Edited by Greg Sitek

There is a fundamental change under way in the approach states are taking to clean up old industrial sites. Sites once avoided as potential locations for new development are now sought after because of progressive new programs. Pennsylvania's Land Recycling Program is considered the "gold standard" of those programs. It sets uniform cleanup standards and standardized review procedures for cleanup plans, releases developers from cleanup liability once standards are met, and protects banks and local economic development agencies from cleanup liability where they did not contribute to the pollution. Cleanups that were once motivated by fear of litigation are now voluntary.

What this means to those in the construction, environmental and demolition industries is great economic opportunity. Sites that have sat abandoned for years are now being revitalized into new residential, commercial and industrial properties. But while there are blue skies ahead, the issue of environmental cleanup still must be addressed and handled responsibly.

What is a typical project undertaken by environmental professionals? The most common would be converting a former industrial site into another use. According to Brad A. Maurer, Esq., CPCU, executive vice president of TerraSure Development, each scenario is requires a different approach. "The end use of a property is what dictates the due diligence required before an environmental action plan can be executed. For example, converting an industrial manufacturing site into an industrial warehouse usually requires some cleanup, but the site does not have to be what you would call 'pristine.' That's because exposure to the occupants would be limited to working shifts and the pathway between the ground and the structure would be blocked.

"On the other hand, the level of cleanup necessary for a manufacturing plant that is being converted into residential use or a school would be much higher. The investigation and approach would be much more stringent."

Some buyers and sellers recognize the value of a property, but are concerned about perceived environmental issues and costs to resolve them. As a result, they back away from the sale and purchase. Often, a buyer will make an offer for the property that is well below the property's true value because of the environmental remediation cost uncertainty.

To protect themselves from unpleasant "surprises," some buyers and sellers are deciding to engage a company that cleans up contaminated properties for a guaranteed fixed price. A company like TerraSure working with a qualified environmental contracting firm would complete all the necessary site work required to restore the property to comply with the regulatory requirements for re-use. If undocumented conditions are found, the company handles it without additional expenditure of time and money to the owner. Without the fixed price agreement in a traditional remediation project, all activities would be stopped and the project delayed for months so that the costs for the scope changes could be resolved. According to TerraSure's Maurer, less than 5 percent of environmental cleanup firms operate under the guaranteed fixed price remediation model. But with the growth in voluntary cleanup programs, that number is expected to grow to 33 percent in the next couple of years, he said.

Some states require the seller to make representation of the history of the site before a transaction can be completed. States like New Jersey, Illinois and Virginia have mandatory exposure laws; others do not. A savvy buyer should always require a representation before a sale that documents through a survey or other records what activities occurred and substances made or stored at a site. Some sellers may want to conduct the survey up front to document any suspected contamination present. This will smooth sales process in terms of time, money and goodwill.

Typically an environmental consultant completes a survey by first evaluating the condition of the soil and groundwater. An initial review is made of any discharges, releases, buried drums, or the presence of underground storage tanks. The second phase is where actual drilling takes place and soil and water samples are taken.

Next, there is an evaluation of the condition of the structure. The consultant conducts a visual inspection of hazardous materials, such as asbestos-containing fireproofing. According to TerraSure's Maurer, the most commonly found contaminant found in older industrial or commercial properties is petroleum, followed by solvents.

Once the condition of a structure and the land are evaluated, they are followed by the preparation of a scope of work, which details the plan for cleaning up the materials. A company like MARCOR Remediation, a nationwide environmental service contractor, is then brought in to perform the remediation. A qualified contractor should have the breadth of experience, equipment and technical expertise to handle both expected and unexpected situations.

Maurer gave several examples of how the guaranteed fixed price approach to remediation was invaluable to property owners and developers. One is a privately owned, non-engineered and unregulated drum and waste storage facility in New York state. There were more than 900 drums, including approximately 150 buried drums, removed from the site by contractors for the New York State Department of Environmental Conservation. The property was listed as "Class 2" on the state Registry of Inactive Hazardous Waste Disposal Sites. Class 2 means that a significant threat to the public health or environment exists.

The drums contained a wide variety of chemical compounds in the form of liquids and sludge material. The site remained vacant for many years because the original owner was financially insolvent. Located in a residential section of Staten Island and in close proximity via public transportation to Manhattan, a developer saw the opportunity to turn the land from a non-productive blight on the community to a multifamily residential development complex. TerraSure's strategy included excavation and disposal of soil contamination "hot spots" and the implementation of land use restrictions to prevent exposure to the site workers and future occupants. During the work, several undocumented conditions were found that were handled under the fixed price agreement.

A spokesman for the developer, the Equitable Group, said, "If this were a conventional 'time and materials' project, we clearly would have blown through our remediation cost budget. But by 'owning' the project, our provider was able to react to project surprises in a cost-effective way."

Another instance where the fixed price remediation model worked is a Pennsylvania manufacturing company that sought to divest a 27-acre property with a 200,000-square-foot building that had been used for printing and battery manufacturing since 1966. The property was valuable because of its overall sound condition and its proximity to major interstate highways. The site has numerous excavated underground storage tanks that were not properly closed and lacked any other investigation data regarding potential releases that may have occurred over its 40-year history. Once the client had a fixed price to resolve outstanding environmental issues and regulatory closure, the client was able to market the property at its true "clean" value.

With "land recycling" becoming a hotter growth area for the construction, demolition and environmental industries, the need for experienced and thoroughly vetted environmental professionals is more essential than ever. Although there has been a sea change in how the American government, at both a state and federal level, approaches site cleanup, regulations remain stringent and ever changing. Each time a real estate transaction, public sector redevelopment or factory closure happens, environmental issues are usually present. It's the safest and smartest move to go with professionals with the best-proven track record.