Evolution of the ASTM E 1528 Task Group

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Evolution of theASTM E 1528 Task Group

• by
• Jon Walker
• Regional Vice President, EDR
• Co-Chairman, E 1528 Task Group
• For Presentation
• at
• Environmental Bankers Association
• Portland, OR
• June 2004

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ASTM E 1528 Task GroupHow was the group formed?

• After passage of the Brownfields Law, the
  industry questioned if the Transaction Screen
  (ASTM E 1528) could live up to its original
  purpose
• to permit a user to satisfy one of the
  requirements to qualify for the innocent
  landowner defense to
• CERCLA liability (E 1528 1.1)
• ASTM set up a task group to explore the future of
  E 1528
• Jon Walker (EDR) and Bill Weissman (Piper Rudnick
  LLP) were appointed as Task Group Co-Chairs

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ASTM E 1528 Task GroupPurpose

• E 1528 as it no longer satisfies all components
  of the proposed all appropriate inquiry
• Focus revised standard on various alternative
  levels of environmental screening that may be
  appropriate as due diligence by users (lenders)
  for a parcel of commercial real estate,
  specifically those perceived as lower risk

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ASTM E 1528 Task GroupInitial Members

• Jon Walker-Co-Chair (EDR)
• Bill Weissman-Co-Chair (Piper Rudnick LLP)
• Dick Hoffman (B of NY)
• John Rybak (BBT)
• Cindi Lewis (Enviroassessments)
• Harriet Greenwood (Comerica)
• Susan Peck (Sovereign Bank)
• Marc Guerin (Citizens Bank)
• Dan Neal (TX DOT)
• Julie Kilgore (Wasatch Environmental)
• Scott Kurtz-Ninyo Moore
• Jeff Telego-EBA
• John Worland, Converse
• John Manzo, Heron Environmental

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ASTM E 1528 Task GroupWhy Keep the Transaction
Screen?

• 1. There is a need at smaller sized banks
• 75 of banks that lend on commercial real estate
  are community/smaller regional banks and they
  lack understanding and resources to manage
  environmental risk
• Consequently, over 500,000 commercial real estate
  loans receive little or no due diligence

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ASTM E 1528 Task Group Why Keep the Transaction
Screen?

• 2. Byproduct of this effort is the creation of a
  Level Playing Field

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ASTM E 1528 Task Group Why Keep the Transaction
Screen?

• 3. The document makes business sense
• It is risky for the lender and for the borrower
  to ignore environmental risk
• Increasing losses due to environmental exposures
  are moving more and more banks, particularly the
  community and smaller regional banks, to address
  environmental issues during due diligence

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ASTM E 1528 Task Group Why Keep the Transaction
Screen?

• 4. The E 1528 document will allow lenders and
  consultants to consider alternative levels of
  environmental due diligence on lower risk
  properties where a Phase I Environmental Site
  Assessment may not be deemed appropriate (e.g.,
  recourse loans)

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ASTM E 1528 Task Group Why Keep the Transaction
Screen?

• 5. There is strong support for E 1528 from
  utilities and government agencies. These
  industries are represented in the task group.

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ASTM E 1528 Task GroupProposed Changes

• 1. Remove all references to CERCLA liability

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ASTM E 1528 Task GroupProposed Changes (cont)

• 2. Rewrite document to outline alternative levels
  of environmental due diligence that may be
  appropriate for a parcel of commercial real
  estate, specifically those perceived by the user
  (lender) as lower risk
• Alternative levels of environmental screening
  options vary in scope, comprehensiveness and cost
• The borrowers experience, creditworthiness of
  the borrower, loan structure, deal financials,
  and integrity of the collateral will influence
  the lenders selection of a specific level of
  environmental investigation

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ASTM E 1528 Task GroupProposed Changes (contd)

• Alternative levels of environmental screening may
  include
• Level 1 Limited Questionnaire
• Level 2 Comprehensive Questionnaire and Site
  Inspection
• Level 3 Comprehensive Questionnaire, Site
  Inspection and Government Environmental Records
  review
• Level 4 Comprehensive Questionnaire, Site
  Inspection, Government Environmental Records
  review and One Historic Use Resource
• Level 5 Comprehensive Questionnaire, Site
  Inspection, Government Environmental Records
  review and Multiple Historic Use Resources

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ASTM E 1528 Task GroupHow the lenders benefit?

• 1. Provide a user friendly guidance tool for
  performing environmental due diligence on
  properties perceived by the lender as low-risk.
• Leveling the playing field for all lenders
• Support greater awareness of environmental risk
  management
• 75 of the FDIC insured banks perform little or
  no environmental due diligence
• This segment houses the greatest risk
• 4. Build a stronger community of environmental
  bankers
• Lenders are thirsty for environmental risk
  management information
• Today the EBA has 37 banks membersTomorrow
  2,000 banks members?
• 5. Drive awareness through EBA training
• Seminars
• Training
• Tip sheets

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ASTM E 1528 Task GroupHow can the EBA support
the effort?

• Work with the Task Group to develop a document to
  support screening lower-risk properties
• Goal is to create a viable revision and bring the
  draft to ballot in early 05

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Items for Discussion

• Should this be a standard guide or a standard
  practice?
• Should we revise E 1528 to reflect changes
  brought upon by AAI and then create another
  environmental risk management guidance document?
• 3. How will the consulting community be affected?

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Items for Discussion

• 4. Are the five levels of environmental due
  diligence appropriate? Should there be additional
  levels? Less levels?
• 5. Should the document include dealing with
  higher risk loans Phase I, Phase I?
• 6. What makes a loan lower risk