What Minnesota’s New Vapor Intrusion Policy Means for Due Diligence

Vapor intrusion occurs when vapors or gases from contaminated soil or groundwater seep through any cracks or openings of a building. The most common sources of vapor intrusion in Minnesota are radon, petroleum hydrocarbons and chlorinated solvents commonly found on sites that were formerly dry cleaners or gas stations, and volatile organic compounds (VOCs) such as trichloroethylene (TCE) and benzene. Vapor exposure is considered extremely harmful to humans and the above chemicals are all considered carcinogens.

As of February 2017, the Minnesota Pollution Control Agency (MPCA) has revised their Best Management Practices for Vapor Investigation and Building Mitigation Decisions and Intrusion Screening Values (ISVs) for evaluating potential risks from vapor intrusion.

A Phase I Environmental Site Assessment (ESA) can identify the presence of a Recognized Environmental Condition (REC), which can include Vapor Intrusion Conditions. An environmental due diligence consultant will then recommend a Phase II Environmental Site Assessment, in which more extensive sampling is performed to evaluate the extent of the potential contamination through laboratory analysis. For vapor intrusion, this includes drilling beneath the surface of an existing structure (sub-slab) to sample the soil for volatile gases.

If a Phase I ESA identifies a vapor intrusion REC, two rounds of seasonal sub-slab soil vapor samples are now required to demonstrate that a building is not a risk for vapor intrusion and to receive a final letter of assurance from the MPCA. Based on projects throughout Minnesota, data collected identified a large seasonal variation of vapor intrusion impacts.  Due to this variability in data, the MPCA now requires a sampling event in the heating season (Nov. 1 through Mar. 31), and a sampling event in the non-heating season (Apr. 1 through Oct. 31). There must be at least 30 days between sampling events.

These regulatory changes have had an impact on multiple commercial real estate stakeholders.  The timeline for full compliance through Phase II environmental assessments and any necessary remediation has been extended by up to 3-4 months. As a response to concerns and feedback from banks, agency lenders and other CRE entities, the MPCA is modifying their 2017 regulation changes in two ways to facilitate easier transactions.

First, they have begun issuing conditional “no-association determination” (NAD) letters. These provisional letters are issued when follow-up Phase II Environmental Site Assessments (ESAs) show acceptable levels of vapor intrusion on the property during the first round of sampling. While a second round of testing is underway, a conditional NAD is issued from the MPCA, allowing for the nuts and bolts of the transaction process to move along. This includes any other due diligence or escrow conditions that must be met and paperwork associated with the transaction.  Once the second round of sampling occurs with vapor intrusion levels below the applicable action levels, a final NAD letter will be issued by the MPCA.

Secondly, the MPCA is allowing the implementation of partial building surveys for vapor intrusion contamination. Previous policy stipulated that to assess any on-site REC discovered through a Phase I ESA, the Phase II vapor intrusion sampling would be required to encompass the entire building footprint. If a buyer was acquiring a large space that only had a concentrated contamination area of concern(s), they would be spending valuable time and money on unnecessary due diligence resources if required to assess the entire building.  With a partial building survey, the consultant can perform accurate scientific sampling that is compliant with regulations in a more rapid and cost-effective way.

It is important to engage the services of a capable, local due diligence consultant who is both intricately aware of Minnesota policy regulations and can provide sound environmental consulting services.