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Remediation and "Buying" Liabilities
There are numerous pieces of property that have significant economic potential which is constrained by the environmental liabilities associated with the property. In many such instances, an entity (corporation, individual, governmental unit, etc.) retains the environmental liabilities for properties; the entity has usually established a dollar reserve to cover the liabilities associated with each property. Figure 1-1 shows the typical owner/operator Liability/Response action flow sheet.
Spills and leaks of chemicals from various sources have contaminated soils and groundwater at many sites, creating a threat to public health and the environment. There are remediation technologies available that can address most contamination in a timely and cost-effective manner. Figure 1-2 shows typical sources of contamination and the general sequencing of response action.
Contaminated Site Issues
Site-specific concerns generally focus on several site issues:
Remediation activities typically focus on reducing the chemical concentrations in the soils and groundwater to the extent necessary to protect the public health and the environment; the site-specific remediation criteria are usually based on reducing the public health and the environmental risks to acceptable levels. At most sites, some residual chemical concentrations remain after active remediation is completed; the "owner/operator" responsibility for the site continues after active remediation and even after "site closure."
The Brownfields program has done an excellent job addressing the long-term beneficial use of "remediated" sites with residual, low-risk chemical concentrations. However, the residual environmental liabilities for the sites typically remain with the property owner unless the owner has received specific indemnification from the previous site owner or from some other legitimate entity.
The objective of the site assessment is to define the site-specific issues. Typically this is accomplished by reviewing the site database and by expanding the site database when necessary to develop a response action plan and costs. It is critical to be objective and thorough during the assessment phase; the goal is to learn everything possible about the site and the contamination. The site assessment may require several steps when the information generated in step number one reveals significant, critical unknowns. Figure 4-1 is an example of program controlled analytical capability.
Program Controlled Analytical Capability
Economic Site Use
Ultimately it is the long-term, site-specific economic value which drives the remediation and the liability "purchase."
There are two critical issues associated with contaminated sites:
In many cases, the current property owner can not develop the economic potential of a site because of the environmental liabilities associated with the property. Typically, lending institutions are wary of financing developers who "own" the property and the environmental liabilities.
Remedial Response Plan
Based on the site assessment, the chemicals of concern, the physical characteristics of the site, and the long-term site use, it is possible to develop a timely, cost-effective remedial response plan. The goal is to remediate the site to reduce the public health and the environmental risks to acceptable levels and to optimize the long-term economic value of the site.
Typically, a sequence of proven technologies will be effective; the key is to optimize the cost-benefit ratio for each step in the sequence as shown in Figures 6-1 and 6-2. The general sequence is:
Remediation Technology Sequencing
Environmental Issues Management
The most effective way to manage the environmental issues associated with a specific site is for the "remediation company" to secure "ownership" of the "issues." The site-specific environmental issues or liabilities need to be reviewed in terms of the opportunities available. Can the remediation company turn the liabilities into opportunities by effective remediation and by minimizing the site risk? Figure 7-1 shows the Liability/Response action flow sheet after the remediation company "acquires" the liabilities.
In many cases, the remediation company will secure ownership of the environmental liabilities associated with a site via a "double closing" whereby the remediation company indemnifies both the current property owner and the future property owner(s). This "double closing" nets to the remediation company the funds for the site remediation and for the long-term environmental liabilities management; an appropriate premium for the risks associated with the site is included. In other cases, the remediation company will acquire the environmental liabilities associated with a specific site by executing an agreement with the existing responsible party whereby the liabilities are transferred to the remediation company. This process is a "win-win" for all interested parties:
Typically, the remediation company that "acquires" a site's environmental issues, has the ability to successfully evaluate and manage the issues; thus, the remediation company would generally not require insurance to cover the site-specific risk. However, focused risk insurance could be a part of some "liability transfer" agreements in order to increase the comfort level the original and/or final property owner(s). There are several national insurance brokers (for example, Frank Crystal and Co.) that handle this type of insurance. Each policy is site-specific and based on the:
Table 7-1 shows examples of focused insurance coverage; the coverage is typically a 4-6 year term policy with the face value at about two times the estimated project cost and with a deductible at 75% to 100% of the estimated project cost; the single lump-sum premium is paid when the policy is issued.
