We’ve all heard the familiar saying: it’s the things that you can’t see that could be the most risky and expensive factors in any commercial real estate deal. Most people know about the health and safety dangers posed by asbestos, mold, and lead inside of a building. However, they may not consider what is lying in the soil and groundwater beneath the structure, creating gases that can migrate into the building itself. Now, more than ever, we are aware of the possibility of, and risk associated with, vapor intrusion. The State of Michigan is tightening regulations overseeing vapor intrusion, which may force previously ‘closed’ sites to re-open under these possibly far more stringent and comprehensive standards. This may include as many as 4,000 sites – including over 350 Resource Conservation and Recovery Act (RCRA) corrective action sites – throughout Michigan that have known spills of volatile compounds or petroleum which has potentially created a risk for vapor intrusion.
Vapor intrusion occurs when vapors or gases from contaminated soil or groundwater seep through any cracks or openings in any type of building. Initially conceived with radon concerns in mind, vapor intrusion has now expanded to include other chemicals like petroleum hydrocarbons and chlorinated solvents like tetrachloroethene (also referred to as PERC and commonly found on sites that were formerly dry cleaners or gas stations). Other vapor-forming chemicals may include volatile organic compounds (VOCs), such as trichloroethylene (TCE) and benzene, select semi-volatile organic compounds, such as naphthalene, elemental mercury, and some polychlorinated biphenyls and pesticides. Vapor exposure is considered extremely harmful to humans and can, in some cases, cause liver, kidney, and central nervous system damage. Additionally, many of the aforementioned chemicals are considered probable carcinogens.
If you already own a property that was contaminated and is now considered ‘closed’ or a site where volatile compounds were previously detected, it may be possible that the new regulations could impact you and require an environmental due diligence assessment. The first proactive step to take is to review your Baseline Environmental Assessment (BEA). The specifics written in your BEA may be enough to protect you as an innocent landowner. If the property that you own or lease contains volatile compounds, your BEA may be subject to EPA action if there is a concern that vapors could potentially be exposed to inhabitants. Owners should also review any Due Care Plans (DCP) that have been put into place to track compliance with and manage ongoing purchaser obligations to make sure that the liability protection stipulated in your BEA has been maintained.
Until the new regulations are enacted, MDEQ will continue to review and approve requests for ‘No Further Action’ under the current standards, but with the caveat that screening levels used “may not reflect best available science.” This is is enough to give any transaction stakeholder cold feet during a real estate deal. Aggressive due diligence, comprehensive remediation plans, and engaging well-informed technical experts will continue to be a necessity for lenders and buyers to protect themselves from potential risk of these new guidelines.