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Tuesday, February, 2, 2010

If All The Leaves Are Brown, And The Sky Is Gray, Maybe Don't Buy The Property: Environmental Due Diligence Checklist

It has long been the case that any company (or individual for that matter) that buys another company that was ever involved in chemicals or textiles or energy production (or was even just buying land from such an entity), had to worry about all manner of environmental headache that could not only complicate the deal, but result in future, unknown liability. Now that we live in the era of green, checking out one's environs before buying a hunk of land is even more important, lest your client find out after the fact that the land has a secret volcano on it and will emit noxious gases that might be taxed at some point in the not-too-distant future. (Hey, anything is possible.) That's what environmental due diligence is all about — maybe not to find a volcano (that would probably be obvious) but for other potential liabilities.

Environmental Due Diligence Checklist, by Jacqueline M. Vidmar (Seyfarth Shaw LLP), hits the high and low points (as in, above and below ground) that your client should be concerned with in procuring property. It is set up as something you can submit to a seller, basically demanding specific information about every nook and cranny of the land. And when Toolbox says every nook and cranny, he ain't kidding — here's a taste:

Physical Condition of Property...

4. Determine and describe any locations on the property where any materials, wastes, or substances have been released or disposed of, providing for each: size; when disposal or release occurred; nature of material waste or substance; and nature of disposal or release; any remedial action that took place.

6. Are there any stressed or unusual vegetation or physical irregularities that might indicate unusual subsurface conditions or disposal of wastes?
Ongoing Operations at Property

7. Wastewater Issues — Determine the total annual process wastewater discharge and the place of discharge; the total sanitary wastewater discharge and the place of discharge; the total surface runoff water discharge, the place of discharge, and any treatment thereof; wastewater constituents which are monitored and the results of any monitoring; potential restrictions on wastewater discharges due to POTW capacity and/or water quality.
Indoor and Miscellaneous Environmental Issues

5. Chlorofluorocarbons – Are chlorofluorocarbons used at the property? What is financial impact of replacement with systems which do not use chlorofluorocarbons?

And so on. Vidmar even gets into potential issues with adjacent properties and gets you to demand documentation for everything. With this handy list, your client will never accidentally buy a site near even a dormant volcano.

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