Case study #1, Retail Shopping Center Expansion Site (Houston, Texas)
Spilled chlorinated cleaning solvent (from an abandoned dry cleaning business) contaminated the first shallow water-bearing zone at 10' to 20' bgs; the plume is about 40' long x 80' long near the property boundary; the plume is migrating at about 10' per year. The source and the free-phase have been removed; the shallow (to about 5' bgs) TCE has evaporated; the only issue is the plume in the first water-bearing zone.
The property is prime commercial real estate. The existence of the TCE plume has prevented the sale and economic development of the property.
Installed seven "perimeter" monitoring wells to evaluate the overall site and to target specific areas of concern. Installed six monitoring wells in the single area of concern. Also confirmed that there was no immediate risk to the public health and to the environment. The only issue was the shallow TCE plume. Completed eight, continuously sampled, soil borings in the area of concern; the soil analytical data confirmed that the shallow soils were no longer a source of TCE to the shallow groundwater. Figure 8-1 shows the site layout.
Response Action Plan:
Pump and treat the affected groundwater from three strategically located wells to reverse the groundwater flow gradient; pump approximately 2.5 gpm; treat with double-pass carbon absorption. Add nutrients (di-ammonium phosphate, potassium nitrate, and potassium sulfate) to the treated water and inject at the edge of the plume at five locations; use a portable unit and "operate" the system eight hours, twice per week. Sample and analyze the pumping wells and the carbon effluent weekly to measure progress. Figure 8-2 shows the progress data for TCE. Figure 8-3 shows the mobile remediation unit.
Mobile Well Service Unit
Chickadee executed a lump sum contract with the property owner and with the property purchaser whereby Chickadee will:
No insurance was required.
Case Study #2, Gas Station, Mini Mart (Omaha, NB)
Leaking UST's; two tanks may have leaked for 10 years or more. Soil and groundwater impacted to about 30' deep; shallow potable wells about 600' down gradient have been impacted; point-of-entry treatment (POET) systems have been installed at 28 residences. The chemicals of concern are benzene, MTBE, and TBA. The LUSTs have been removed along with about 300 yd3 of contaminated soils.
The property is prime commercial real estate when combined with adjacent parcels of land; the property is the cornerstone of a planned development; the affected groundwater has impacted the overall project financing.
Completed two phases of soil borings and monitoring wells to define the nature and extent of the affected soils and groundwater. Identified free-phase in the vadose zone soils and in the groundwater; the dissolved plume is about 100' wide by about 700' long in the first water-bearing zone at 20' bgs to 30' bgs. The concentrations of TBA and MTBE are decreasing on the leading edge of the plume. The permeability and transmissivity across the affected zone is relatively uniform. The analytical data confirmed that the source control has been effective. Figure 9-1 is a schematic of the plume and the response plan.
Response Action Plan:
Soil vapor extraction, thermal oxidation, and pump and treat in the high concentration zones of the dissolved plume and of the vadose zone. Use dual-phase (water and vapor) extraction wells to expand the vadose zone down to the aquitards at about 30' bgs.
Extract approximately 200 scfm of soil vapor from six extraction wells and treat in portable thermal oxidizer. Pump about 4.5 gpm of water and treat in an activated sludge aerobic bioplant; add oxygen and nutrients to the treated water and inject into nine injection wells; start the in-situ bioremediation when the BTEX, TBA, and MTBE concentrations are all below 10 ppm. Convert to monitored natural attenuation when the benzene is less than 120 ppb, the MTBE less than 150 ppb, and the TBA is less than 200 ppb. Figure 9-2 shows a schematic of the aerobic in-situ bio system. Figure 9-3 shows the chemical concentrations at two progress monitoring wells.
Chickadee purchased the property (the site and not the business) from the "original" owner and indemnified the owner in regards to the contaminated soil and groundwater; Chickadee immediately sold the property to the development company and indemnified the development company in regards to the contaminated soil and groundwater. The difference between the selling price and the purchase price was placed in a Chickadee trust account to pay for the remediation and long-term site management. The agreements among Chickadee and the other parties:
Chickadee secured a 5-year term insurance policy with a face value of $1,000,000 and a $400,000 deductible to cover the project.
