prevent vapors from collecting under building slabs and to minimize vapor impacts on building occupants. The MPCA is concerned that vapors may enter into occupied spaces through cracks in the floor, openings in floors, or through joints where floors and walls meet.

With new construction, the appropriate controls (such as passive or active venting) can be incorporated into building plans at a relatively modest incremental cost. For existing construction, sub-slab depressurization systems can be designed to vent vapors away from the building and address potential vapor intrusion concerns. Installation in an existing building raises additional issues as the system needs to be incorporated into a building’s floor plan and existing uses. Provisions need to be made for access to occupied space so that a system can be installed without disrupting ongoing operations. If the space is leased out, arrangements need to be made with tenants.

Once installed, a system needs to be operated and maintained and, when and if appropriate, decommissioned. Decommissioning can occur, but soil vapor levels must be reduced to very low levels before a system could be shut down. As a practical matter, systems that control or mitigate vapors may need to be in place and operational for years. For that reason, a building owner or other responsible party needs to be mindful of the long term consequences of installation of such a system.

A sub-slab depressurization system may include floor penetrations, a blower running a vacuum system, piping, electrical connections and other system components. The system may be vented through the ceiling and roof to the top of a building. Although sub-slab depressurization systems are not overly complicated, certain components (blowers or manometers) may break down and need repair and replacement. Active systems are powered by electricity and may have a panel with system components including an alarm to indicate that the system is no longer functioning. The cost of operation and maintenance of a sub-slab depressurization system will vary depending on the extent of the area under a building that is to be covered and the design of the system.

Because soil gas conditions may persist for a long and often an indeterminate length of time, buyers and sellers need to pay special attention to system design and operation.

The attorneys of Hessian & McKasy’s Environmental Law Attorney Practice Group are experienced in dealing with environmental concerns that arise in real estate transactions. We assist clients on issues related to the assessment of environmental conditions on property including soil, groundwater and soil gas/vapor impacts. We are involved with the review of Phase I Environmental Site Assessments and the identification of recognized environmental conditions (RECs).

Our environmental lawyers are involved with due diligence review and steps to ensure that transactions meet the requirements of all appropriate inquiry. We are familiar with property transfer and voluntary cleanup programs and regulatory requirements in Minnesota, Wisconsin, Iowa, North Dakota, South Dakota, Iowa as well as in states across the country. We provide risk assessments and advice as to the availability of cost recovery actions. For information about our professional services or a consultation as to services, please contact environmental law attorney Joseph Maternowski at jmaternowski@hessianmckasy.com or 612-746-5754.

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