1. Considerations for Transactions with Environmental Issues Richard M. Fil, Esq.

2. Sources of Potential Liability Federal CERCLA / state counterparts RCRA (federal and state) Common law Other causes of actions (e.g., public trust)

3. Types of Damages Environmental damage to real property Bodily injury / personal property damage Third party claims from off-site impacts Claims for off-site / non-owned impacts Operational non-compliance –Capital costs –Penalties –Operational losses

4. Importance of Allocation Seller caused the problem Buyer owns the problem Failure to allocate may result in: –Litigation –Uncertainty –Additional costs

5. Basic Considerations Condition of facility (current and historic) Operation of facility (current and historic) Divergent interests of buyer and seller

6. Potential Sources of Concern Compliance –Permits –Reporting / other requirements Contamination –On-site –Off-site –Former sites –Neighboring properties (sources and receptors)

7. Importance of Site Characterization Potential compliance needs (e.g., permitting; Transfer Act) Identify site history / conditions Establish baseline Quantify remediation costs Allocate responsibility

8. Types of Site Assessments Environmental conditions –Phase I –Phase II –Phase III Operational practices –Necessary permits in place –Compliance with permits –Compliance with reporting / other requirements

9. Considerations for Retaining a Consultant Confidentiality Generate written reports only on request Stamp all reports “A/CP” and “Draft” unless directed otherwise Product ownership

10. Considerations for Retaining a Consultant (continued) Insurance Access to all sites Clearly identify the client Time and cost issues Reporting requirements

11. Potential Reporting Requirements CERCLA C.G.S. Section 22a-450 (spills) C.G.S. Section 22a-6u (S.E.H.) RCSA Section 22a-133v-1 et seq. (LEP Regulations) C.G.S. Section 22a-134g (termination of operations) Federal SEC disclosures Aquifer Protection Regulations (in draft)

12. Ethical Considerations Identify your client Watch for conflicts that may arise Remain aware of divergent interests of others

13. Important PSA Elements Definitions Representations and warranties Schedules of exceptions Indemnification by buyer and seller

14. Definitions Environmental conditions Environmental liability Hazardous materials Environmental laws

15. Representations and Warranties Potential on-site and off-site contamination Actual or threatened claims or proceedings Presence of USTs, asbestos, PCBs Health & safety Provision of all relevant documents Permit status and compliance

16. Schedules of Exceptions Identify exceptions to representations and warranties Typical thresholds may include materiality, time period, and seller’s knowledge Examples: –Spills –Orders, NOVs, litigation –Exceedance of permit limits

17. Indemnification Division of responsibility Trigger for indemnification Define compliance Basket and cap Limits on notice / time Independent statutory claims

18. Considerations for Indemnification Define cleanup standards and options Identify party in control of cleanup and agency contact Provide for adequate access Require cooperation Define survival period for right to indemnification

19. Examples of Buyer- and Seller- Friendly Agreements Buyer friendly terms Seller friendly terms

20. Other Forms of Protection Covenant not to sue Prospective purchaser agreement Comfort letter Environmental insurance

21. Connecticut Transfer Act C.G.S. Section 22a-134 et seq. “Establishment” “Transfer”

22. “Establishment” Generation of more than 100 kg of hazardous waste in any month since 11-80 Handling of hazardous waste generated elsewhere by another person Operated at any time since May 1, 1967 as: –Dry cleaner –Furniture stripper –Vehicle body repair or painting shop

23. “Transfer” “Any transaction or proceeding through which an establishment undergoes a change in ownership,” with 20 exceptions Includes leases of 25 years or more

24. Transfer Act Filing Forms I-IV RCSA Section 22a-133k-1 et seq., Remediation Standard Regulations (“RSRs”) “Certifying Party” Environmental Condition Assessment Form (“ECAF”)

25. Transfer Act Non-Compliance Strict liability / damages to transferee under C.G.S. Section 22a-134b Penalties under C.G.S. Section 22a-134d Other enforcement actions by DEP

26. RSRs and ELURs RSRs –Soil and groundwater –GA v. GB –Residential v. industrial / commercial ELURs –Limit site uses –Impose controls

27. Other Relevant Requirements in Connecticut Termination of operations Aquifer protection regulations

28. Hypothetical Transactions Consider the sale of a car dealership to: –Another car dealer –“Big box” retail developer –Affordable housing developer

29. Conclusion Consider and address potential liability for: –Compliance –On-site and off-site contamination State and federal requirements Contractual and statutory liability