Case Study #3, Fixed base operation (NW Montana airport)
Private plane service and maintenance operation adjacent to public commercial airport; fixed base operation has been active for 70 years. Spilled/leaked fuel and maintenance solvents over the years have contaminated the local soil and groundwater to about 60' bgs; the regional groundwater at about 400' bgs has not been contaminated by the site; the groundwater plume could impact private potable wells in the future. The chemicals of concern are benzene, MTBE, 1,1-DCA, and vinyl chloride. Source control has been effective; localized elevated chlorinated levels in soils continue to be a source to the groundwater.
The property has high value as part of the overall commercial development of the airport area. The original owner lacked resources to complete the remediation and manage the liabilities long-term; the contamination restricted the ability to finance the property purchase and the property development.
Soil borings and monitoring wells defined the nature and extent of the soil and groundwater contamination. Some small isolated pockets of free-phase chlorinateds exist in the vadose zone soils; there does not appear to be any free-phase on the groundwater. The dissolved plume is about 90' wide by 400' long and is migrating toward the northeast at about 10' per year; only the first water-bearing zone at 40' bgs to 60' bgs is impacted.
Response Action Plan:
Ozone/peroxide oxidation of localized free-phase; pump and treat and in-situ anaerobic bio to reduce the 1,1-DCA levels to less than 5 ppm; convert to aerobic in-situ bio to reduce all the target chemicals to less than 100 ppb each; convert to monitored natural attenuation.
The remediation company purchased the property from the "original" owner and indemnified the owner for the soil and groundwater contamination. The remediation company leased the property to the developer; 99-year exclusive lease with full property owner rights; one lump sum lease payment when lease was signed; remediation company (lessor) indemnifies lessee for any environmental liabilities; lessee pays property taxes and insures improvements as lessee deems necessary. Lessor and lessee agree as follows:
Case Study #4, Tank Farm, former oil production area (Houston, Texas)
Oil and gas production area and fuel and chemical storage tank farm since the 1950's; still some ongoing operations; most of facilities and tanks are inactive. Upscale residential construction has occurred over the last several years up to the perimeter of the site. The property is a prime residential development site. The current local residents are serviced by a municipal utility district, thus the local residents are not directly impacted by the site. Scrap equipment, surface staining, salt water impacts, large excavation pits, etc. create a negative appearance. A residential developer has acquired the site. Figure 11-1 shows the site and surrounding area in 1995.
1995 Aerial Photograph
A phase-1 and a phase-2 environmental site assessment defined the site issues. A detailed remedial investigation generated the data necessary to develop the remedial response plan; several areas with surface (to a depth of 4') organic contamination were delineated; salt water has impacted shallow soils and vegetation in several areas; evidence of surface organic spills and leaks in the process equipment and tank farm area. No significant groundwater contamination. No contamination in the excavation pit sediments. Figure 11-2 shows the assessment details.
Response Action Plan:
Case Study #5, former petroleum refinery site
Petroleum refinery site for 60 years, starting in 1917. Part of the site was used as a cement plant from 1927 to 1992. There are no ongoing operations on the site other than some focused remedial activities; all the major equipment and facilities have been removed from the site. The property is a prime industrial development site with direct access to rail and a major deep water port; the property is ideal for industrial activity as all of the adjacent properties are active industrial properties. The nearest local residents are serviced by municipal water, thus the nearest residents are not at risk. Several companies are interested in developing this site if the environmental issues can be resolved. Figure 5-1 is a 1964 aerial photo of the site.
Several detailed environmental site assessments have been completed. These assessments have identified several areas with elevated TPH in soils and one area with elevated benzene in groundwater; the benzene plume is well-defined and confined to the northeast corner of the property; the source of the benzene was a pipeline leak in 1982. Over 80% of the sludges and elevated TPH soils have been effectively treated in the on-site land farm. The site assessments provided enough information to develop a remediation and site closure plan.
Response Action Plan:
For most contaminated sites, there is a timely, creative, cost-effective way to address site remediation, liability management, and economic property development. All interested parties need to focus on protecting health and the environment and on developing the potential of the site.
How can the environmental issues be converted to opportunities? Risk can be minimized by proactively managing the environmental issues.
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